eyecare by the numbers

Your Most Important Investment

by Alan H. Cleinman

As the CEO of my firm, I consider myself an investor. Like any other business owner, I control balance sheet assets in the form of cash, equipment, facilities, and inventory. Like others, I also employ off-balance sheet assets in the form of my team.

THE CEO'S JOB

My job as CEO is to invest cash in the right way; to take care of assets so they'll be around for the long haul, both in terms of deploying and maintaining hard assets as well as properly developing and leading my most important assets—the individual members of my team.

The bottom line is that the CEO's role is to manage assets to realize a return on investment (ROI). It's a big job and a big responsibility. Not only are our respective livelihoods dependent on our investment success, so too is the well-being of all of the individuals and firms who have hitched themselves to our respective wagons.

INFORMATION IS POWER

Like any investor, my primary tool for deciding how to best utilize my firm's assets is information.

Over the years, I have invested heavily in my information systems, be they accounting- or benchmarking-oriented. As a result, I know the current and projected financial performance of my business at the touch of a button. Most stress is the result of a lack of information. Even in tough times, it's easier to work with the known versus the unknown.

Even though I have a solid financial background, I rely upon others to do that work. Said another way, I think of the financial management role in my business as you likely do patient care…your job isn't to collect data, but to interpret the findings.

If you're like most eyecare professionals, you're lacking a solid financial control system. You may have poorly organized books and even do your own bookkeeping. Many of you are stressed and struggle with cash flow, even as your business thrives on paper. Most of you operate on cash-basis accounting, which distorts your reality. And many of you don't know how profitable your business really is; especially, if like some owners, you operate your business like a personal bank and focus on the avoidance of taxes. And now, with ever-more anemic profit margins resulting from the further penetration of vision plans, some of you are operating in crisis mode.

FROM BOOKKEEPING TO THE INVESTMENT BUSINESS

As the CEO of your enterprise, it's time to get out of the bookkeeping business and into the investment business. Your business activities must be built on solid financial information, and that information comes at a cost.

At Cleinman Performance Partners, we invest approximately three percent of our current revenue on our accounting and financial management functions. That investment, as a percentage, will dramatically reduce as we grow, but it's a significant investment for a small company.

As a result, the entire team manages for bottom-line performance as their bonus structure is directly tied to the economic performance of our enterprise. Every member of our team understands how their individual function impacts our bottom line. In order to be able to manage their responsibilities, they have to have good information.

I believe that it's the best investment I've ever made. As a result, I don't stress about financial matters because I have a clear understanding of where our revenue comes from and where our expenses go. Not only do I know what happened, but more importantly, I know what tomorrow looks like. I have good information at my fingertips and the support team to develop it.

MY CHALLENGE TO YOU

Most eyecare retailers are experiencing eroding profit margins, the result of increased penetration of vision plans. In this environment, having a rock-solid financial control system that delivers the information you and your team need to manage for profit is increasingly critical. The time is now to make a change.

So, for January 2012 implementation, my challenge to you is to invest in your financial control system. Indeed, I believe that investing in your financial control system is your top priority.

Yes, building and maintaining an accurate financial control system involves an investment of both time and money. But the information that you glean will provide you with the necessary accurate and timely data from which you can make better, more effective decisions. The investment will provide an outstanding ROI and you'll dramatically reduce your financial stress levels. EB

Alan Cleinman is the founder and CEO of Cleinman Performance Partners (cleinman.com), a business consultancy specializing in the development of high performance optometry practices. The information contained in this column is derived from the database of Cleinman Performance Network, the members of which are generally very large optometry practices. ©2011 Cleinman Performance Partners, Inc.