A “business algorithm” is simply the recipe behind a thriving private practice—defining its people, funding, facilities, benchmarks, and long-term vision to drive both financial and qualitative success.
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The word algorithm can make even the most seasoned business owner's eyes glaze over. But here is a reframe that changes everything: your business algorithm is simply your recipe. In this episode of the Private Practice Survival Guide, Brandon Seigel walks practice owners through how to define, build, and financially model their unique business algorithm, the backbone of every thriving practice.
At its core, a business algorithm is the recipe behind how your practice operates and generates outcomes. It guides decision-making, creates uniform results, and provides the data you need to grow with confidence. Think of it as the master document that answers: Who works here? Who do we serve? How do we get paid? And what does success look like?
There are two types of outcomes your algorithm helps produce: quantifiable metrics like revenue and net profit, and qualitative metrics like exceptional patient care. The Medical Group Management Association (MGMA) consistently shows that practices with clearly defined financial benchmarks outperform those operating without them.
Before you can write your recipe, you need to know what you are cooking toward. What is your long-term exit strategy? Are you building toward a sale, a succession, or simply a sustainable practice that runs without you? Brandon recommends defining this destination 10 to 15 years out, because the decisions you make today need to align with where you want to end up.
Once the destination is clear, define your differentiation strategy. What makes your practice different? It cannot just be that you accept insurance. Your point of difference is what attracts the right patients and repels the wrong ones.
Your people strategy defines who you hire and what productivity looks like for each role. Your funding strategy identifies your payer mix. Your facility strategy determines the right amount of space for the revenue you are generating, targeting no more than 10% of revenue toward rent, with 4% as the ideal.
Brandon's benchmark: total people expenses should not exceed 60% of total revenue. This aligns closely with data from MGMA's annual Cost and Revenue Survey, which confirms that practices managing labor within this range consistently achieve stronger net margins.
The most powerful part of your algorithm is its financial model. Research from McKinsey Digital shows that companies implementing systematic business algorithms in decision-making are 23% more likely to outperform competitors in revenue growth. Precision is not obsessive, it is a competitive advantage.
If your practice feels unpredictable or like you are always reacting instead of leading, the answer is almost always the same: you do not have a clearly defined algorithm. Start there. Build it. Model it. And revisit it regularly as you grow.
