12 ways your orthopedic company can move closer to profitability.

This article is for orthopedic company leaders looking ways to reach profitability or improve cash flow. Market conditions have tightened, as its more important than ever to reach profitability.

Some of these 12 are short-term wins, some are long-term wins. Some are obvious, some are new ideas. There should be nugget in here for everyone.


1 – Do an annual Reduction-in-Force of 10% of the employees (the bottom 10% aren’t really contributing anyway). The hard work is figuring out who isn’t contributing.

2 – Keep your star employees productive, happy and pointed in the right direction. It’s very expensive and disruptive to replace good people if they leave.

3 – Re-negotiate payment terms with your suppliers.

4 – Rearrange sales force commissions and asset allowances. In other words, give the highest performing sales people higher commissions and more inventory… and give the lowest performing sales people lower commissions and less inventory.

5 – Sell off idle assets. Assets that are not actively being used, sitting around costing money, rather than generating money need to be sold for cash. It makes no sense to hold on to assets that have become expenses. You can use the cash made to reinvest into your business to increase its profitability. Sell patents, sell trademarks, sell equipment, sell anything that isn’t actively supporting your business.

6 – Reduce inventory to the smallest amount possible while still meeting customer demands. Use QMed Quest service to effectively “double your instrument assets” in weeks. This is a “no brainer” if you have alot of assets out in the field. Listen to the Podcast discussion.

#7 – Test price increases with selected hospitals and ASCs for certain products. Deliberately increase your prices to see how your customers react. If no changes in demand occurs, slowly increase the prices until demand levels off. Along with demand, the cash you generate declines, then set your prices back. If demand falls, but your cash generation increases, stay at the new price to keep your new profitability.

8 – Analyze profitability by product line. Think of every product that your company sells as if it were a separate business. Does each one contribute to profitability? Every product you have is certainly not producing a profit. When this occurs, you will need to get rid of these products and keep those which generate money. This will help you eliminate costs in favor of profitability. You will see your profits increase significantly once you eliminate these weak performing products and services.

9 – Enter into a joint venture or a strategic alliance with other device companies to market each other’s products. Strategic alliances are the perfect opportunities to expose your business to new markets. It definitely makes sense to partner with those whose businesses complement your own business.

10 – Focus on your most profitable customers. Sell more products to these existing customers. Upselling. Increase the dollars per surgery.

11 – Engage your employees in the a “Profitability Exercise”. Hold a company-wide meeting where you discuss the goal of increasing profit margins by 10% within the next year.

12 – Seek input from outside your organization. Consultants can help you see things in your business that you are too blinded to see. You cannot see the system from inside the system.