with Gary Gerber, OD, The Power Practice;
and Steve Sunder, Director of Sales, Uprise
The way you think your practice is performing, and the way it actually is performing, are sometimes two very different things. The fact is that successful practices aren’t afraid to face reality and keep a close eye on not only how their practices are performing, but how they are performing on key markers that drive profitability. Rather than relying on guesswork or your own perceptions, it is also important for you to measure key indicators of financial growth.
Here, we share our thoughts with ROB on common questions practice owners have about determining which metrics to track, and how to use benchmarks to assess growth.
Benchmarking works. The act of tracking key measures of practice performance sets you on a course to improving those numbers–if you take four actions: measure, monitor, react andplan.
Why is it important to measure different benchmarks in my practice?
Dr. Gerber: You want to look at different benchmarks because there are multi-facets to your practice. In the beginning, you may need to look at several benchmarks and then you can refine it down. Starting with several different items will allow you to get a broad view and then pick the right benchmarks for your own practice. There are a lot of variables that can affect what benchmarks are right for you.
But once you define the benchmarks that are best suited to help you reach your goals, it’s important to stay on top of them on a regular basis so that you can be proactive in making the right changes in order to meet your desired goals. If you don’t invest the time in keeping up with these benchmarks, it’s likely that you’re not going to be making the necessary adjustments in your daily routine to help you get on track, which will result in losing money that you could be putting in your pockets.
Steve Sunder: The old saying “knowledge is power” is absolutely true. As a practice owner, there is great power in understanding your own practice history. This history becomes the baseline from which ODs can monitor areas for improved practice efficiencies and develop business strategies. The reason it’s important to measure different benchmarks is that it takes more than one thing to drive success. You need a well-rounded picture of the practice. Once you have selected the most important benchmarks for your business, you should regularly:
What benchmarks should I be monitoring most often?
Dr. Gerber: It depends on the individual practice and its unique mission, values and goals. There isn’t one set list that universally applies to everyone. For example, new practices should place more emphasis on new patient count while established ones should focus on patient return rate. It’s up to you to invest the time in determining what your goals are, and what you need to measure and monitor in order to reach those goals.
Steve Sunder: I agree with Gary. Different practices are going to need to monitor different benchmarks, depending on what is important to their own individual needs. Gary mentioned the importance of new patient count for new practices. New patient growth in a new office may be 80-90 percent, however, this would not be applicable to an established office where their new patient growth rate may only be 7 percent max.
What tools are available to help me monitor and calculate different benchmarks?
Dr. Gerber: Most practice management systems can help, some better than others, and you can also use Microsoft Excel and accounting software such as QuickBooks. When all else fails, depending on the exact benchmark, paper can work too! For example, you don’t have to have technology to track how many phone calls to the practice were converted to appointments. You can ask your front desk staff to keep a tally and report back to you at the end of the day. Don’t let lack of tools be an excuse not to keep up with your practice performance.
Steve Sunder: While there are some metrics in your practice that you can monitor on your own, having a practice management system that has extensive reporting capabilities is going to save you a lot of time from running all the numbers on your own each week or month. Capable practice management systems will give you the ability to run financial, auditing and analysis reports to help identify any issues in your practice. You’ll also gain insight on your patient database with the ability to analyze appointment durations, demographics and your best-selling products.
Having a system that tracks this information for you and allows you to clearly see your practice’s performance with the click of a mouse will be a big help. And if the system is cloud-based, you’ll have the flexibility to run reports from the office, home, or anywhere else.
You both recently contributed to an eBook that lists eight benchmarks every practice should monitor. How did you determine industry averages for those benchmarks?
Dr. Gerber: The Power Practice has worked with over a thousand practices, and reviews data from them on a regular basis. We have looked at thousands of profit and loss statements and have seen the effect of making changes based on those numbers, as well as other information supplied to us from our clients. Based on that enormous set of data, we are able to determine industry averages. Interestingly enough, those averages and trends are proof of the positive effects that working with us can have on a practice’s profitability.
Steve Sunder: I’ve spent 17 years in optometry managing multi-location primary eyecare clinics and providing optometry consulting services. Throughout that time, I’ve gathered a variety of practice data from a wide range of practices that has allowed me to establish industry-wide productivity and financial averages. While it’s best to compare your own practice’s benchmarks to each other over time, it’s also important to know where your colleagues stand and how your practice fits in with industry norms.
Do benchmarks vary greatly regionally? Where do I get regional benchmarks?
Dr. Gerber: Labor and occupancy. For example, the average that you should spend on rent is going to vary greatly if you are in Manhattan versus a small town, same with labor costs. Make sure you keep these benchmarks regional. You can check with colleagues in your area to get an idea, or work with a consulting company like mine–it’s free!
Steve Sunder: Gary hit the nail on the head. The best thing you can do is network with your colleagues to find out what’s standard in your area. If you don’t think you’re getting a clear picture that way, reach out to a consultant for help.
How frequently should I revisit these benchmarks?
Dr. Gerber: As frequently as you can act on what the numbers tell you. In other words, the frequency is going to vary by each benchmark. There’s no sense in looking at your yearly gross on a daily basis. But it’s pointless to wait until year-end to look at something like no-show rates. By that point, you’ve let months go by without being proactive and have, therefore, lost money that you could have earned by looking at no-show rates each day and strategizing ways to keep that number down.
Steve Sunder: I’m a believer in being proactive in monitoring clinic performance so that you are keeping your finger on the pulse of the office. Every practice should have some metrics that they measure daily, weekly and monthly. Like Gary said, the daily bucket is going to be made up of different metrics than the weekly and monthly bucket, but there should be something that you want to monitor at each of these intervals. By making daily, weekly and monthly reporting and evaluation standards, you force yourself to stay tuned into your practice, and it will be easier to recognize patterns and variances as they occur.
What is the single most important benchmark a practice should monitor?
Dr. Gerber: The one that is most aligned with your practice’s goals is the best one to measure. You may be thinking, “well that’s vague,” but that’s not the intention. It’s impossible to list one single-most important benchmark that will apply universally to all practices. Your practice is unique and your success will be driven by a variety of aspects–what’s critical to one practice will be a low priority for another. The idea isn’t to find a cookie-cutter set of benchmarks and just roll with them. You need to take an active role in determining what is going to make your practice more successful and hone in on those items. So, I would say that it’s more important to determine your needs, goals, etc., than it is to determine benchmarks to track. Without one, you can’t do anything with the other.
Steve Sunder: I agree with Gary. It depends on whether your practice is new or established in the industry. One key question to ask yourself: What areas are in need of the most improvement? Once you’re able to answer this you should have a better understanding of what you need to assess, and how often, in order to make those improvements.