Don’t become a boiling frog in business ownership: the hidden cost of inaction13 Jul 2022 - Simon Palmer - Practice Sales Vet Practice Sales
There is an urban legend that if a frog is suddenly put into a pot of boiling water, it will jump out and save itself from impending death. But, if the frog is put into lukewarm water, with the temperature rising slowly, the frog will keep trying to adjust and acclimatise…until it’s too late.
Whether the urban legend is accurate or not, the term "boiling frog syndrome" is often used as a business metaphor to describe the slow, stealthy creep of compromise and complacency, and the failure to act against a problematic situation that will increase in severity, until reaching catastrophic proportions.
The business ownership equivalent of the “Boiling Frog” syndrome is observed more commonly in vet practice ownership than you would think, especially towards the end of a veterinarian's career. Many once-successful businesses have become mediocre or poor businesses, only because compromises occurred so gradually and incrementally, that they either went unnoticed or they were small enough to make the necessary rectifications more difficult than getting used to the new normal.
If I told most successful business owners that in 5 years their business would have 30% less turnover… most would either start to make drastic changes in the way that they operate, or they would sell now, before the lower revenue compromised the value of the practice.
However, in my experience, if a business reduces its revenue by 6% on a compounding basis for 5 years, the business owner will be less likely to take action and more likely to make a creeping attempt to normalise the shrinkage. As the practice shrinks, they will turn a blind eye and tell themselves and others that the reduction is either:
Temporary, and part of an industry-wide trend, national or local economic cycle, that will right itself soon, without any change necessary from them or,
By design and choice: saying things like “the reason why the practice is reducing is that I don’t want to work as hard as I did. If I worked as hard as I used to, the business would be back in a second”.
While the example above is about revenue shrinkage, a business owner also needs to be wary of the slow creep of rising expenses. Many will give staff pay rises above industry norms, despite the declining or stagnant fortunes of the practice. Others will continue to pay for marketing that is not bringing in a return on investment. Some are reluctant to increase their fees, even though the costs of production (wages, rent, consumables) are all going up every year.
A business owner that is watching their business revenue, profit and practice value shrinking over time, without acting, is the equivalent of the frog treading water that is being heated up, hoping that the heat will eventually go away or that they grow to be comfortable.
When a business owner is in this situation their exit needs to be strategically timed to ensure that the value of the practice doesn’t experience a catastrophic decline.
It is important to realise that in the “Boiling Frog Syndrome”, the frog was not killed because of the boiling water. The frog was killed because it didn’t jump out in time.