We all enter the optometry field for various reasons, but it’s pretty safe to say that we do what we do because we want to help people. Whether we’re treating dry eye or fitting new contact lenses, we’re here to care for and support the patients who walk through our doors.
And in some cases, opening and operating our eye care practice may be the best way we can provide the services our community needs.
However, there’s so much more to operating an optometry practice than filling an appointment schedule. There are budgets to maintain, staff to hire, a building to manage, and, ultimately, profit to make. Without a solid foundation, you might start to feel the all-too-common financial strain many practices struggle with throughout their lifespans.
Today, we’ll look at some important financial principles you should know about when you start operating your eye care practice and the strategies you can use to take your business to newer and greater heights in a simple, 4-step process.
Still, owning and operating a practice is a monumental task—one most people don’t take on alone. If you’re a new or seasoned O.D. looking for new ways to enhance or grow your practice, contact Dr. Scott Colonna today to see how he can help. His services span from leadership coaching all the way to cost analysis and even team building, and you can start learning more when you book an appointment today.
Step One: Create a Budget
The first step toward building a successful eye care practice is creating, understanding, and following a budget plan.
The easiest way to get started on budgeting is by pulling out a pen and some paper and listing the things your practice will need. You don’t need to worry about the exact cost of everything right at the beginning—in fact, there is little to no chance of predicting the precise cost of running your practice—but knowing what your potential costs are can help give a much better idea of how your practice will operate.
Some of the things you might want to list on this simple budget plan can include:
- Rent or mortgage payments
- Renovation costs and furnishings
- Number of staff members plus salaries
- Equipment you’d like to use
- Product inventory
- Consulting costs
It’s also important to have some working capital to help keep the practice afloat for the first few months of operation. It can take a little time to take your practice from the red to the black, but being prepared can help ease the stress these costs can cause.
Step Two: Know How You’re Making Money
At a glance, net income and cash flow may look similar, but they represent very different aspects of your business.
Net income is the money your practice makes before expenses like taxes and wages, while cash flow represents the money going in and out of your practice at any time. If you manage your own optometry practice, it’s vital to know both so you can understand your practice’s financial well-being.
Where Is Your Money Coming From?
While determining your cash flow and net income, take stock of what services and goods seem to be making the most money for your practice.
Suppose you’ve invested in eyeglasses but notice that your dry eye or eye disease management services bring in the most cash. In that case, this might be a sign to pivot your financial focus to maximize your earning potential.
Knowing where your cash is mostly coming from can help you start creating realistic goals to help grow your practice over time. You can then track how well you’re following these goals by using key performance indicators, or KPIs, which we’ll get into later in this blog.
Managing Accounts Receivable Payments
Part of being an optometry practice is working with various payment options. Some people may be most comfortable paying for their services upfront, but others may need a payment plan, or you might have to work with their insurance company to collect payments.
When you start opening up different payment options, you might have a chunk of money tied up in plans for a period of time, and this can be frustrating, especially when you’ve performed a service that costs you “x” amount of money.
It’s essential to keep track of your accounts receivable patients so you have an accurate representation of what your practice is actually making. You can do this by using a number of different software and tools that help manage payment plans and ensure your business makes money on time.
Step Three: Leverage Your Metrics to Grow Your Practice
What Are Key Performance Indicators?
Key performance indicators, or KPIs, are different ways you can measure the profitability of your practice and maximize its potential. Different practices have different KPIs, but some of the key metrics you can use include:
- Monitoring how many patients you see
- Tracking how many products you sell
- Measuring how productive your staff is
- Determining which services have the highest demand
You don’t have to monitor your KPIs constantly, but it’s important to observe them every month or so to see what trends are developing and what you can do to improve the financial performance of your practice.
Growing Your Practice
Monitoring your practice’s performance is a great way to determine how you want to grow your business over time. Depending on what the data is telling you, you may want to:
- Specialize your services
- Increase fees to represent your quality of service
- Purchase another practice
- Invest in marketing and branding
- Invest in newer, more powerful technology
Whatever direction you decide to take, always base your decisions on the information your KPIs provide you and always look at how your decisions add value to your practice. It may take several months or even years to see how well your practice is doing, but keeping an eye on your KPI metrics is a great way to start expanding and growing your business.
Final Step: Have an Exit Plan
We all want to retire eventually, but how you manage your practice will ultimately determine when you retire and how much your practice will support the lifestyle you want to live.
Have an idea of what kind of life you want to have when you retire and how much of a relationship you’d like to maintain with your practice. For example:
- Identify the gap between you and your current retirement goals.
- Decide if you want to sell the practice entirely or as a partnership
- Determine if you’d like to still work in a limited capacity or would like to walk away completely.
Building, growing, and maintaining an optometry practice is a massive undertaking that will take much of your life to do properly. It’s important to remember that everyone makes mistakes at the beginning, and there is no replacement for experience, but getting the right help early in your career can significantly change your practice’s financial health and future.
Find out how Dr. Scott Colonna can help you make the right decisions for your practice by booking an appointment or by visiting his Products & Services page to learn more about how he can support your growing business today.