I am a huge numbers fan. Numbers can tell us so much about not only your business but also about your staff, office culture, as well as guide our future decisions. My excitement with numbers began when I was young, growing up in New York City. My father would constantly drill me on my multiplication tables and how to calculate the tip in restaurants. Running a medical eyecare office has become more challenging over the decades but understanding gross revenue versus net revenue has never been more vital. A business’ Gross revenue equals every single dollar collected and deposited in your company’s bank account, while Net revenue refers to the amount of money left after every possible office expense is paid. Gross revenue is often confused with build revenue. If you are on a cash basis system with your accountant, billed money means absolutely nothing. However, if you are on an accrual system, then this needs to be looked at differently. As an owner, you need to factor in the percentage you truly receive based on your practices historical data.
I am all about focusing over 90% of your time on growing your “Top” numbers (your gross revenue) as much as possible. It’s always easier to run a business with annual growth rather than with a stagnant, or worse, declining practice.
Growth for me has always been different because of how the cost of doing business varies. I define growth as anything 5% or more from the previous year’s gross revenue. I hear quite often that this is absurd and incorrect. It’s my viewpoint that inflationary costs need to be factored into owning a brick-and-mortar business. For example, our national average for staff salary raises is just above 3%. Health insurance rates, utilities, expenses, and property taxes are also examples of items that continue to inflate. This is why I use the 5% or more barometer for “true” growth. Part of being a true leader is being honest with ourselves; pats on the back only go so far.
Net revenue is something we all spend way too much time on. I recommend spending only the month of January on reviewing and prioritizing all possible negotiable expenditure items. Some examples of these negotiable expenses are insurance (all types), costs of goods, I.T., waste disposal, security companies, retirement plans, and many more which we will discuss in later articles. I am a believer in the age-old practice of getting at least three quotes for each item. Obviously, if a great deal presents itself between February and December you should address it but stick with that mindset until the end of January and then switch to focusing on full-on growth. This also allows us to create a budget for expenses for the entire year, and then take that budget and do the math. We take the monthly budgeted amount and divide that number by the number of hours we are open, so we know our costs of doing business down to the hour. Too often I will see our clients forget to factor in their one-time payment items. These must be factored in and broken down to truly understand your operating costs.
You cannot cut your way to success! There are only so many things you can cut before nothing is left. The mentality of constantly cutting will begin to affect culture within the office or worse, start becoming visible to patients and clients. It’s all about growth! Growth comes from change and challenging yourself as well as your staff to become the best possible.