Optometric Management Tip # 437 - Wednesday, June 30, 2010
I think the concept of a satellite office is a great idea for growing your practice. Consider these tips to see if multiple offices might be right for you.
The strategic plan
There are several strong reasons why the concept of multiple locations makes excellent sense.
- Expand your market. In many cases, an eye care office experiences slow growth after a period of years because the local population is too small for the number of eye care providers in the area. Another office location in a completely new market area where there is a need for eye care can grow much quicker than the original office. The distance from other practice locations can vary based on local habits, but 10 miles is a good rule of thumb as a minimum. You want a location that will not simply cannibalize your existing patients and have them move to the new location, because that is not a net gain in business. A recent consumer study showed that patients almost universally do not want to travel more than 10 miles to see the eye doctor. Another consideration is where the doctor lives who will serve the new location. If one doctor will work at two offices, living somewhere in between them is convenient.
- Expand your facility size. Many practices can't increase productivity even if they have the patient demand because they cannot handle any more people. To see more patients per day could require more exam rooms, a larger staff and a bigger optical area. Of course, moving to a larger office would help this situation, but that is not always practical. There may be a long term lease or perhaps there is no other viable office space near the first location. Having multiple offices allows you to see more patients and increase staff without leaving your current market area.
- Continue your model. Great value exists in the way a successful practice functions. This includes the accounts, systems and methods that are in place. It is a smart business strategy to duplicate that business model that is already known to work in a new market. This is the basis for franchises, and you can do the same thing within your own organization. You already know how to schedule appointments, bill insurance plans, order contact lenses and eyeglasses, hire staff, and so on. Even if it is not all written down, you know how and what to do. Doing it again someplace else has a strong likelihood for success.
- Marketing power. Owning multiple offices allows you to benefit more from advertising and promotional efforts. Whether you use direct mail, newspaper ads, internet or any other form of marketing, all your office locations can be listed and will benefit.
- Associate doctors. With multiple office locations you may generate enough patient demand to allow you to hire an associate optometrist much sooner than you could have with just one office. Whether the associates become partners or work as employees depends on your vision.
Of course, operating multiple offices has some drawbacks, so proceed with your eyes wide open.
- More administration time. I think many optometric practices already suffer from insufficient time and effort for management, and adding another office greatly increases the need for that. Strong office managers will be needed in each location and the practice owner should plan to spend more time on management and not just seeing patients. For some, this may be a positive change.
- The financial investment. Opening a new office can easily cost over $100,000 in build-out, equipment, furnishings and inventory, plus some period of general operating expense. While we can certainly expect a good return on this investment over time, that is never assured and there is always some risk. If you have the resources or the borrowing power to invest, you must ask yourself if this is the best investment. Consider what else you could do with that cash and what kind of return you could expect. Typically, business ownership offers a much greater potential ROI than almost any other investment.
- The break-in period. Essentially, opening a branch office is like opening cold. Your practice may have some reputation in the new area, but new patient relationships must be formed. Most practice growth occurs with some word-of-mouth factor and that takes time. It may easily take two to three years before a significant profit is realized.
Here are a few side perks of multiple offices:
- Greater buying power. Ordering frames, lenses and contact lenses for multiple locations will make your account more valuable to your suppliers and labs. You will see better discounts and better deals.
- More flexible use of staff. Staffing is not necessarily easier with multiple locations, but you do gain some flexibility that only comes from a larger staff. In an emergency you may be able to assign a staff member to cover the other office. A new job position can open up in office A and you can offer it to a star employee from office B.
- Sharing instrumentation. Many ODs move advanced diagnostic instruments from one office to the other on a rotating basis. This can cause some wear and tear, but it allows the high cost of advanced instrumentation to be utilized on a larger patient base. Small instruments are easily transported.
- Specialty referrals. Even if you don't move some instruments, you may be able to refer patients to the other office for specialized services. This could include medical diagnostic procedures or other specialties like vision therapy and low vision.
- Lab work. Some practices invest in an in-office lab in one location which does the surfacing or finishing for all office locations. There is a strong economy of scale with this approach.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management