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Tuesday / May 21.
HomemibusinessTaking Stock of Your Profits

Taking Stock of Your Profits

It is the job every business owner dreads – the stock take. Time consuming? Dull? Yes and yes. Many businesses have more than half a million dollars tied up in stock. Managed properly, it could be the key to unleashing your practice’s profits.

As an eye care professional, you know the importance of a clinical eye exam. It would be nice if your patients prioritised their eye health in the same way. But as we all know, running a practice is not just about caring for vision, it’s far more complicated than that, requiring today’s optometrists to master skills in business, fashion… even psychology.

While some patients may be content to take whatever frames are on offer, spectacles have evolved into a high fashion item. They’re also often considered to be an intensely personal item – an extension of the wearer’s personality. Conservative frames may reflect a more subdued personality, while bold colour may indicate flamboyance or the willingness to take risks.

So, if that’s true (and you know it is) it is not too big a leap to acknowledge that the frames you have in stock are also a reflection of your practice, and speak volumes about how you perceive your patients. With the average optical practice carrying stock valued at around AUD$600,000, that’s an enormous amount of wasted capital, if your message is off key.

The sales rep can be your secret weapon. Gone are the days of the ‘frame flippers’, many of today’s optical sales reps are more like business consultants

First Impressions

We’re all warned about judging a book by its cover, but that’s exactly what potential customers do when they pass or visit your store. It is said that it takes about 15 seconds for someone to form a first impression – which is why so much money and energy is devoted to creating enticing shop front displays.

Ever walked into a clothes shop, scanned the racks for something that catches your eye, only to turn on your heels and walk out? The same happens in an optical retail practice. Potential clients will judge your practice on the frames you stock. Are they old and tired or worthy of a second look? More of the same or an interesting mix of styles? Fashion forward and a little funky or entirely predictable?

Sure, every practice has its core clients – those you have developed a close relationship with. You are the drawcard.

But, for the rest, you have to maximise those 15 seconds. They are equally happy to buy down the street (or online) and they’ll have their eye exam at the same place they’ll buy their frames. If they like the look of your stock, they’ll stay – providing you with a chance to dazzle them with your professional skills and personality and convert them to a core client – if not, that opportunity will pass
to your competitor.

The first lesson, then, is that ‘first impressions leave a lasting impression’. The second is that the frames you stock will define your clientele.

Facts and Figures

Here are a couple of quick questions for you:

  • How old are your average patients – are they elderly, young adults, families?
  • What occupations are represented in your client list – predominantly tradespeople, office workers, corporate professionals, stay at home parents?
  • How much do your customers earn?
  • What do they do in their spare time?

Knowing your customer demographic is key. It’s no good stocking the latest cutting edge frames from Silmo if the bulk of your client base is corporate conservative. Budget offerings are unlikely to appeal to people from a wealthy demographic (and vice versa). Stocking sports frames may be a waste of time if you have an elderly demographic.

While this seems like basic business sense, it is surprising how many optometrists don’t identify their customer demographics.

Here are a few more questions:

  • Do you know the sales cycles of your frames?
  • What are your top performers?
  • What frames are not selling?
  • How much is your average customer willing to spend?

If the answer to any of these questions begins with: “I’m not sure…”, then you’re not managing your stock effectively.

The right selection of frames should be available for sale whenever a customer comes into the practice and is ready to purchase. In today’s time poor society, we’re used to getting what we want, when we want it. How can you do that if a) you don’t know who your customers are and b) you don’t know what they’re already buying?

Wasted Resources

The optical practices I’ve dealt with typically have up to AUD$600,000 tied up in stock. That’s a lot of resources locked away, particularly if your stock is not moving.

The longer a frame sits on your shelf, the more money it drains from your business because capital tied up in stock is not available to invest in other growth opportunities.

Your inventory represents a significant portion of your working capital: How do you free up cash? You need to work on reducing the sales cycle as soon as you can.

Do you know which frames are the best performing ones? Purchasing new frames not only encourages and motivates the staff, but can be a powerful incentive for both existing and new customers to enter the store, touch and try on the latest style and colour trends.

Do you stock frames that are tried and true classics? It may be counter productive to stop stocking older styles, if that’s what your customers want.

Every practice is individual. Remember: shortening the time that frames sit on the shelf frees up capital to invest in marketing and to advertise your practice to generate faster growth and increased revenue.

Using Your Sales Rep

The sales rep can be your secret weapon. Gone are the days of the ‘frame flippers’, many of today’s optical sales reps are more like business consultants. They visit a variety of practices in your area. They know what sells. And it is in their best interests to help you to sell frames.

Many sales representatives today can assist your practice at point of sale, with marketing resources and even training.

By choosing to work closely with your key suppliers, you can harness their resources, ideas and energy to work the frames with you and for you.

Timing Matters

It also pays to take note of when to buy frames. Develop the best possible relationship with your suppliers, but buy frames only when it suits you and your business needs.

Buying frames because they are on special, or part of a promotional offer, is not the best way to buy. In fact, it is a false economy. How often have you come home from a personal shopping expedition with a ‘bargain’, only to have your purchase sit unused in your wardrobe/cupboard/shed? The same is true for purchasing optical stock.

Ask yourself what newly available products are likely to be highly attractive to your particular customer group. If the product just happens to be on sale or part of a promotion; that’s great. Grabbing ‘bargains’ to keep cheaper frames on the shelf or to fill up empty space is not the answer – fully understanding your customer demographics and stock
turnover pattern is.

Alternative Strategies

For some businesses, other strategies to manage stock include taking advantage of services that allow practices to hold stock on consignment. The customer tries the frame on in the store, the order is then phoned through and completed frames are delivered to the optometry practices.

While these systems are becoming increasingly popular, there are tax implications for consignment stock.

Right Advice

Still not convinced of the benefits of effective stock management? I worked with one practice recently that increased its sale of frames by about AUD$50,000 (in wholesale terms) in 12 months – by doing nothing other than looking after their stock.

Many optometrists don’t realise the tools to effectively manage their stock are at their fingertips – specialised software, strong relationships with savvy suppliers and sales reps, and basic business sense will go a long way to improving stock flow.

For many practices, the key is seeking the specialised advice of a business consultant. Think of it as the difference between hiring a personal fitness trainer – one that keeps you motivated to reach your fitness goals – and simply visiting the gym now and again.

If you haven’t previously invested in understanding your customer demographic, identifying your top sellers, and working out your stock turnover pattern, it may seem like an overwhelming task. But, like personal fitness, once you reach your goals, and have an effective stock taking system in place, the maintenance is easy.

Colette Kinsella is the owner of the business consultancy Takestock (www.takestock.net.au). She has extensive experience in the optical industry, having held senior management positions in sales or business operations for Eyecarepartners; Optometry Giving Sight (in Australia and the US); the International Centre for Eyecare Education; General Optical and Hydron/CooperVision.