By Peter J. Cass, OD
March 28, 2018
Making mistakes in the building of any business is unavoidable, and an optometric practice is no exception. Over the years, I’ve course-corrected to realize greater patient care, efficiency and profitability. Here are three corrections I needed to make, and how making those corrections benefited my patients and practice.
Practice Purchase Negotiations That Didn’t Go Well
Mistake: I did not negotiate the purchase of my first practice effectively. I was fresh out of school, and so eager to start a practice that I did not realize the power that I had as a buyer. I likely paid 10 to 20 percent more than I should have for the practice, and did not have any help with the transition. The retiring doctor moved out of the state three days after the sale. I am sure that we lost some patients over the abrupt transition.
Correction: I had the retiring doctor write, and pay for, the postage of notifications to all of his patients. I worked extra to make myself available to patients since the other doctor was not around.
Cost of Correction: I lost time (and money) staffing the office, easily in the $10,000 range. I also likely lost some patients with each one being worth about $306 per year, plus their family members, at $306 per year.
Benefit of Making Correction: Ultimately I became a better negotiator, and learned how to get better terms on equipment purchases, loans and land deals.
As a buyer of a practice, you typically have more power than you think. If buyers ask for reasonable concessions, and a fair market price, they can have a good working relationship with the retiring doctor and a smooth transition for patients to a new practice.
Hiring a Doctor Instead of Delegating More to Support Staff
Mistake: A doctor can cost over $100,000 per year, while an employee costs around $30,000. That difference is significant, so it is important to first see if you truly need another doctor, or whether you can simply delegate more tasks to support staff, and see additional patients yourself.
Correction: I hired two doctors and lost two doctors within two years (one who opened his own practice and one who moved when her husband was offered a position in another town). Both of these ended on good terms, but the stress and cost of interruptions in the schedule, finding a new doctor, and explaining it all to patients was high.
Cost of Correction: This is one where the correction actually saved money. After losing a second doctor, I simply hired a staff member to be my assistant and scribe. I was able to see almost the same amount of patients that the other doctor and I had been able to see together.
Benefit of Making Correction: The efficiency gained has dramatically improved the profitability of my practice (large increase in gross before needing to add a second doctor again). And the initial change to delegate more led to more delegation and even greater efficiency.
I also applied these same principles of efficiency and delegation when I needed to hire a doctor. And that new doctor is even more productive than she would have otherwise been. We both work part time and gross over 2 million (on 1.2 FTE doctors) annually.
Sold Land Next to Practice Before Considering Future Growth
Mistake: I sold land next to my practice. I owned about one-third of an acre next to my practice, and sold it for about three times what I paid for it. It seemed like a great deal at the time, but now that my practice has grown, I am out of parking.
Correction: The land beside me is now for sale at double the price I sold it. Even if I were to buy it, the zoning regulations would make it much harder to add more parking. We are currently looking at more creative ways to add appointment slots. We are considering opening earlier and staying open later as well as adding Saturdays.
Cost of Correction: It is slowing down our growth, and forcing us to change the way we schedule.
Benefit of Making Correction: It forced us to be more creative, and changing our scheduling will actually improve patient service, and allow us to grow in different ways.
Owning your own building or land is almost always a great investment. I still own the original building that my practice was in, and lease it out. It provides passive income, and I plan to keep it long term. I wish I had kept the land beside my new building, as well.
The most important thing is to learn from mistakes. We will all make them. Correcting course, and coming out better for them, is what counts.