I recently attended a Puget Sound Business Journal breakfast where the speaker was the CEO of Virginia Mason (healthcare organization). He said something that I had recently heard on a news show, that health care is one-sixth of our GDP (gross domestic product). One-sixth! That’s amazing and a bit scary.
Think about your business. If one-sixth of your revenues were from one customer you’d be thinking of diversifying your customer base. If one-sixth of your output depended on one key employee you’d be at risk if he or she left.
To business appraisers and business buyers, these things matter.
Especially when the one-sixth (or more) is tied to the owner. This is called a dependency and can be a real stumbling block when determining the value and price of a business. The buyer fears that when the owner leaves that the knowledge, relationships and expertise (needed to generate profits) walks out the door and won’t be easy to replace.
If you’re an owner, reduce any of these high concentrations. As citizens we should be trying to get health care to be a smaller percentage of our GDP, especially because the other part of the speakers comment on this was that at least one-third of all the money going into healthcare is wasted.
“The United States was founded by the brightest people in the country-and we haven’t seen them since.” Gore Vidal
