The Business of Contact Lenses
Putting Benchmarks in the Proper Perspective
By Gary Gerber, OD
Striving for industry benchmarks is a bad idea. By definition, a benchmark is an average, so if you attain the benchmark, you wind up being average. Some of the most successful practices I have counseled consciously brush aside benchmarks. It's not that they don't use benchmarks. They do. But they use them for competitive purposes. Instead of trying to meet the benchmarks, they analyze their practice culture and business model and strive to break the benchmarks. Here are two examples of how you can use benchmarking to rise above the average.
Besting the Benchmark
Practice One wants to increase the percentage of their patients who wear contact lenses. As part of their research, they contact their local sales representatives and learn that 15 percent of the vision-corrected population in their region wears contact lenses. They analyze their own patient database and find out that only 10 percent of their patients wear contact lenses. Instead of setting their goal at the 15 percent benchmark, they choose to beat it and strive for 20 percent. If they attain 15 percent, they will be perfectly average, but average does not exist in their world. Their practice culture is focused on being a cut above the rest. To stay true to that commitment, they can't languish in the middle of the bell curve. They know that industry benchmarks are the numbers they need to surpass—not match. The next step for this practice will be to decide on specific tactics geared toward meeting their 20 percent goal.
Counterintuitive But Effective
Practice Two is located in an area where staff wages are about 25 percent of total collections. Their current labor costs are at 27 percent. Carefully analyzing related metrics, Practice Two knows it has a 28 percent net profit, while its local area net profit is 30 percent. So, it appears that if the practice were to cut labor costs by two percentage points, its net profit would be in line with other local practices. In fact, following that logic, if labor costs were reduced by 5 percent, its net would be even higher than the average. Or would it?
Astutely examining their business model and practice philosophy, Practice Two determines that a high-touch, personalized approach is essential to the success they have already achieved. If they cut staff or decrease hours, they will lose their most important differentiating features. So, blindly shooting for a labor benchmark of 25 percent would likely reduce their net further.
Their decision? With a primary goal of increasing net profit—and conscious of the labor costs benchmark—they hire more staff and increase labor costs. They don't just hire someone and hope for the best, however. They make sure their new hire is laser-focused on increasing the practice's net profit. For example, they may have a new staff member reactivate a long-ignored recall system, or they may hire someone to revitalize the practice's marketing efforts. These are just two of the dozens of items on any practicebuilding to-do list.
A Total Practice Plan
Sharing benchmark goals with staff is essential to growing your practice. Make sure it's within the context of the competition and in the spirit of setting the practice apart from the ordinary. For example, let staff know, “Only 15 percent of patients wear daily disposable lenses. Here are seven things we can do to make sure 25 percent of our patients wear these lenses.” Simply declaring your goal is not as effective as explaining why you want to achieve it and how the staff can help. CLS
Dr. Gerber is the president of the Power Practice, a company offering proven and comprehensive practice- and profit-building systems. You can reach him at www.PowerPractice.com and follow him on Twitter@PowerYourDream.