Do you know how to keep your practice
safe from a slowdown?
By Jerry Hayes, O.D.
It's been bound to happen sometime. After the longest expansion in post-World War II history, bad news is on the economic horizon. Manufacturing and production statistics are down and layoffs are up. Economists are reporting that we're either in a recession or we're headed toward one.
The question for optometrists is: How will a recession impact your practice and what can you do?
By historic standards, economic times are still good. Optometrists reported all-time- high net earnings in the 2000 calendar year. The NASDAQ is off 40% to 3,000, but it was only at 1,000 5 years ago. The Dow Jones index is below 11,000, but it was only half of that in 1996. Despite recent layoffs, the national unemployment rate is still as low as it has been in the last 30 years.
The biggest obstacle your practice will probably face in 2001 is a decline in consumer confidence. However, look for several silver linings when the economy slows down:
- It'll be easier to hire good help this year. You'll find it an opportune time to upgrade your staff.A The Federal Reserve is lowering interest rates to stimulate the economy. This will give you an opportunity to refinance high interest loans.
- Look for real estate values to stagnate or decline. When this occurs, you might want to consider purchasing that house, office or piece of property you've coveted.
- Some of your favorite technology companies will offer shares at lower prices in the stock market.
ILLUSTRATION BY ALAN
Beyond trying to look on the bright side, work on some of these concrete goals for your practice:
- Mentally prepare yourself for a slow growth
year. Unless you're booked up well in advance or have a deal already locked in, this year won't be the time to take on a partner or associate on the speculation that your practice may grow.
- Make sure you don't go into a recession with an over-staffed
practice. Two rules of thumb apply here:
- 1. Your staff compensation expenses shouldn't exceed 18% of your gross income.
- 2. An efficiently run practice doesn't need more than one full-time non-lab staff member per $100,000 of gross income.
- Preserve cash. If your practice is in good financial health and you need equipment, buy it. However, don't pay all cash for capital equipment that represents more than 1% of your gross per year. You might even want to stretch out a loan you anticipated paying off in 3 years to 5 years to lower your payments.
- Don't lock yourself into top-of-the-market real estate
prices. If you're considering buying property or renting new space, you may want to wait until the market softens in your area.
- Don't let your office get that run-down or out-of-date
look. Consumers often divert their spending from frivolous to more quality-oriented purchases during tough economic times. Prepare yourself by making sure your office looks like the place a quality provider of vision care products and services would practice.
It's all in the attitude
If you experience a slow down, take it in stride, realizing that good times are just down the road. This isn't the time to exhibit a negative attitude to your staff or patients.
Make sure that your office is an oasis of professionalism and success. That's the attitude that will attract desirable staff and patients to your door in good times and bad.
Dr. Hayes is director of the Center for Practice Excellence. You can direct practice finance questions to him by fax at (904) 273- 1224, or by e-mail at
Optometric Management, Issue: March 2001