MidYear Business Review: Questions To Ask Yourself
It’s hard to believe it is June already, midway through the year and time to dig into our results and determine where our focus needs to be for the remainder of the year.
Many clients tend to take one of two approaches:
Wait until year-end when their accountant tells them how things went; or
Dig into too many metrics and become too overwhelmed to act - creating a state of what I call analysis paralysis.
Deciding which metrics to focus on will depend on where you are in your business cycle, as well as what is going on in your market. As a rule of thumb, I suggest that business owners start by reviewing the following five areas and asking themselves some key questions:
1. Gross Sales: Actual Top Line Revenue From All Sources
How to measure - Percentage of growth (or decline) in gross sales, current year-to-date vs last year for the same period. If it is new business, six-month trend vs. your forecast budget.
Questions:
What changes have occurred in factors such as market, staffing, product etc?
Are you trending up? If so, what is working that you need to continue? Noting what is working is as important as what isn’t working.
Are you trending down? If so, look closer into the parts of the business that are down and build steps around those areas. See examples to come as to what this can look like.
2. RX Capture / Conversion
Target: 38-40%
How to measure - Number of glasses dispensed divided by total number of eye exams. Some would argue that you should no use all exams; I believe we should, as there is potential to meet the needs of all patients.
Questions:
Are you exceeding the goal? If so, what is working that you need to continue?
Are you below the goal? If so, look at the following elements:
Patient Handoff - Is it done in the lane? Does it include a recommendation? Are you setting clear expectations of time for patients?
Ask your dispensers what objections they are having trouble overcoming, i.e. price, assortment, competition, sales skills to uncover needs, and technical knowledge.
3. Gross Sales Per Staff Hour
Target: $120 - $135 Per Staff Hour
How to measure - Gross practice revenue divided by number of staff hours. This metric goes hand in hand with conversion; it helps to identify if you have the proper staffing for your business needs.
Questions:
*Note: Unlike other productivity metrics, you do not want this number too high or too low.
What if the number is too high? Your staff may be spread too thin, and you could be missing business or sacrificing your patient experience. If that is the case, here are some options to consider: adding staff, using temporary staff, outsourcing tasks, more effective scheduling, and cross training.
What if the number is too low? This either indicates you are overstaffed, or perhaps some of your staff are not as productive as they could be. If that is the case, some options to consider: Identify any team members who may be struggling and provide the appropriate training and support; observe your culture - is it positive or does it have challenges; reduce hours; adjust scheduling.
Before taking any drastic action, cross reference this metric with your labour percentage (see #4).
4. Labour / Compensation As A Percentage of Gross Sales
Target: 18-24% of Gross Sales
How to measure - Total labour costs divided by gross sales.
Questions:
Is your labour percentage below the goal? If so, ensure you are competitive with your compensation and determine if you need to add staffing, especially before summer holiday season.
Is your labour percentage significantly above the goal? If so, you have two options: increase productivity to bring the percentage down or decrease wages (hint: the first option is preferable).
How can you help keep labour in line and staff motivated? Consider having bonus structures that are self-funding and related to attaining sales goals.
5. Cost of Goods Sold
Target: 28-34% of Gross Sales
How to measure - total cost of the goods sold divided by gross sales.
Questions:
*Note: In terms of product, limit the amount of supplier partners you work with. The more volume you have with a supplier, the more they can do for you. Know your margins on products and have an inventory purchasing plan.
What if frame costs are high? Consider the inventory you carry - less product assorted properly is more effective than an excessive number of frames. Ensure you have the proper mix of frames with various profit margins. Review your demographics to be sure they match your product assortment.
What if lens and contact lens costs are too high? If so, then shop around, ask for better margins, partner on promotions, educate your team.
The numbers never tell the whole story, but they do tell you where to look. The goal is to review key metrics over which you have control and create action plans to impact these results.
Everything is figure-out-able; as this is a coles notes version of options, feel free to reach out if I can help.
Nancy Dewald is a business development professional, workshop facilitator and optical industry veteran who founded and is CEO of Lead Up Training & Consulting, a company specializing in identifying business gaps, implementing solutions and developing leaders.
Article as seen in Optical Prism