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HomemitwocentsIndependent, but Not Alone

Independent, but Not Alone

Business consultant Michael Jacobs reflects on lessons learnt from a high profile career in optics, giving mivision readers his ‘two cents worth’ on the future for independent optometry, Australian-style. In this article he talks about how to mitigate the isolation of independent practice.

You are an independent optometrist. You chose to be independent for a reason. For many the driving force was the desire for clinical independence: not to be told to do 20 minute appointments or to be told that you have a KPI to sell a certain number of frames per day. You wanted to give your patients your unbiased clinical advice, free from the pressure of sales targets. You had principles, ethics and a sense of moral responsibility. Maybe you just didn’t want anyone telling you how to run your business. Whatever your reason, you wanted to be in control.

So, now you are independent and in control but at what cost? Is your practice performing above or below par for a practice of its size? Do you have too many employees? Are you paying them too much? Are you spending every night doing payroll or paying bills? Are you getting the best deal from your suppliers? What is the best way to advertise? The questions go on and on but no one answers. You are ALONE.

This is the experience of independent business owners in virtually every industry or profession and probably the major reason why franchises have been so successful.

So, now you are independent and in control but at what cost?

Franchises

Now that it is on the table, let’s talk about franchises.

What is a franchise? My preferred definition is that a franchise is a business system – a business system that is proprietary to the franchisor. It is (or should be) a proven, successful system that is provided to you for a fee to help you run your business more successfully. In the case of optometry it provides the business systems while allowing you to continue to practice clinical optometry. Thus a franchise could be a good cure for the isolation of being an independent optometrist and providing assistance in those areas where you are not so skilled. However most, if not all, franchises are run primarily for the benefit of the franchisor – not for the franchisee. This is evident when one considers franchise fees which can run as high as 20 per cent of gross sales. Notice, this is 20 per cent of gross sales so the franchisor makes money regardless of whether you are making a profit.

Additionally, franchises often dictate what products you can sell, take over the head lease for your practice and want you to sign over your patient list. If you should change your mind at the end of your franchise agreement you will effectively have to start from scratch building a new practice. So, it is not surprising that many independents do not succumb to the franchise lure.

Industry Association

So if not a franchise, where else can the independent go for help. Clearly the first option is the industry association, Optometry Australia. OA offers a range of services that may assist the independent, however, they have their limitations in that they represent all optometrists – independents, franchises and corporates – and thus provide broader, less specific guidance than might be preferred by some independents. This is not a weakness of the association, just a statement of fact: they represent the profession not just independents.

Buying Group

What other options are available? Probably the next largest group in terms of overall representation and certainly the ones that are dedicated to the independent optometrist are the buying groups. I use the term ‘buying group’ rather loosely as there are major differences between the key players in this field – at one end, those acting solely as a buying group and at the other end, those that offer an array of services similar to franchises.

Let’s explore some of the most important of these services and the likely benefits to you as a business owner.

First is the actual buying group aspect with the primary objective being the reduction in your cost of goods sold. This is done through the volume of purchases the buying group controls and the concentration of purchases within a limited number of suppliers. To gain the benefits of the buying group the member must purchase from the preferred suppliers.

The second, and in my view the most valuable service, is business advice. Getting a great discount on your purchases is important but if you can’t attract enough patients or sell enough products to pay the bills, it is meaningless. Different groups offer their business advice in different ways. Some groups have formal programs with an advisor assigned specifically to you and your practice. In this model the advisor takes on the role of business coach. Other groups provide less specific advice, instead offering an a la carte menu of templates and policies that allow the practice to choose how much or how little they wish to implement.

The tool used by the larger buying groups’ business advisors, which in my view is essential for any independent operator, is industry benchmarking. Benchmarks must be specific to independent optometry, not just general retail (as often offered by accountants) due to the unique characteristics of independent practice.

I believe that every independent should perform some level of benchmarking in their business on a routine basis, ideally monthly. Lack of such a tool is synonymous with running a race blindfolded. How can you possibly know what is reasonable performance and what is not without some basis for comparison?

You, or your business advisor, can use benchmarks to analyse your business and identify your strengths and weaknesses. The advisor can then work with you to develop a realistic plan to improve your business and even provide assistance in implementing the plan.

The next most important service for many independents is marketing. Again, some buying groups provide assistance in this area with at least one having their own internal marketing team dedicated to developing marketing campaigns for members. It is important not to confuse this marketing assistance with that provided by some product wholesalers. Product wholesalers are interested primarily in selling their product whereas your marketing plan needs to address all aspects of your business. The wholesaler’s campaign is merely an adjunct to your total campaign.

Other benefits that are available from some buying groups include branding, which can be important in marketing and succession planning, staff management, salary recommendations and a host of others.

What’s Right for You?

Decision time! You know you need help and you are ready to accept it but no matter what level of help you accept, you will have to give up some level of control, some of your hard earned independence. You are going to have to compromise. Maybe you don’t want to be told to do 20 minute appointments but you know you cannot afford to do 90 minute appointments either. Accepting compromise is the first step toward change and improvement. How much compromise? That is up to you.

Write a list – what areas of your business are you least comfortable with? List the top three and find the buying groups that have consistently demonstrated these as a strength. Invite the short listed buying groups to make proposals specifically for your practice. Assess the proposals on proven performance, not on promises that may or may not be achieved. Ask about the performance of the practices in the buying group and how they have improved. Finally, ask about price and remember that the lowest price offer is not necessarily the best.

One last word… If you want to get the best out of your buying group you need to contribute more than the annual fees. Be prepared to attend training and even be prepared to volunteer for management or committee roles. You will be amazed how much this will help both your personal and your business development.

Michael Jacobs is the former Chief Executive Officer of Eyecare Plus. He is now a business consultant and columnist for mivision.

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