Like most small business owners and managers you are probably looking hard at strategies to boost revenue to keep up with the roller coaster economics we’re currently experiencing. The specter of dwindling profits due to rising expenses has everybody thinking. Your game plan may include raising prices, compacting your schedule to fit more exams in, or looking into practice differentiation to attract new patients. All viable options, for sure. Don’t forget, though – your bottom line has two sides, revenue and costs. Cutting costs is dollar-for-dollar every bit as effective as boosting revenues. A smart strategy for protecting your bottom line needs to include both sides of the equation. In this article, I’ll be covering tactics that are primarily cost-related.
Start with the discounts
“Everything is negotiable.” It’s more than an easy line; it’s a serious business truth. You have buying power as a small business, and you can maximize your benefits with some smart choices and astute questions. Your lab, your frame reps, and your contact lens suppliers all want your business. Leverage the relationships you already have with suppliers, but don’t be afraid to talk to new ones. See what kind of options are available in product discounts, and ask, ask, ask – are there any programs they offer that you could be taking part in?
Make your product choices more exclusive
Limiting the number of brands or lines you carry typically has a positive impact on the success of your sales. The numbers bear it out. Having fewer lines with deeper brand representation tends to yield better results, so the first step is making some judicious choices about which brands you will carry. Be frank with your reps, and let them know that you’re analyzing which brands and which relationships are going to be the most beneficial to your business. Let them tell you what they can bring to the table to win your business, and make the best selections for your patients and your bottom line.
Frame board management for profit
Fewer frame brands tend to yield better results in frame sales, and get you better pricing. If you’re using more than 3-5 frame vendors, consider consolidating and offering that valuable space to fewer vendors. Ask for consideration in the form of volume discounts and bulk pricing.
Reconsider lens design and enhancement choices
Think about your lens choices. I’m never going to advocate for any product that negatively impacts your patient results, but you may not need to get the premium, most well-known brand of lenses or coatings on the market. There may be a lesser priced option that will serve your patients as well in some cases. There’s never any harm in giving another product a test-run, just choose a “safe” test subject as your guinea pig. Have a pair of glasses made for yourself or a trusted staff member and get feedback. It doesn’t hurt to look, and you may find you can knock a few dollars off the cost of goods in this way.
Work your payables
Extra discounts may also be available for early payments. Check with your lab and vendors, and read your invoices. Early pay discounts can run from 3-15%, depending on their policies. That could be a major cost savings. Remember, every dollar you don’t spend is a dollar you don’t have to earn back. Make sure your administrative staff is paying attention to any deadlines like these.
Watch for hidden expenses
Everybody else is feeling the pinch right now, too; they are making adjustments in their own pricing structures to accommodate their rising costs. Delivery fees, shipping fees, and other surcharges are places that you may see rising prices reflected. These can be easy to overlook, but they need to be factored into your cost equations. They increase your Cost of Goods Sold without raising an individual item price. If your pricing only reflects the actual line item expense for the material purchase, you may find yourself absorbing an increase unintentionally.
Revisit your price list
Have your costs gone up with frames and consumables? By now you probably assume that’s true. Have you revisited your price list to accommodate those price changes from your vendors? In most cases, that should be done once a year at a minimum. Given what’s going on at the moment, it’s probably a good idea to review more often. Check your revenue results against your lab bills and don’t forget your 3rd-party reimbursements. You need to know if your product and service sales generate enough gross profit to support your personnel and overhead costs, while leaving a net profit for the business.
Where not to scrimp
When costs start to rise, one of our first instincts is to cut costs everywhere, including in our personnel. In today’s employment climate, finding a skilled person may also be extra challenging or expensive. Right away, we tend to look for savings on salary, thinking we’ll hire someone who is less skilled or even untrained, with the intent of training them on the job. Unfortunately, the good intentions often don’t give the results we need. Skills are not an absolute guarantee of performance (of course), but there are some “unforced errors” that can occur with less-trained staff and drive your costs up, in terms of remakes, lost sales, drops in premium products, patient experience, and office efficiency.
It’s more important than ever for your team to be successful in selling additional eye wear, lens enhancements, and premium products. It’s also critical that we do the work correctly the first time and avoid expensive warranty work as often as possible.
Don’t forget the overhead.
Every aspect of your business is subject to cost inflation at any time. Utility bills, professional services, office supplies, and discretionary expenses are all on the rise. Keep a weather eye on these indirect expenses, and watch out for any big jumps. If you don’t have time to check the invoices personally, ask your office manager to notify you if any of your regular expenses increase significantly. And don’t be afraid to make a phone call. Oftentimes, you can get a discount on service rates just for asking. Those companies want to keep their customers, too.
Work the relationships
Your vendors need you, just like you need your patients. Make sure you reach out to those who supply you with goods and services. Let them know that you are actively looking to keep your costs low, and that you appreciate any consideration they can give.
Pay attention to both sides of the bottom line., revenue and costs. Work on both of them to really drive your numbers, and help keep your practice profits stable in challenging economic climates.