fix this practice

The Big Five of Business

Focus on these areas to improve your practice’s financial performance.

Richard S. Kattouf, O.D., D.O.S.

Q I love to see patients and practice optometry. The business aspect of my clinic and optical, however, have passed me by. Can you share the most important business aspects of an optometric practice?

Dr. G.L. Dawbeck via e-mail

A: Most O.D.s do a great job in the clinic, yet many do not have a pulse on the business of the clinic or optical. To improve the business performance of your practice, concentrate on these five areas:

► Percent of salaries (for nonoptometrist employees) to gross. While the percent of salary to gross for non-optometrist employees differs from region to region, here is the important point to remember: If you automatically assign raises annually, you will exceed your ratio and lower your net income. Once the percent of salaries to gross is out of control, the remedies are difficult and painful. To avoid this situation, develop a commission system. When staff members earn raises through commissions, the practice avoids raising this key business metric.

► Cost of goods (COGs). COGs is the amount spent on sellable goods (eg., frames, spectacle lenses, lens enhancements, contact lenses and contact lens supplies). The national average is 29%. When a practice lowers its COGs by 10%, its net income increases by that amount. To lower your COGs, consider developing an in-house surfacing, lens casting and finishing service. If operated properly, an in-office lab can cut costs on progressive, A/R coated lenses by two thirds. In my experience, any step that improves service raises income.

► Staff control. To avoid overtime pay, set a clear policy that limits employees to no more than 40 hours per week without permission of the owner. In addition, base all scheduling decisions solely on patient and practice needs. Do not allow any employees to influence scheduling decisions, as such practices tend to compromise staff morale.

Also, encourage productive work time. Cell phone use (talk, text, etc.) and surfing the net are production and profitability busters, so prohibit cell phones within the building, and place a “lockout” system on computer software. (This does not apply to the owner.)

► Collections. Teach all employees the organizational method of collecting fees. For example, patients with managed care (M/C) vision plans must pay all co-pays in full. No partial payments. You cannot afford to give M/C patients extended payments. Doctors stay out of the business area when fees are being quoted and collected. As a consultant, I observe patients ignoring the assistant and speaking to the doctors concerning payment options. Empower your staff, and get back to the clinic. The worst thing an owner can do is not adhere to his/her own policies.

► Hours of operation. While this is definitely the owner’s decision, consider evening and Saturday hours to accommodate patients who work during typical weekday business hours.

To verify the results of your efforts in these five areas, monitor profit-and-loss statements on a quarterly basis. Initiate a measureable check-and-balance system to manage staff performance.

Awareness, control and attention to detail are the keys to improving your practice’s business performance. Remember: You’re running a business. OM