Article Date: 11/1/2000

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.

Making connections

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 relocation?

         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 committee.

Submit a loan application in the following manner:

         R�sum�. 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.

Other services

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.

Quick solutions

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 street.

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 be $48,000.

         Total expenses = $180,000

         Projected practice income = $118,000 (for the first year)

         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 include:

         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.

Optometric Management, Issue: November 2000