January 6, 2007

It's 2007 – Do You Know Where Your Numbers Are?

You should be getting your year-end figures from your accountant soon. Are you one of those people blessed with a knack for numbers who is eagerly anticipating gains over last year? Or are you one of those too busy running the business to bother with numbers?

The fact is that you can't improve what you don't measure. Now you're probably wondering, why is this designer going on about numbers? Isn't my accountant or bookkeeper supposed to keep track of that stuff?

Your bookkeeper can keep your checking account straight. Your accountant can do your taxes. But until you start tracking and comparing how your business is performing from one year to the next, you're like a ship's captain without a compass.

If you keep on sailing in the same general direction you’ll probably hit some land sooner or later. But it won't be the destination you hoped for. If you want your practice to sail into the port called success, you have to start by finding out your current position. Then you'll be able to set specific goals and figure out strategies and tactics to reach those goals.

When I talk to practitioners who want to move to a new office or build a new building, one of the first things I ask for are a few basic financial statistics on their practice. Then I can talk with them about how the right design for the new office can result in big gains in those numbers. We can't set measurable objectives for the new facility without having current numbers to start from.

Many times the gains turn out to be higher than they first dared hope for. I like to know the numbers so I can keep score on how well my designs perform for my clients. (By the way, I know the numbers on my own business and I use them to improve our performance year by year. I practice what I preach.)

Office design is first and foremost about higher performance and productivity, which as a bonus comes wrapped in an attractive package. When you have "before and after" numbers for comparison, you can figure out the exact return you are getting on the investment you made in the new office. If you have a nice-looking new office, but aren't seeing significant gains in your numbers, you have made a bad investment.

What are these magical numbers that you should know about your practice? Here are the very basic statistics that will tell you if you're going in the direction of your dreams or foundering in the doldrums.

1. Gross revenues
This is the easiest. Most people have at least a rough idea of how much money came in the door last year or last month. But it's much better to have an exact number to work from.

2. Growth rate
Compare this year's gross revenue with last year's. Did you take in 10% more (average), 20% more (better than most), 30% more (on the fast track!)? If your growth rate is less than 10% you are in the danger zone and you'd better do something about it pronto, like hire the best practice consultant you can find!

3. Average number of exams performed per month
Your office management or accounting software should be able to pull up this number for you without much fuss. If it doesn’t, have your accountant or bookkeeper figure out a way to get this number and report it to you monthly.

4. Average revenue per exam per month and per year
This is a simple calculation that even the most number-resistant business owner can and should look at every month. Just divide your monthly income by the number of exams performed that month.

At the end of the year average out all twelve months to see your average revenue per exam for that year. Here's where the story gets more interesting. Small improvements in either or both of these numbers can translate into a great deal more income over time.

Is your practice maxed out on productivity? If you are booked out two weeks or more and office bottlenecks prevent seeing more patients, then it's time to start planning a move up to a bigger office! A business that’s not growing is in danger of slipping backwards.

Is your dispensary set up right so the frames practically sell themselves? Or are your opticians handicapped by poor lighting and outdated displays? Improving the dispensary should always result in higher average revenues per exam, putting more money in your pocket whether or not the number of patients seen increases.

However, a dispensary upgrade should also result in more word of mouth referrals and more new patients. When you invest in a new dispensary, reserve some money for advertising and promotion of your new and improved look.

One of the most powerful words in advertising is the word “new,” so take advantage of having something new to promote! With a one-two punch of new dispensary plus promotion, your average revenue per exam can easily shoot up 20% or more.

5. Profit
When all expenses are subtracted from all income, this is the "bottom line" that the business gurus always talk about. If some of your other numbers show gains, but there is little or no gain in profit, then you need to do some serious pruning on those expenses. Or maybe take a look at whether you're spending so much on new equipment that it's eating up all your profits. Equipment junkies will hate to face that one!

There are many more sophisticated comparative statistics that a business consultant can help you glean from your accounting records. Then a good consultant will teach you how to use them to improve your practice and your profits. At the very least you must have a handle on the basic five above if your ambition is to join the ranks of the top practices in your area.

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