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Management

Forward planning - Annual business plans

13/09/2017
By Karen Crouch
A sound business plan is a crucial part of any well-run enterprise. KAREN CROUCH explains the non-negotiables you need to consider for your practice to reach its potential.

The end of financial year is nearing, requiring review of achievements budgets and various other targets established for 2016-17. While these actions are a logical closure to the financial year, planning for the next 12 months is of equal importance.

So, although the 2016-17 Business Plan may have been compiled along traditional lines, it’s worth considering various influencing factors, which may deserve deeper thought and possible changes.

Business Plans are typically comprised of two main sections, tactical and strategic. While one is short term and operational (tactical), the second aims to achieve the practice owner’s more longer-term objectives (strategic).

Tactical

"If the strategic plan covers a three-year period, business plans should target progressive and realistic completion of stated goals so all aspirations are successfully achieved."

This section is a ‘business as usual’, day-to-day management framework by which the practice functions to ensure financial viability and support for initiatives in order to achieve strategic goals.

Expenses are an essential part of any tactical Business Plan, whether it is in the form of budgets on a line-by-line basis, based on historical experience, or ‘educated guesstimates’ for start-ups. Figures cast on a monthly basis should recognise cyclical peaks e.g. for quarterly or annual payments CPI increases must be factored in.

A tactical plan should also include an income assessment. This is derived from annual revenues, based on practitioner numbers, working hours, charging rates and number of consultations/treatments. This figure should exceed expenses to ensure viability (gross/net profit).

Measuring is also important. Tracking mechanisms are vital to ensure performance is on track, or recognise if it requires adjustment.

Monitoring is achieved through pre-planned measurement factors that staff and practitioners agree to, such as; KPIs derived from performance rates e.g. 90% patient satisfaction, patient numbers; Ratios (e.g. salaries-to-expense, income-to-expense) benchmarked to industry norms and; tracking systems which measure performance to targets, including ‘variation explanations’. Better than budget performance highlights practice strengths which should be repeated, whereas poorer than budget outcomes present opportunities to analyse problems and remedy them.

Furthermore, non-financial considerations need to be taken into account. It may be necessary to adjust, or introduce new, day-to-day procedures – clinical or administrative – to ensure compliance with changing business imperatives or external factors. The human resources section should cover plans to develop staff and practitioners in order to target ‘employer of choice’ status.

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Meanwhile, capital must be taken into account, especially if expansion or upgrades are planned. Related costs (borrowing) and repayments should also be included. Finally, there is profit and loss. Ultimately, the net difference between expenses and revenues will reflect the [targeted] profit for the year.

Strategic


This section is vital to the growth prospects of a practice. It’s aimed at optimisation of new opportunities and business expansion, such as acquiring another practice, or reputation enhancement (becoming recognised leaders in a particular field).

If the Strategic Plan covers a three-year period, Business Plans should target progressive and realistic completion of stated goals so all aspirations are successfully achieved by the end of, or before, the three-year period.

As part of measurement/monitoring, it is advisable to review Business Plans each quarter to ensure end-of-year tactical and strategic goals are met.

Correlating the two plans

And finally, the annual Plan should be closely correlated to the practice/owners’ Strategic Plan which represents the macro vision of the practice/business, while the Business Plan is the micro level which ensures both are constantly aligned.

Tips for annual budgeting

A convenient method of preparing an annual budget is to merely extrapolate current ‘year-to-date run rates’ across the following year. However, potential ‘landscape changes’ merit closer scrutiny.

Competition: Have other practices opened nearby? Discover services they offer, particularly any that your practice may not. Determine whether there is a need for change.

Technology: Has it improved patient care, productivity or reduced costs? Do the benefits of acquiring the latest technology justify the investment?

Previous results: Unmet targets warrant remedial action, while areas in which they have been exceeded should be reassessed.

Continuous improvement: Have employee meetings been adequately focusing on operational productivity and the theme of ‘working smarter’?

 

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