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Embrace your practice – this is how you can take charge of your business

– CHRIS FAUL


A few years ago, I did a presentation to 126 optometrists on business matters. To kick proceedings off, I conducted a simple survey, and as it turned out 74% of the room confessed that they did not know what their net profit was for the previous financial year. I must confess, I was shocked! The language of business is numbers and you have to know them and use them to run a business successfully. There has always been a penchant for optometrists to run the business on the revenue line. In other words, if the appointment book was full, all was deemed to be cool. There exists a tricky road with many potential pitfalls between the turnover line and the bottom-line net profit.

The Corona crises has left many businesses in a devastating state of disrepair. Many will have to pick up the pieces and conceive a new strategy to get back on track. This, in itself perhaps, presents the opportunity to take charge of what I call the deeper issues of the optometric business. Nobody will ever care more about your business than you. It is possible to take charge of the financial management of your business by incorporating just a few, but very important protocols.

Business Plan

As the saying goes: “Those who don’t know where they are going, usually get there.” There are any number of business plan templates available from Mr. Google. However, it does not have to be a massive work of detail. It must, at least incorporate a financial forecast and budget, a marketing plan, and specific goals you want your business to achieve. The Gap Model is a useful tool I describe in detail in my book, Navigating the business of optometry. In a nutshell, it shows how to convert the forecast in Rand terms into patient units. This is done simply by calculating an average invoice value, which is the number of appointments for the year divided into the total turnover for the year. Let’s say you forecast an increase in turnover of R300 000 for the ensuing year and your average invoice value is R2 500, you can convert this into 120 patients for the coming year, or merely 10 patients per month. In my opinion, this is a far more tangible concept in planning. How am I going to find 10 more patients per month? Projects, such as digital marketing, can then be set up to achieve this goal. A goal must be specific, attainable, measurable within a period of time. Setting goals for your business by tabling a business plan is a tried and trusted way of growing your business.

Set up correctly

Financial management 101, is about setting up a chart of accounts that will provide you with the right information, in a format you can relate to, at the right time. A big breakthrough right now is the imminent launch of Humint, business information software for optometry. The outstanding feature, along with all the other bells and whistles, is an integrated accounting system. The beauty of this is, it can generate monthly accounts in a summarised layout which can provide the owner with a monthly financial management over-view, which will literally take just a minute or two to assess. There will be no need for month-end journal entries – the owner will have immediate access to financial management reports. This, in my opinion, is what optometry has been waiting for – an online business software package.

Manage your GP%

The easiest way to corrode your net profit is by neglecting your GP%. To be able to manage the GP%, one must understand the mechanics of it. The GP% tells us the gross profit margin we are making across all our product groups. It is a fabulous management tool. It can only be influenced by what we pay for our products or what we are selling them for. These are the common factors that can affect your GP%:

  1. Purchase price
  2. Sporadic buying
  3. Selling price
  4. Shrinkage (theft)
  5. Remakes
  6. Discount given
  7. Discount received
  8. Trade discounts when reflected in the books
  9. Redundant stock
  10. Undisclosed income
  11. Product mix

Monthly Stocktake

In order to authenticate the monthly management accounts, a monthly stocktake is essential. If set up correctly with a barcoded system, it can be an effortless exercise, taking up very little time. It is of no value to discover an inventory shortfall after an annual stock- take. The horse would have bolted.

Pricing

There are only three ways to improve a business;

  1. Increase turnover
  2. Reduce cost
  3. Increase selling price

The first two have a feeble effect on net profit but increasing your price by 1% will improve the net profit by 5%, or increase the price by 5% will increase net profit by 25%! One should avoid the trap of a standardised, across the board pricing formula. Instead, transactional pricing is a better strategy. This is also discussed in detail in my book in the chapter on pricing and discounts.

Lens Casting

In-house Lens Casting, offers massive scope to increase profits. The only requirement is, you must already have the volume of work going through your cutting and fitting lab. If you are prescribing between 4-6 pairs of multi focals per day, the potential saving is in the region of one million rand per annum. You can check out the profit calculator on their web site, to see if it would work for you.

https://www.visionmachinery.co.za/

Value Your Eyes Campaign

This campaign will be launched soon. The goal is to promote eye care nationally, and to funnel appointments to optometrists who subscribe to the campaign. Digital marketing makes it possible to reach millions of people at a nominal cost to the optometrist. Given that only 14,6% of South Africans wear a visual correction, the potential for growing our industry, and particularly generating appointments for the participating optometrists must be enormous.

Some optometrists battle to make R1m turn over per annum, whilst others make that and more in net profit. What makes the difference?

 Navigating the business of optometry

https://www.chrisfaul.co.za/

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