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.

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

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.

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

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.