The financial year-end is an important time to review past performance, reflect on strategies implemented and plan for new successes in the year ahead. Steven Johnston from Provision and Simon Lewis from Eyecare Plus offer mivision readers a few pearls of wisdom.
The end of the financial year can mean different things to different people.
Sometimes it’s a period of celebration about a successful business year; sometimes it’s a period of reflection about what we could have done better.
June is the month to think about the projected net profit and whether it would be appropriate to prepay any eligible expenses, or spend on capital items that could generate a claim for investment allowance or depreciation.
This is also an excellent time to reflect upon your Key Performance Indicators (KPIs) and identify the areas that should receive extra attention in the next financial year. This is all about planning, but any plan is only as good as the foundations that it is based upon – and KPIs help us to focus on those aspects of practice that need to be worked on.
Taking the time to work ‘on’ your practice, rather than ‘in’ it, is always a good idea
KPIs really only give you a measurement and in isolation can sometimes be meaningless, unless we have something to compare them to. That’s where benchmarking has its strength, because it allows us to interpret the KPIs.
One KPI we often recommend to optometrists is the ‘percentage of new patients’. This figure is reported on the KPI report from both Sunix and Optomate, but what is a normal or desirable level? Because a new practice will have close to 100 per cent new patients, this figure only really becomes relevant for established practices. A commonly recommended benchmark for optometry is 30 per cent new patients. It’s not possible to survive if the proportion is 0 per cent and all patients are returning patients because normal population attrition due to death and moving will eventually shrink the number of patients and lead to practice failure.
Another valuable KPI for comparison is the ‘recall success rate’. Once again this statistic is reported in the KPI Reports form Optomate and Sunix, but before it becomes useful, it is first important to define what measurement is actually going to be used as a benchmark? The most commonly accepted figure is the percentage returning within three months of the recall being sent.
Unfortunately this number is not explicitly reported in most practice software; instead you need to add the response rates for months one, two and three. When considering the recall response rate, it is also important to make sure that three months have actually passed before the number is measured.
Once the recall response rate is understood, a commonly recommended benchmark is 35 per cent returned within three months of the recall notification. Even this benchmark is ridiculously low when compared to levels for other healthcare professions that typically average 70 per cent, but 35 per cent is the current figure for optometry in Australia.
Looking for Improvements
Taking the time to work ‘on’ your practice, rather than ‘in’ it, is always a good idea. However, this is especially true at the end of a financial year when we are already reporting total business performance and looking for ways to make improvements.
First understand your strengths and weaknesses by using the KPI information that is already available in your software. Then give these figures meaning by using benchmarking from a group like Eyecare Plus. Having taken these steps you’ll be ready to move on to considering your opportunities and threats.
Make the small effort and I’m sure you’ll enjoy large benefits. Remember that other well-run businesses do this and that your practice is a business too.
Best wishes for the financial year ahead.
Simon Lewis is the General Manager of Eyecare Plus.
No matter what size your business is, June is an ideal time to prepare for the new financial year commencing 1 July.
Once you attend to the year-end finance mandatories like running a stock-take, your focus should be devoted to planning: strategy, budget, and people.
In small business, it’s pretty easy to fall into the rut of just doing what you’ve always done, but we all know it’s pretty hard to deliver a better result when nothing else changes except for the environment. Good businesses not only recognise changes, they embrace them and respond to them in a constructive way.
At ProVision, we advocate to members that they apply some real thinking to the three planning areas mentioned previously:
- Strategy – using a balanced scorecard approach so that you consider what you need to do to deliver exceptional service to your clients (‘the customer’), what systems you can change to make you more efficient and productive (‘the process’), how you can leverage your talent (‘your people’), and what financial outcomes you expect to drive (‘finance’). This can be simply brought to life with key objectives, initiatives and measures to track progress towards your goals.
- Budget – establish realistic targets by month that reflect the changes you expect to derive from executing your strategy. It is next to pointless to have a goal of increasing gross margin without a plan to achieve this and so,
for example, it will be important to review price points. If you want to increase your sales revenue, then you need to implement initiatives by, for example, selling more second pairs. The budget planning process also forecasts the need for investments and gives you a monthly barometer of expected versus actual performance.
- People – the most important part! Good businesses recognise their key differentiator is their people. Get the right people doing the right things and almost anything is possible. ProVision has recognised the importance of this and developed a three-day Practice Culture program, which will be completed across nine different locations by the middle of August.
Once you have articulated where you want to go (your vision), how you want to get there (your mission) and how you want your people to behave (your core values), it is vital that you assess your team members against their ability to live your values and their ability to contribute towards delivering the mission i.e. that they are ‘on the bus’. If they cannot, then you have to assess whether you can inspire them, coach them or get them off the bus.
To make this happen objectively requires a performance management program that holds people to account for the achievement of individual and/or team goals, while exhibiting the core values that we have defined.
June is the ideal time to establish key targets and identify areas for employee focus and improvement for the year ahead.
July is the ideal time to look back on the year just passed and assess employee performance against agreed targets and standards of behaviour (core values). It is important to note that this is not an ‘annual review’, but the culmination of at least quarterly, and preferably monthly conversations.
The financial performance of your practice will ultimately be determined by the cumulative efforts of your team members.
Invest the time in your people in June – July and don’t leave it to chance.
Steven Johnston is the Chief Executive Officer of ProVision.