How do you create efficiencies in a high-cost, low-margin retail environment? That was the question I was going to answer.
First, I think you have to remind yourself why you are in a high-cost, low-margin retail environment. The answer, because Susan blabbered at me until I brought in high-end product, is not enough in this case to restore confidence. (No matter how true it may be.)
High-margin product, while briefly beneficial, will have long-term detrimental effects on your profitability. Why?
A cup of coffee has a very high margin in the way that we typically think of margins, as a percentage of profit over revenue. I can produce a cup of coffee of very low quality, but perfectly acceptable to the majority, for 0.12 cents, and sell it, in a high-end environment for $2.50. That is a huge margin of 95%. Good on me! But what if we consider margins as dollars instead of percentages. The problem is I have only netted $2.38 after cost of goods. Which means, I have to sell:
Life suddenly seems long measured in cups of coffee, and so would the work day be. For to sell 3,536 cups of coffee a month, I need to turn 117 cups of coffee a day, or 10 cups of coffee an hour in an 11-hour work day. Which means I need to sell 1 cup of coffee every 6 minutes of every day. That is also before factoring in the money I will need to be able to produce more cups of coffee.
Before I can produce enough revenue from selling high-margin, low-cost product to pay myself, I have burned through my available register time, my staff’s energy, and my customer-base.
How then, do I solve the capacity problem? I look to my low-margin, high-cost product. You see, if I can sell a sandwich instead of a cup of coffee, I increase my revenue from each of my customers by a multiple of 4. It costs me $5.00 to make the sandwich I am selling for $10.00, so my margin, as a function of profit over revenue, is only 50%. But, I just made $5 dollars! More than twice what I earned in dollars from the high-margin cup of coffee.
If I burn through the same 3,536 customers and they never even buy a coffee, I gross $17,680 dollars (against $8,415 from just coffee alone). I now have $9,260 to pay myself and reinvest back into my business, from the same amount of work because I am selling lower margin, high-cost product. My cost of goods rises, but the fixed costs of running a business do not operate as a percentage of your revenue so dollars become really important. If you don’t believe me, the next time you have a slow month, ask your staff to take a pay cut. I am now able to take the dollars I earn from low-margin, high-cost, high-retail product and pay myself, or maybe another full-time employee and add another register allowing me to burn through those customers at a faster rate. Investing in staff and space allows for more time with each customer to also sell them a cup of coffee, thereby increasing revenue to $26,095.
Let’s call it the Sandwich Solution. The next time you find yourself wondering why your cash flow is feeling a pinch, and you are about to go to a trade show to load up on high-margin, low-cost product as a resolution, take a coffee break and consider the consequences of reverting to a churn and burn inventory management model.
Then leave the barista a big tip.
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In... Read more
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Selection? Value? Convenience? Quality? Price? Expertise?
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Can you complete that sentence?
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My... Read more
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Unpaid Meal... Read more
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Doctor, I see floaters in my vision. I think I have a retinal detachment!
I don’t need an exam because I did a screening online.
I put a moist teabag on my eye so it would heal faster.
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Good marketing for an independently owned optometric practice isn’t one size fits all, especially now when there are multiple generations with unique mindsets, characteristics, values and eye care needs in the United States.
Let’s say that as an independent Optometrist, you’ve decided to add new eyewear products into the mix at your practice, and now you’d like to market these products to existing and prospective patients.
I’d like to share an incredible customer service experience I had recently.
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The Inevitable Plateau - “a state of little or no change following a period of activity or progress”
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A practice owner with a cash crunch recently pushed back on the advice I was giving – to defer some compensation for a quarterly distribution – with this statement: “I thought I was supposed to pay myself first!”
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Numbers don’t lie. A fact I am reminded of every time I step on the scale. Those ten little digits twixt naught and nine are our friends. And, like any good friend, we may not always like what they say, but they always tell us the truth.
I haven’t always been... Read more
I was named in a lawsuit once. Fortunately, I was the doctor who found the problem – not the one who misdiagnosed it. Nothing really came of this on my end, but I still recall the moments of terror that gripped my body every time a letter showed up from the legal firm handling the case.... Read more
Starting a solo optometry practice can be a daunting task, especially considering most optometrists do not graduate optometry school with a strong grasp of the business aspects of running a private practice. There are many things you need to do prior to your grand opening, but the work doesn’t... Read more
Office Managers are responsible for setting the expectations for all office employees. The optical staff is a unique situation because the patient experience is easily measured. Good communication and clear goals will go a long way to improve patient satisfaction in this very... Read more
Google and social media have changed the ways we look for information, discover area service providers and research options for health care, and as a result, many Optometrists who own a practice now question which tactics are the most effective to increase brand awareness, number of... Read more
The Science of Selling
Have you ever made what you considered an iron clad case for why a patient should purchase a certain product or service from you, only to have them walk out without ever making the purchase? As clinical professionals, we can be very logical in our approach with... Read more
Your optometry practice is incredibly valuable to you. “Well, Nathan” – you may say – “of course it is!” But have you ever thought of why it’s valuable?
You spend most days pouring your blood sweat and tears into it: hours and hours of patient care, planning,... Read more
The internet isn’t usually a popular topic in conversations I have with owners and staff members of optometric practices. Dealing with reviews and competition from web-based retailers along with the challenge of creating and maintaining a website and good social media marketing may have many... Read more
Optometrists in private practice sometimes fail to offer a clear reason why someone should choose them for their vision care over competitors - on their websites or in other marketing collateral – sometimes when you try to market to everyone, you fail to capture anyone.
What... Read more
When working with small business owners to create marketing plans and strategies, I run across the following scenario far too often: “Hey, I’m not sure how to log in to my Google listing. My office manager used to handle that for me, and she’s not on the team anymore... Read more
“You might as well ask me to describe the essence of music, or the color of starlight.”
Did you make any New Year Resolutions? Well, I did. I do every year, and in keeping with my obsession with goals and metrics that I have professed here repeatedly, I write them down and check in... Read more
For starters, I’m not a licensed psychologist, I just play one as a practice management consultant. It’s been my observation that whenever human beings come together in an environment where they are required to work together and interact, inevitably some tension and conflict will arise.... Read more
Your schedule has gotten busier and you’ve hired an associate OD. While you would like to keep the associate’s schedule filled most of the time, it’s not uncommon for an associate to have some gaps in his or her schedule – at least in the beginning. This often leads to some resentment by the... Read more
Before anyone panics, I am not suggesting that most practices go out and spend $80,000 or $100,000 on a COO tomorrow, or that your manager is due a large raise for 2018. I typically only recommend that type of role for multi-location practices grossing over $2M-$3M per year: practices... Read more
Sometimes it’s not the inventory you choose to carry or the reps you choose to indulge. It’s not the pricing or the shipping or the cadence of your reorders. As we head into the tail end of the holiday season, I can’t help but think of the process of opening presents.
Everyone has... Read more
Texting is an incredibly tempting mode of communication for marketing-minded businesses competing for the attention of consumers, primarily because the open rates on a text from businesses to consumers are incredibly high (98%) compared to other forms of communication (email is around 20%,... Read more
“How many frames do I need?” “How many frames should I carry?” “How much stock should I have in inventory?” It doesn’t matter how you phrase it, at least 1/3 of my consultations start the same way. I’m going to make this all very, very easy for you. Consider it my holiday gift! To determine... Read more
If you are in a competitive area, you’ve already learned that marketing is a necessity to attract brand new patients to your practice. It’s easy to confuse marketing tactics – sending email, creating Facebook posts and advertising in a community magazine, for instance –... Read more
A practice owner pulled me aside at our most recent conference in Denver to start thinking of an exit plan. I always ask two questions when these discussions come up:
“How long do you see yourself continuing to own your practice?”
“How is your retirement savings coming... Read more
A consumer-centric culture with a focus on customer service is becoming increasingly important for brick & mortar businesses. While I do believe most practice owners strive to deliver on great service, it requires a team effort. I often hear owners tell me they want to be known in their... Read more
Most businesses have polices that employees are required to follow. In general, office policies are a good idea. Policies provide structure for how to conduct business and create consistency around processes and operations. But in a service-based industry, well intended but rigidly executed... Read more
With all the talk of private equity roll-ups and regional alliances, many practice owners are concerned that if they aren’t a large, multi-office, multi-doctor practice, they don’t have a future in independent optometry.
Is that... Read more
One of the interesting mysteries that I get to unravel in many practices is the mystery of tight cash flow. Sometimes it’s obvious – a small practice with low profitability, for instance. But other times it’s not.
First off, what is tight cash flow? Here’s my simple definition:... Read more
Doctor: Would you like to order your contacts today, Mrs. Smith?
Mrs. Smith: That’s OK. I’ll just take the prescription and get them online.
What happened here? You just did a thorough, high-tech eye... Read more
For practices looking to grow, there are basically two paths: see more patients or generate more revenue per patient. Ideally, a practice will do both. One thing I consistently hear from ODs is that it’s hard to generate high revenue from contact lens patients. Even when selling annual... Read more
Can you find 20 or 30 minutes a week to hold a staff meeting? You might be surprised at the impact that it has on your optometry practice.
Your staff is your most valuable business asset. Your investment in optometry marketing, technology, office design, etc. will fail to deliver an... Read more
The very phrase can cause irritation, anxiety and bewilderment in the minds of owners who understand that they should somehow be participating in the conversations across the various social media platforms – but which ones are the best for optometry practice... Read more
While there is more than one way to achieve success, there are a few common traits that successful independent optometry practice owners have in common.
They refuse to accept the status quo. While others remain stagnant, ignore trends, and complain about the... Read more