Set up your practice right and make more money

It has always been a mystery to me why it is so difficult to convince so many optometrists to embrace the business side of optometry. There seems to be a general tendency to abdicate from the financial management of the practice. Some optometrists, with high-powered practices, are in the top ten percent of all earners in South Africa, which is remarkable. However, many others must be desperately disappointed with the lifestyle optometry is affording them. To create a high-powered practice, justice must be done to two aspects: clinical expertise and business acumen, which does not mean getting a BCom degree, but just the will to learn some basic business concepts and have the right tools at hand. There is often confusion between practice management and the business of optometry. Practice management is about the daily processes such as cutting an invoice whereas the deeper business concepts are about, planning, funding, merchandising, branding, marketing, and so on. If you have a business, you need to understand and work with numbers, it’s the language of business. The key to it all is to have the right system set up, meaning the right chart of accounts run on the right software. Optometric software has historically been off-line and does not incorporate a built-in accounting system. Now Humint software, an online system, is available and most importantly, its subsidiary, Hufin, will let you take charge of the financial management of your business as easily as pie. Hufin will provide reports with the right information at the right time, in a format you can relate to. Taking control couldn't be easier. Within ten minutes you will be able to assess the status of your business.

But here is where it invariably breaks down, the inability to come to terms with the effort required by change that must be employed to reap exponential benefits for the business. Nobody picks up a musical instrument and sets off entertaining friends from the get-go. No! it takes time and effort to train the brain and muscle memory. The requirement to learn over time applies to just about anything such as sports, art, or mastering a keyboard. Yet, for many, the effort to introduce a better software package to the practice becomes a roadblock! This lends itself to getting stuck in old antiquated business practices, whilst the whole world is moving business online and utilising the best that the digital world has to offer. 

Another pitfall is allowing an accounting firm or bookkeeper to set up your business chart of accounts according to their best practice, and not according to your financial management needs. This often results in a modus operandi where you wait to receive information after the fact, instead of receiving information that will serve as tools to drive the business to better profits. In other words: the right information at the right time in a format you can relate to. The GP%, for instance, is a very powerful tool to protect your net profit, but one must be assured that it is truthful and correct, consistently over time. The optometrist/owner is the one who needs to ensure that this happens.

Letting your staff voice a strong opinion about the ease of use of new software is a big mistake. This often happens without the full understanding of what the long-term goal is with the new software, and a tendency to be set in the involuntary motor actions of the old software. Perhaps the biggest sin is judging software by only the monthly cost, without fully understanding the business implications which happens easily if one has been a stranger to the financial management of the business.

A big danger in business is what we don’t know we don’t know. Did you know that if your cost and turnover remain constant, but you increase your average price by 1%, your net profit will increase by 5%? Likewise, if you increase your price by 5% your net profit will increase by 25%!

Did you know with premises at R320/psm for 150 square meters at a mere 8% annual escalation you will pay over R65 million in rent over thirty years? That should serve as adequate motivation to occupy your premises. The key remains to have the right information at the right time. 

I was fortunate enough to retire from optometry at the age 62 years. I was never the brightest spark in any class, but planning and making the right decisions allowed me to maintain my lifestyle into retirement. Setting up your business structure correctly has everything to do with your business success right up to retirement as far in the distance as it may seem right now.