Reviewing Your Past Year and Looking at the New One
December 30, 2015
Another year has gone by and this week between Christmas and New Year’s Day is always a great time for reflection. It is the perfect time to analyze your business trends for the past year and to set goals for the year ahead. Here is a guide with some factors to look at.
Your business year in review
Generate and print your practice profit and loss statement (P&L) from QuickBooks or at least tally up your collected gross revenue for 2015 and 2014. Basically, this is a total of all your payments from patients and insurance plans. Did the revenue increase in 2015 as compared to 2014 and if so, by how much? Of course, you always want to see some growth, but a large practice may grow at a slower rate than a small or new practice. We might say we want to see at least 5% growth for a very large practice, but 10% to 20% growth would be a good goal.
If you have a P&L, look at your major expense categories and see if they are in the normal range for optometry. We especially want to look at cost of goods, employee payroll, rent and other occupancy costs, equipment, marketing and miscellaneous overhead. We would like the practice net income to be 30% of the collected gross revenue, but by convention we include all doctor salaries in this net figure, even if a doctor is an employee.
Also, print your practice production report for 2015 and spend time analyzing the products and services you sold. Where did the revenue come from? What was the total revenue generated per eye exam?
Put your ideas on paper
As you analyze your practice, think about what should be better. I find writing things down on a pad of paper helps me think. Make lists of the services and products that did well and more lists about what you would like to improve. These ideas will become your business plan for 2015.
If your personal income is not as good as you would like, what number would you prefer? Work backwards from that. If you want to earn $240,000 personally, what would the gross revenue of the practice need to be? If you net 30%, your gross would need to be $800,000. That is quite doable. What do you have to do to generate that much revenue? Maybe attract more patients. Maybe raise fees. Maybe sell more goods and services to each patient. Make more lists about how you could improve on each of these big factors.
Here are a few points to consider:
Review your office lease. Don’t wait until the lease is due for renewal to think about your office space. If you do that, you’ll have to make a quick decision and you’ll just end up renewing the lease because it is easy. Is it time to move your office to a larger place with better visibility or other benefits? Moving to a better location is a great marketing strategy; it gets your practice noticed. More space can convert to a larger staff and more sales.
Is it time to open a branch office? If your practice is not growing, it may be due to the local population size in relation to other eye care providers. You might do well to keep your present office, but also open a new one in a different market area that is growing faster.
Should you appoint a marketing director? Is there someone on your staff who could take on this additional duty and work under your direction on all kinds of marketing activities? If this new job takes that employee away from other tasks, hire a new employee to do those tasks. If the plan works right, you will generate enough new revenue to more than pay for the salary of the new employee. What if the marketing doesn’t work? That is a business risk and you need to take some risk to move the practice forward. It won’t fail all at once. You can adapt your plan as you move forward.
Can you increase your eyeglass retention rate? There is no clever way to stop patients from taking their Rx out or buying glasses online. The way to do it is to make your optical great. Make it more beautiful and more impressive. Make it larger. Make the service better.
Office hours. What would happen if you kept the office open a couple of evenings until 7pm and added hours every Saturday until 1pm? What if you were open that weekday that is generally closed? Think about it. You might make more money if you would see more patients. You might make enough additional money that you could hire more staff and maybe even hire an associate OD. Your office could be open 55 hours per week; that does not mean that you or any employee would work all those hours. People can have different days off. Some people can work Saturdays while others do not. One thing I know for sure: patients love office hours that are convenient for them. Offering more convenience to patients is the first step toward great customer service and more word-of-mouth referrals.
Raise fees. Does it make any difference to your bottom line if you raise your fees, considering vision plans are so prevalent? Yes, it absolutely makes a big difference. Even vision plan patients must buy some things from your office that are not covered and when they do, you must make a strong profit.
As you plan for the year ahead, look beyond as well and consider how much longer you want to practice optometry. When could you sell your practice and retire? If you could own the practice as a business and hire an associate to see most of the patients, would you still be in a hurry to sell? Would you enjoy retirement or would you become bored? How old are you and how long might you live? How much money would you need on hand to live as you wish if you had little or no earned income?
These are all good questions and there are many more. Talk to your spouse and a trusted advisor, such as a financial planner or a practice consultant. Join a study group of ODs and ask them what they are planning to do. Share your experience and ask your colleagues to share theirs.