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Adding an Associate

Bringing in and compensating a new associate

By Rick Guinotte

Many optometrists who have opened their own practices find themselves asking a few questions about personnel: “When do I add an associate to my practice? And how much should I compensate the individual for their time and services?”

There are several key indicators as to when you should look to bring in a new associate. After all, you want to make certain the practice continues to grow and that the optometrist you bring in fits the business.

MEASURING PATIENT BASE

To identify whether there is a need for a new optometrist to join your practice, begin by looking at your numbers. As you review your weekly and monthly statistics, do you see your patient base growing or shrinking?

Measure that base by comparing your practice's established and new patient exams this year versus last year. Use both the complete and intermediate exams to determine this.

As you review the numbers, ask yourself, “Am I seeing more new patients this year than last?” If the answer is no, and you are booked three or more weeks in advance, this is a good indicator that you should add a new associate to your practice.

Next, answer this set of questions:

■ Have you been in practice five to 10 years?
■ Are you booked weeks in advance and having difficulty fitting new patients in to your schedule in a timely manner?
■ Are you looking to improve your balance between family time and the practice?

When the doctor answers yes to the above questions, we begin to discuss with clients the option of adding an associate.

NEW ASSOCIATE PROFILING

When selecting a new associate, consider the needs of the practice. You may, for example, be an optometrist who has specialized in vision therapy. If this is the case, the office may benefit from a more traditional optometrist to help increase dispensary and contact lens revenue.

Perhaps you are a practice that sees very little medical billing. In that case, you may consider bringing in a doctor whose focus is more medical, which would allow you to give your patients a more complete eyecare facility.

Ultimately you will be looking for an optometrist who can expand the value of your practice and who will bring more new business to your practice.

ATTRACTING NEW PATIENTS

Why is it so important to bring new patients into your practice? Here are three facts about established patients.

■ First, they have already referred their friends and family to your practice. So they are now helping you to grow.
■ Second they do not spend as much money when in the office as they did as new patients.
■ Third, they move away or pass on, leaving you with a shrinking practice.

Your goal should always be to strive for 30 percent new patients in your office. If your practice is below 30 percent new patients and dropping, you have reached the mature stage of your practice.

A new associate can help you to bring in young families and begin to build a new patient base, changing from a mature stage to an introductory stage again. This will also help increase the market value of the practice, an important factor when you are considering selling or planning for retirement.

BREAK-EVEN ANALYSIS

Whether bringing in new business or helping to maintain current patients, an additional optometrist in the office must be affordable. Consider not just what you will pay, but also the additional expenses to the business.

How much revenue will the office need to generate to “make break even” with a new associate? Here is how to find the answer: First, look at what your office expenses are for the month, as well as your revenue per doctor day. Then, answer the following questions:

■ MONTHLY BREAK-EVEN. How many days do you work before the office breaks even in a given month?
■ EQUIPMENT. Will you need to add new equipment to the practice for the associate to work?
■ CONTRIBUTION MARGIN. For the additional expenses, look at the contribution margin. This is the cost of the new associate plus the cost of doing business. You need to calculate this in order to project the additional revenue you need to generate in order to maintain the current profit margin for your business both now and after you have added the new associate.

DOING THE MATH

Here's an example of a sample practice that will help you understand the cost of a new associate.

■ COMPENSATION. If you pay a new associate $400 for 2.5 days per week—at $1,000 per week in a four-week month—you will pay the doctor $4,000 a month.
■ REVENUE. If your practice is generating $600,000 in revenue per year, you will need to generate an additional $6,053 per month in revenue to maintain your current profit margin after the new associate begins. The following costs include, but are not limited to: offsetting the additional expenses of your new technician, paying the loan for the new equipment, the cost of additional medical supplies, and so on.
■ IMPACT ON BOTTOM LINE. After you have totaled the expenses to the practice, add the amount you will need to generate in order to maintain your current profit margin ($6,053 in the example mentioned above) to your monthly receipts goal, and identify how this impacts your bottom line. It should not move the bottom line.
■ REACH OUT. Now you must help the new associate grow his or her patient base. One of my first suggestions to new associates is to become involved in the area—local schools, daycare providers, health fairs, nursing homes, and even hair salons.

The key is to get the new associate involved with and seen by the family members who make the healthcare decisions—that is, the mother or wife.

The new OD will be participating in many of the same community functions you became involved in when you opened the practice. Let candidates know what events you participated in that helped you to be successful when you started.

FROM THE START. Make it clear in the interview process with the candidate about your expectations for community involvement.

MOVING FORWARD. Educate him or her why this is important for their future. Be sure to explain the importance of being involved and visible in the community for both the long-term career growth as well as of the business.

■ INCREASED SPENDING. As you look at the new goal for your monthly receipts, remember that new patients who come with the new associate will typically spend more than the established patients—those you are currently seeing.

PROFIT SHARING

After you have hired the new associate and paid the base ($350 to $450 per day) for awhile, if you have determined that this is the individual for your patients and staff to continue working with until your retirement, then, you may want to consider adding to the compensation.

First, however, you need to make certain he or she is motivated and committed to you and your practice.

You will want to reward the associate's behavior and growth by giving him or her the opportunity to participate in the success of the practice.

To do this you will want to consider a profit-sharing compensation format. This is a safe way to give the associate a raise without putting your profits at risk.

Here are the steps for determining breakeven points for your practice. You must take this step in order to set up a profit-sharing plan (PSP).

1. Identify your breakeven point for doctor days worked. Note that doctor days - the number of days the doctor sees patients.

That figure does not include administrative days.

2. Add up the expenses for the office per month and identify how much revenue you need to generate to break even.
3. Divide the revenue you need to generate to break even by the doctor days worked each month.
4. Add your monthly expenses--including both fixed and variable, cost of goods, and payroll. Then divide the total by the number of doctor days worked.

You now know the break-even point for each doctor day that is worked in your practice. EB

Rick Guinotte is a Senior Consultant at Williams Group in Lincoln, Neb. (www.TheWilliamsWay.com)