cover story
Write a Winning
Business
Plan
Don't be intimidated by the details. With
forethought and organization, you can start a strong practice from scratch.
By Neil B. Gailmard,
O.D., M.B.A., Munster, Ind.
YOUR
PRACTICE
will become your career and likely one of the largest financial assets you will
ever own. It deserves to be planned properly.
My final course in graduate
business school was dedicated solely to writing a start-up business plan. I submitted
my finished B-plan, as we called it, to the faculty committee who decided whether
or not I would receive my MBA. Fortunately, I passed.
In this article, I share some of the
basic steps of writing a business plan, as well as some of the lessons I learned
while starting my own practice.
|
Go-to
Guides |
| Some excellent sources to consult as you begin
your quest for business facts include:
• Practice management lecture
notes
• Optometry practice management textbooks
• Articles in Optometric Management and
new O.D.
• Original surveys or market research —
just ask people
• Practice management consultants. Although
these experts charge professional fees, they may provide easy answers to questions
at no charge for the goodwill value.
• Established practitioners
• Printed materials and Web sites from vision
care plans, medical insurance and Medicare
• Optical suppliers, labs and equipment
vendors
• The AOA and other professional optometry
organizations.
|
Why a Business Plan?
Many optometry practices probably started without
a formal business plan, but that doesn't mean you should try to do the same.
Typically, business plans are presented
to potential lenders, from banks to venture capital firms, to obtain financial support
for a new enterprise. Most O.D.s starting a new practice or buying an existing one
will need financial assistance, but even if you don't, a business plan is an essential
exercise for checking the feasibility of the venture. It is the due diligence for
a huge investment of your money and time.
Lenders and some landlords may
require a business plan, but you also may want to share a copy with your accountant,
future partners and associates. However, the most important person who can benefit
from your business plan is you, because it makes you consider and research every
aspect of your practice. A good business plan becomes the blueprint for your future
operations.
When I opened my practice cold,
I needed a bank loan to finance the equipment, inventory and start-up costs. I didn't
know how to write a business plan back then, but the bankers requested some of the
same elements, such as financial statements, projected costs and projected revenue.
I learned the impression I made on the loan officer had a huge impact on his approving
my application. When you think about it, all you have to offer a lender is yourself
and your plan, since your business does not exist yet and you have no track record.
If I had approached the bankers with
an impressive business plan meeting all their requirements and more, I have no doubt
I would have obtained more financing at a better interest rate.
Build a Good Case
|
Elements of a Successful Business Plan |
|
You don't need to follow absolute rules for writing
a business plan, but it should be as comprehensive as possible. In addition to the
cover page, table of contents and executive summary, you should include:
• Information about ownership
and management
• Plans for staffing the
practice
� Financial data
• Marketing strategies
• Analysis of
local competition
• Plans for selling
your services and products
• Details about
the customers and suppliers with whom you plan to work
• Daily production
and operations procedures
• Plans for meeting
government regulations (HIPAA compliance)
• Summary of
information presented in the business plan (strategic planning)
• Appendices
listing the references and documents used to create your business plan |
As you begin to develop your business plan, keep
in mind the one tenet my business school instructors drilled into me: Every assumption
you put in your plan should be based on facts, not conjecture. At first, that may
seem impossible when you have to predict how many patients you'll see per day or
how much each patient will spend, but you can consult resources to back up your
projections. (See "Go-to Guides" for a list of resources.) An
effective business
plan uses information from these sources to back up every statement. Remember to
cite sources in the text and list them in the appendix.
Here's an example: If you project you'll
see four patients per day for comprehensive eye exams and two for contact lens check-ups,
follow up with a statement that your estimates are based on interviews with other
O.D.s who started cold and on survey data obtained from the American Optometric
Association.
Business Plan Basics
The required components of a successful business
are too numerous to list here, so I'll limit my discussion to a few of the most
important. (See "Elements of a Successful Business Plan" for a complete list of
topics.)
A typical business plan is 30 to 40
pages long plus an appendix of supporting data. This document should start with
a cover page and a table of contents showing the name of the business, the names
of the owners and a list of topics covered in the plan. Next, include a one- to
three-page executive summary that:
• Describes
the services and products you plan to offer
• Lists consumer
benefits
• Summarizes
your accomplishments
• Discusses
how much capital you will need
• States facts about the eyecare
market size and growth rate
• Identifies any market
niche of the practice.
In addition to describing your business
and why it will be successful, the executive summary also should grab the reader
and encourage him to keep reading.
|
Don't Forget the
Details |
| Many different elements go into developing a successful
business plan and it's sometimes easy to overlook the small details. Make sure you
include:
• A curriculum vita for each
owner
• Job titles and descriptions of proposed
staff members
• A copy of your fee schedule and mark-up
formulas
• Professionally designed copies of your
practice name and logo
• A description of your proposed practice
recall system
• The name of the office management software
system you plan to use.
Consider developing a checklist to keep track of your progress
as you prepare your business plan.
|
Vital Financial Data
Many businesses fail because they are undercapitalized.
Be sure to ask for enough money, but be conservative by limiting your equipment
and inventory to just basic requirements at first. Keep the budget lean, and stick
to it. You always can reinvest once you're in the black. Important financial information
to have at hand includes:
• A
personal financial statement. This is also called a net worth
report, and it lists all assets and all debts (liabilities). The difference between
your assets and liabilities is your net worth. Many recent college graduates have
a negative net worth, which can make financing more difficult, but not impossible.
As small businesses go, optometry practices are very low-risk. Banks provide blank
forms for borrowers to fill out, which can serve as a helpful guide if you're not
familiar with financial statements, but don't actually use the form. Provide the
same data in your own format.
• Practice
financial statements. Incorporate a detailed statement of income (profit and
loss [P&L] statement), balance sheets and projected cash flow.
• Pro
forma (projected) practice P&L statement. This can be difficult,
because you have to gather information to make an educated guess, but this step
is extremely important, not just for the lender but also because you'll get an advance
look at your potential financial situation.
• Income
and expense information for a stated period of time. (See "Projected
Budget" for a list of typical expenses.) Provide projected monthly and annual P&Ls
for 3 years into the future, showing growth in units, revenue and profit. Remember
that you will start to see established patients in addition to new patients after
year one. Calculate your break-even point (when your income passes your expenses),
making sure to factor loan payments back into the expenses. Some banks may let you
pay interest only, or they may not require any payment for the first several months.
Of course, interest keeps accruing, but it can help you through a period of weak
cash flow.
• A list
of all clinical equipment. Don't forget to account for optical display and office
furniture, as well as clinical equipment. Provide a price for every item on your
list.
Get the Word Out
|
Projected
Budget |
|
Use these figures with care when you're estimating
income and expense information because a new practice does not have enough gross
revenue to ensure accuracy. Cost of goods sold should remain correct, since it varies
with volume, but the other expenses should reflect your actual marketplace.
• Cost of goods sold: 30%
• Equipment:
3%
• Rent: 7%
• General
overhead: 7%
• Staff payroll: 18%
• Net:
32%
• Marketing: 3%
The practice net income (profit) is the amount
left over after all expenses. |
Lenders will be interested in how you plan to
attract patients. Begin with a summary of local demographics, and research growth
trends, age groups, household income levels and average education. Use national
census data and information from the local Chamber of Commerce. Next:
• Tour target
market areas and document growth spots.
• Provide national
statistics about the eyecare and optical industry.
• Discuss how
you will attract new patients, such as local newspaper advertising (announcements),
press releases, office open house or a direct mail campaign.
• Describe insurance
plans (vision and medical) for which you will be a provider and how patients select
doctors on these plans.
• Cultivate referral
sources, such as other doctors and school nurses.
• Discuss your
community involvement in civic groups and participation in vision screenings and
health fairs.
• Provide speeches
and seminars on eye care topics.
Scout the Territory
If you want to establish a strong practice, you
need to know your competition. Include this information in your business plan by:
• Providing a
list of all other eyecare providers within the market area. This should include
private O.D.s, ophthalmologists, optical shops, optical chains and mega-mart optical
stores. A map with colored dots is a helpful visual aid.
� Discussing
how you will differentiate your practice from the competition. Will you offer superior
customer service or specialty niches?
Restate Your Argument
The second to last section of your business plan
should bring together and coordinate all the previous sections. Restate the major
goals and the overall vision of your practice and make a strong case for why you
will be successful. Discuss your practice in the context of SWOT: Strengths, weaknesses,
opportunities and threats.
Follow the strategic planning section
with appendices that list all the supporting documents you used to prepare your
business plan. Include items like invoices, sales quotes, correspondence, copies
of articles and Web sites, market research, office policies, fee schedules, examples
of advertisements, licenses, awards and achievements.
Reap the Rewards
Writing a winning business plan is hard work,
but it should also be a labor of love. Get off to a good start by recognizing your
role not only as a doctor, but also as the CEO of your company. This philosophy
will serve you well throughout your professional career. Develop your vision of
a truly great practice and devote the time and energy required to make it happen.
Dr. Gailmard
is in private practice in Munster, Ind., and is president of Gailmard Consulting.
He is editor of "The Management Tip of the Week," a publication of LWW VisionCare.
Optometric Management, Issue: March 2006