An entity exists out there that plays a major
role in the health of your private optometric practice. You may not realize it,
but this entity is your local bank. This month, I'll explain just how big a
role your bank plays in your life and how forming a relationship with your
bank's executives can benefit you even more.
The president of my local bank and I have
been friends for 20 years. Jerry's a fellow Rotarian and we've attended church
together for a long time.
Jerry and the banking staff provide general
advice and offer financial planning. Because we've established a relationship
through common interests, he doesn't give me a song and dance � he just tells
me what he thinks I should do.
Involving yourself in the community can
provide benefits beyond your anticipations. Civic clubs, church, political
rallies, sports events and local school activities all provide opportunities
for you to meet leaders in your community.
My own community involvement has enabled me
to develop friendships or make the acquaintance of the presidents and
executives of three local banks.
The banker has a feel for the pulse of
what's happening in the community. Advice from your local banker can prove
invaluable to business people like us.
A familiar scenario
For example, say you've outgrown your clinic
space. You may want advice on the following questions from your banker.
� What are the typical property values in the area?
Should I rent, buy or build a building?
� What area in the community would be best for
� Would the bank be willing to finance the expansion?
What's the best interest rate and payment schedule available?
The loan application
Even if the president of the bank is your
best friend, you need to give him a detailed loan request to submit to the loan
Submit a loan application in the following
Include professional experience, education, honors and awards, professional
affiliations, credit references and personal references.
� Individual financial statement. Include assets and liabilities which, when added
together, will provide your net worth.
� Loan request. Should include:
� A paragraph stating why you're requesting the loan.
� A breakdown of the financing required.
� Projected operating expenses: rent, salaries, optical
costs, insurance, utilities, etc.
� Estimated cost of furniture and equipment (per item).
� Renovation/building and decorating costs.
� New frame and contact lens inventory costs.
� Project gross practice income for the first year,
explaining your method of estimating: for example number of examinations and
glasses prescriptions per day projected quarterly.
� Total income, which includes gross practice income
plus other income. This is the projected family income for the year.
� Subtract the projected income from the expenses
projected for the practice. The difference, plus your living expenses, should
equal the amount of the loan request.
See below for a simple example on how to
outline these projections.
Your local bank offers a variety of services
from credit-card transactions to interest-bearing accounts. I know it makes me
more comfortable to seek advice from someone I know when it comes to deciding
on which type of account best serves the needs of my business. I can count on
my banker, Jerry, to offer expert financial advice, and he can count on me to
provide expert vision care.
Banking vs. optometry
The banking business is similar to the
optometric business. When Jerry and I get together, customer service and staff
training are inevitable topics of conversation. He encounters many of the same
problems hiring and training employees that we do.
Planning for growth and expansion in a bank
isn't unlike projecting and setting short- and long-term goals for our
practices. I've incorporated business perspectives from Jerry that have helped
our practice take more of a business path that's not based solely on an
optometric business mindset.
The relationship you develop with your
banker can benefit you in ways that may not be obvious. For example, my sons
have occasionally been remiss in keeping track of written checks. Rather than
sending back checks that are a few dollars overdrawn, the bank contacts them
and allows them to correct the balance. This happens less frequently now, but
it makes me appreciate a bank that cares enough to not embarrass us. They've
carried the customer service issue to great lengths for us.
We've encountered instances in which a car
we were buying needed a few more expensive frills than our bank balance allowed
at the moment. Because we have a long-standing business relationship with our
bank and have established our loyalty and credit worthiness, we can take care
of the credit arrangement with a quick phone call.
The need for a quick "okay" has
also come up when my partners and I have found equipment at a convention that
we just couldn't live without.
The fact that our account has been in good
standing for a number of years and that we've paid off loans as agreed is
remembered! We're not just an account number when we call.
A friend indeed
A friendly banker who knows your needs and
gives you solid financial advice is a great asset. Jerry and his wife are great
referral sources � his employees are our patients. Likewise, many of my
staffers use his bank.
I spoke with my banker about writing this
article. His comment was, "The benefit is mutual." It's a two-way
Outlining Projections: An Example
� Projected expenses for equipment, inventory,
furniture, staff salaries, utilities, office supplies, insurance, rent, etc. =
$132,000 (for the first year).
� Family living expenses for the year are projected to
� Total expenses = $180,000
� Projected practice income = $118,000 (for the first
� Spouse's annual salary = $22,000
� Total income = $140,000
� Total expenses ($180,000) minus total income
($140,000) = amount of loan request ($40,000)
Critical assumptions in the above example
� The projected practice income for the second year
needs to increase to $220,000 plus at least the same spouse salary for a total
income of $242,000.
� Because some of the projected expenses are equipment
and inventory, the second year expenses should be about the same or slightly
less (even when taking growth into account).
� Living expenses projected slightly higher at $50,000
for the second year would leave $12,000 for payment on the note.