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The 5 Ways to Exponential Practice Growth

business strategy financial harmony profit strategy Mar 19, 2024
The 5 Ways to Exponential Practice Growth

Knowing your numbers in business is critical to your success. You hear it all the time - what doesn’t get measured cannot improve. This is true with your business.

The key is to know which numbers to focus on. 

Most business owners focus on just a few. Namely, number of customers (or active patients), total collections (or Revenue), and net income, or the bottom line of their P&L.

The truth is there is more to it than this. In fact, the examples I gave above are not even numbers you can improve. That is until you break them down into their subcomponents.

The Profit Growth Formula

The key to growing your practice is using the Profit Growth Formula. There are 5 parts:

Leads (1) * Conversions (2) = Number of Exams

Transactions (3) * Average Price (4) = Total Revenue

Revenue * Profit Margin (5) = Net Income

Take note here. The base numbers listed before are the results of the 5 parts of the Profit Growth Formula.

You can’t increase revenue without focusing on this formula. You need one or more of the numbered items (1) - (4) to increase. That, in turn, increases revenue.

Yes, this sounds simple when you see it here. Yet, few people are tracking their numbers at this level.

When you put systems in place to track all these, it gives you a better sense of clarity. And you’ll have actionable steps to take to improve your practice. Let’s look at each of these in a bit more detail.

More Leads

The major hot button issue for a lot of small businesses is their ability to generate consistent leads. In short, this is the result of your marketing and advertising efforts.

There are a ton of advertising mediums and marketing channels to explore. Websites, email marketing, digital advertising, offline ads, public relations, networking, referrals, word of mouth. Just to name a few.

Your job is to find the ones that work the best for your business.

How are you going to know which ones work best? By tracking your results.

Have a tracking sheet or dashboard that tracks the number of leads from each source over time. This can be a simple spreadsheet or even a handwritten chart. This way you’ll learn some other critical numbers about your marketing, like:

  • Acquisition Cost: How much does it cost you to acquire a new patient or customer from each of those channels.
  • Marketing ROI: Which marketing channels are producing the best return on investment? Are any of them losing money?

Track the number of leads from each marketing source over time.

More Conversions

This is your sales process. Marketing and advertising gets you in front of your target audience. Your conversion process takes them to the next step of the journey - becoming a paying customer.

This starts with something as simple as the message you are putting in front of your audience.

The key to successful marketing is to enter the conversation taking place in the head of your prospects. There is a problem your prospects have and don’t want...and there’s a result they want but don’t have.

Don't try to be all things to all people. Your conversion process should follow a simple equation:

  • Interrupt & Engage: The headline gets their attention by addressing the problem they have and don’t want.
  • Educate: Show the prospect how you provide the result they want but don’t have, in your unique way that’s different from your competitors.
  • Offer: Provide the prospect an easy, no-risk way to take the next step. Whether that is scheduling an appointment or getting more information.

Calculate Conversion Rate by taking the number of transactions divided by the number of leads.

More Transactions 

New patients cost money to acquire. You can stretch your marketing dollars by offering more to your current patient base.

Typical small business tactics here are cross-selling, up-selling and down-selling.

For our independent optometry clients, we look at things like capture rate and recall rate.

The goal is to maximize patient value once you’ve spent the marketing money to get them through your door the first time. 

Of course, we do this ethically and appropriately.

Most of the time the patient needs to be educated properly on your additional offerings. Then follow up to keep them coming back to you.

Track how many times your current patient base buys from you in a given period of time.

Higher Prices

Increasing your average sale, or transaction value, is not only about raising your prices. But raising prices should not be ignored either.

Gross revenue per exam is a highly useful metric to help you monitor this.

Calculate it by taking your gross collections and dividing by the number of exams you provide in a given timeframe.

Ideas to improve the gross revenue per exam:

  • Analyze multiple pair sales ratio
  • Analyze the sales mix of high-end to low-end frames
  • Review types of lenses being used and make sure staff are trained to present options to appropriate patients
  • Increase exam fees to at least industry norms

More Profits

Improving margins and plugging money leaks out of your practice are some of the quickest ways to improve your financial performance.

Profit margins come in two major categories - gross profit and net profit.

Gross profit is how much you are making on each transaction after subtracting variable and product costs. 

Analyze your gross profit on eyewear regularly. Adjust pricing and improve buying practices to increase gross profit.

Net profit is calculated after taking into account all your overhead expenses. Regular analysis of all fixed expenses is necessary to ensure things do not slip through the cracks.

We’ll go more in-depth on all these in future posts.  For now, understand that improving your practice is a function of all 5 areas above.

In fact, a small 10% improvement in each of these 5 categories can grow your bottom line by over 60%.

A 50% increase in every category can increase your bottom line results by over 600%.

The improvements compound on each other to build to exponential growth.

Take some time now and figure your baseline metrics in each of these categories. Remember, what doesn’t get measured cannot be improved.

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