Is 2019 the Year You Actually MANAGE Your Profit?

Perhaps you’ve heard the news that Williams Group FastTrack clients have seen steady revenue growth in 2018 thanks to the program, but what really has me excited as we roll into the new year is the profit growth!

Remember, as we grow practice revenue, we want to be growing profit disproportionately.  Disproportionately, that is, in favor of HIGHER profit, of course. In other words, as we grow top-line revenue, we want the bottom-line percentageof that revenue to INCREASE, not decrease.  It absolutely can do so, but we often see the opposite – high grossing practices with lower overall profit percentages (although total dollars of profit are likely higher).  Does it strike you there’s something wrong with that picture?

The reason for this is really quite simple – as practices grow (and grow and grow and grow, because you’re good at what you do and you’re patronized for that), many CEOs (that’s you, Doc) manage revenue and expense relationships byHOPE.…You know,“As my practice grows (and grows and grows and grows), I HOPE there’s more left for me after everyone else is paid…”  

Don’t get me wrong… hope is great. I love hope. I tend to live my life as a hopeful person.  But management by hope will only get a practice so far.  At some point, profit is a product of intelligent design, not just crossed fingers.

If I’ve learned anything in 33 years of consulting, it’s that increasing profit is a decision, before it’s a set of initiatives. We decide that we’re actually going to manage profit (my personal definition of “manage” is “choosing to control an outcome”),then we put together an action plan of initiatives that make it impossible not to do so.So if we’re going to manage our profit, we need first to make a decision, then form a very specific objective (and sub-objectives), then prescribe a set of initiatives that will power it to happen.

In reality, most practice owners have this completely backwards. They expose themselves to a set of initiatives (good ideas at the peer-to-peer meetings, lectures, articles, webinars, etc.), but they didn’t first make some sort of decision. It’s kind of like diets. I end up hearing about the newest diet that worked well for a friend, but I didn’t first make a decision about what I was going to accomplish before learning about the diet (probably any diet would work if I’ve made a decision). So with my actions not powered by a decision, and I don’t stay with it and my attempted diet fails. It’s not that the diet (the initiatives) doesn’t work; but rather, that it didn’t work for me.   

Likewise, we may get all kinds of ideas to grow practice profit (or any other practice result), but those ideas weren’t powered by a decision. Did you ever wonder why we don’t implement the stuff we hear at seminars? There you go!(and believe me, it’s not just you…) But hey, at least we had some nice dinners and saw some good friends at the meeting.

How about this, to kick off the new year instead, let’s begin with the end in mind. Let’s make a decision that we’re going to be more profitable. That’s how it’s going to be, period. Then let’s set a very specific objective for practice profitability, and work backwards. Let’s next set the sub-objectives (which we will need both for the revenue and expense sides as well as team productivity and other key metrics). By the way, most staff have no idea what our metric objectives are, so setting these will be a wonderful exercise in which to involve the team. You may not share overall profit objectives with the team, but they should certainly know and be involved in setting our objectives for key production metrics.

When we have these defined, THEN let’s develop and prescribe a set of initiatives that are as foolproof to our outcome as your prescription is for my presbyopia. In fact, it works remarkably similar. As my optometrist, you made a conscious decision regarding the outcome of my vision (to improve it up-close and distant) as your patient, committed to that decision with a very specific objective (20/20 vision), which deliberately drove your actions and ultimately your prescription to get me there. Decision, objective, prescribed initiatives and outcome. Provided I fill the prescription (i.e. – IMPLEMENT the initiatives!), I’ll have my perfect vision. Now then, just practice what you practice!

Learn more about our FastTrack programs.

Tom Bowen

Executive Vice President
Williams Group
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Every small business owner knows that at some point they will want to divest their business interests and enjoy the fruits of their labor. Determining when to start the process of transitioning your practice is key.  If you are considering a fractional buy-in with a valued associate doctor, several factors are vital to a successful transition.

Motivation:  Most practice owners begin to think about an associate with ownership interest when either they, personally, or the business is at a crossroads. There may be a desire to add new services, to realize practice growth within their primary office, or there may be the opportunity to expand with a neighboring satellite practice. Some practitioners consider a fractional buy-in when faced with a full schedule that can’t be managed alone or when increasing demands of ownership responsibilities become too great. Other doctors simply have a desire to cut back on production and realize a return on capital.

Evaluation:  When evaluating an associate for a fractional buy-in, consider what your associate has brought to the practice that would warrant a long-term ownership relationship.  Perhaps, they have added a valued specialty service, created/updated standard of care protocols and trained staff, or added production to off-set patient demand, resulting in a more efficient schedule. Your associate may have brought a higher level of lens expertise, dispensary management or improved coding and billing to the practice. It may have been their understanding of business finances and key performance business metrics, or desire to build the practice through community involvement.  Whatever the value-added process, policy or procedure, your choice in joint practice ownership is an important and far-reaching decision that will impact your business success and service to your community for years to come.

Preparation: So, how do I get started with the plans of joint ownership? There are so many aspects to consider.  The unique structure of your strategic transition plan can be found in the answers to your questions. What percent of ownership do I offer my associate? What can my associate afford and still have enough cash flow to support a family? How do we determine a purchase price? How do we structure the purchase and the purchase agreements? Where do we go for financing? What are the steps to transition and how long does it take? How do we structure our compensation after the sale? What operating agreements do we need once we are joint owners? These and other questions must be addressed throughout the transition process and when properly addressed provide a road map that is clear, insightful and effective.

You’ve spent your professional career growing and managing a successful practice. Your fractional buy-in strategy is unique and must be carefully considered and strategically planned. For over three decades, Williams Group has been committed to offering professional services in a knowledgeable, ethical, and timely fashion to help you reduce the stress of ownership transfer.  Our transitions team has extensive industry experience in all facets of the buying and selling process. From valuations to strategic buy/sell consulting to estate planning, Williams Group is the optometrist-recommended choice to navigate the next phase of practice ownership. Learn more about the programs we offer.

 

Tammi Sufficool

Vice President of Practice Transitions
Williams Group
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