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What’s Ailing Optometry Business Owners Today

Optometry Business Owners

Where You May Be Now

Half of American families are living paycheck to paycheck

You may know someone like this. He’s the guy with the fancy new car, kids in private school, living in the nicest house, with a pool, in the nicest neighborhood. The truth is, he’s probably living well beyond his means, up to his eyeballs in credit card (and other) debt, with very little in savings, and only one month away from bankruptcy.

According to a recent report in Market Watch, half of all Americans are living paycheck to paycheck, while Debt.com reports that less than 1 in 5 of us have set aside emergency reserves, and more than 50% report feeling stressed or anxious about our financial situation. As it turns out, financial problems don’t just occur to those with low income. In fact, less than 20% of Americans facing financial hardship fall below the poverty line.

U.S. Census Bureau data reports that two out of every three Americans carry credit card balances, and almost 20% of us have student loan debt. According to NerdWallet, the average American has $15,983 in credit card debt, $27,775 in car debt and $47,047 in student loan debt.

For many business owners, including optometric owners, we run our businesses the same.
Optometry Business Owners

For many business owners, including optometric owners, we run our businesses the same. We spend beyond our means, are buried in business debt, struggle with cash flow and are forcing our businesses to survive off of scraps, assuming there are any to begin with. And too often we rob from our businesses, keeping everything for ourselves (too high of owner’s pay) depriving our businesses of the critical resources needed to survive (cash)! Studies show that only half of all businesses survive beyond six years. Yet what rarely gets mentioned is that the other half that do survive, struggle to make ends meet.

Fortunately, most optometry practices do survive, but are living insurance check to insurance check, are run by stressed out doctor owners, and rarely experience any kind of real profit or healthy cash flow. Fortunately, it doesn’t have to be this way. Our businesses don’t have to be a source of stress, anxiety and frustration. With proper planning and the right strategy, it’s possible to have the practice of our dreams without it practically killing us.

Too Much Focus On Growth

I clearly remember the day that I realized that I didn’t have a income problem; I had an expense problem. Over the last 20 years, I had parlayed 5 practices into one of the largest single location practices in town. But as our top line revenue continued to grow, so did our expenses, and also my headaches. While our focus over the years had been almost entirely on growth, what we’d (admittedly) failed to control was our debt and our expenses. Sure, we were growing, but so was our cost of goods, our staff, our occupancy costs (I purchased a building in 2015) and the cost of insurance, the internet and paper clips.

The Cash Flow Pinch

Most money problems occur when income slows down or when expenses unexpectedly rise. When both occur, at the same time, you have a cash flow pinch that can result in a disaster. A good month or quarter can convince you that you’re doing everything right. Then you start spending, convinced that you’ve got this; business is booming, and you’re on top of the world. After all, this is the new normal, right? Then you have a slow month, hit the panic button, and scramble to cover the bills by slamming on the breaks.

When we get into financial trouble like this, we hustle to increase revenue to cover the new expenses that we’ve now committed ourselves to (new technology, equipment, third party contracts, etc.) This cycle causes our cash flow to roller coaster and spin out of control.

So we try to outgrow our financial problems: increase collections, acquire another location, buy more equipment/technology, etc. The result is even more expenses, more debt and more financial stress. When we focus only on growth, we simply increase expenses, since as our collections grow, we must incur new expenses to support that growth. And unfortunately, growth doesn’t guarantee profits, only more overhead and more stress.

Too Much Debt

Most of us carry too much debt in our businesses. The temptation to have the latest technology often causes us to make, quite frankly, dumb purchasing decisions that later prove to be costly and unsustainable by our practices. While we all want to provide the highest level of care possible to our patients, it often comes at the cost of our cash flow. When making equipment purchases, we often focus on the monthly payment (“I only have to do X number of procedures a month and I’ll break even”) and forget about the long term liability that we are creating for the business. What happens when we can’t hit the minimum number of procedures to break even? Well, we’re still stuck with that payment, no matter what! And even if we do break even, why are we happy about that? It’s as if we’re running a non-profit simply hoping ​not to lose money! By locking ourselves into loads of long term debt, we practically guarantee ourselves poor cash flow and some sleepless nights with even the slightest downturn in business. Devising a plan to destroy business debt is critical to long term sustainability.

Too Many Expenses

I am fortunate to have a great management team in my office. In fact, my Chief Operating Officer (COO), Don, has been with me for the last 15 years and has seen me through almost all of my practice acquisitions. Recently, I decided to take over the bill paying tasks in my office. I had recently started a new cash flow management system and I wanted to see how things were going to unfold with this new system. What I discovered was nothing less than shocking! The amount of waste and redundancy in my office was enough to make my head spin. At no fault of my finance team, we had grown into a cash consuming beast.

Very quietly, we had become a bloated, inefficient, debt ladened business with few controls to manage our growing expenses. Did we really need paid subscriptions to Pandora, Spotify ​and​ SiriusXM? Seriously! And what about that music on hold system that we’d had for 20 years (you know, the one our patients hate) only to find out that our new, fancy VOIP (that’s voice over the internet for those less tech savvy) system came with it’s own on-hold system. The point is, I’ve been uncovering a goldmine of cost savings simply by taking a hard look at every dollar we spend.

If you take the time, you just might uncover hundreds, if not thousands of dollars of savings simply by looking at every single expense you have in your business. Pull out your Profit and Loss Statement for a full year and get busy. Go for the low hanging fruit, all of those completely unnecessary expenses that you’ve been burying in your practice and ask yourself: “Would I rather be paying for this, or have the money in my pocket?” When looked at from this perspective, you might be surprised by all the savings.

We started our businesses for financial freedom, peace of mind, and an investment toward our future…

We started our businesses for financial freedom, peace of mind, and an investment toward our future, yet most of us are stressed out, worried about payroll, and even possibly growing resentful toward our businesses. When we simply focus on growth, looming debt and increasing expenses can quietly erode any gains we’ve made in the top line. For most practices, once we realize that we have an expense problem instead of an income problem, we can then begin the journey toward improving our cash flow, our profit and our insomnia.

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