How To Put Profit First In Your Optometry PracticeNov 21, 2022
One of the scariest business quotes I see people buy into is “Take care of people and the money will take care of itself”.
Now don’t get me wrong. I definitely agree with the sentiment of this quote. Great people are the cornerstone of any great business.
The problem is relying on that last part a little too much. Taking care of your employees, clients, patients, and vendors is crucial. This will drive revenue into your practice, for sure. But once that revenue comes in, it does NOT take care of itself.
In fact, over 95% of small businesses are struggling. Over 80% fail fast and go out of business. The others fail slowly. Surviving deposit to deposit. Most are one bad month away from having to close their doors for good.
It doesn’t matter if you’re new or well established. I have seen this same issue in a $100,000 business and a $10 Million business. The correction may not always be the same, but the struggle is real.
In my experience, this happens because the owners don’t focus on profit in their business.
How to put your profit first with integrity.
A lot of practice owners I talk with think it is greedy or selfish to focus on profit. If you think this as well, I recommend you reframe your thinking. Profit is not a 4-letter word.
Your optometry practice will only survive if you make it profitable. If you care about serving your patients at the highest level, you need to be profitable.
The PROFIT framework
Use this profit framework to remind you that your money has various goals. (Notice the terms in order form the acronym PROFIT).
Your business likely has a purpose, or a mission statement. You should also have one for your life. If your practice is your major source of income, your life purpose should be funded at least in part from here.
Your business should pay you in two ways. First, a market-based wage if you are working in the business (more on that later). Second, your business should reward you for taking on the risk of business ownership. Frankly, if you’re not getting a return on your investment, the practice is just a job that you own.
Owner’s Pay & Benefits
This is the market-based wage I referred to above. I have worked with several people who could not afford to pay themselves a decent salary. In short, this is not acceptable. If you are not paying yourself for the work you do, that is a clear sign something in your practice needs to change.
If your goal is to grow and scale, that takes money. There are three basic ways to fund growth. Cash (aka retained earnings), equity contributions (i.e., the owner “plowing money” back into the business), and debt. Debt can be used strategically. But the best way here is to self-fund your growth initiatives.
Do you have charitable intent? What organizations, nonprofits, or other causes do you want to support? The most noble causes in the world take capital (read: Money) to meet their goals. That money has to come from somewhere if you want to make contributions to your community and the world.
Your business should pay for the income taxes it generates. Period. It doesn’t matter how your business is structured. If you’re still trying to fund this out of your personal savings, something is wrong.
Remember, your customers and patients want you to be profitable. Actually, they need you to be profitable. This is how to ensure you are able to continue meeting their long-term needs.
I’d go as far as saying you have a moral obligation to them to be profitable. So put your profit first and, by doing so, put your people first as well.
Eric Levenhagen, CPA CTS is the only financial consultant who helps private practice optometrists improve the financial health of their practice with a simple, proven process called Financial Harmony which will reduce their taxes and increase their after-tax profits by at least $10,000 in the first year, guaranteed.