Despite the pressures associated with being a small niche market in the far-off corner of the mammoth health care industry, Rob Benedetti, MBA, consultant for PROMISE Consulting, maintained that it was still possible for an O&P business to make money and remain profitable. Benedetti displayed his confidence in the O&P profession during his presentation at the American Academy of Orthotists and Prosthetists Annual Meeting and Scientific Symposium in Orlando, Fla.
The steps an O&P business owner must take in order to remain profitable are not glamorous. Cash will not instantly flow into your bank account overnight. Simply put, there are no shortcuts.
“It is easier said than done, but a profitable business increases revenues and decreases expenses,” Benedetti told O&P Business News. “Businesses need to manage their cash. Often businesses are not collecting on their accounts receivable or they are overspending.”
Benedetti routinely talks to his clients about cash management. It is human nature to assume in order to make money, you must increase your revenues. This is, of course, one way to go about turning a profit. But Benedetti pointed out that a business can have the same amount of cash flow year after year and turn a bigger profit in each, if they are committed to cutting expenses. Companies assume they do not have any fat in their budgets. Quite often they do.
“In our personal lives, we think the only way to get out of debt or a tough financial situation is to make more money,” Benedetti said. “In our personal lives, we believe the only way to get out of a tough financial situation is to make more money. While that is one way, the easier way or most prudent way is to look at your expenses.”
One of the ways Benedetti likes to help his clients cut expenses is by creating an operating budget. This tool forces the business manager or owner to look at your expenses and discover where they are spending the money. According to Benedetti, when clients actually sit down and see where they are overspending, it makes a greater impact than simply saying that it is probably a good idea to cut expenses.
“Operating budgets are a great tool,” Benedetti said. “Another tool is to create benchmarks and then running your company’s numbers against those set benchmarks. You will quickly find out how you stack up and this can also produce some glaring issues.”
In truth, most O&P companies have enough business. Benedetti said getting business is not the biggest issue; over-expansion and spreading a business too thin are.
“Companies expand too quickly,” he said. “They often think that the grass is always greener on the other side. They think they will open up a new office and people will automatically flood to it. I have seen that. There is nothing wrong with making grand plans, but you better have done the research and homework. Anytime you invest $100,000 in something, you need to be pretty confident that you are going to get $500,000 in return to pay off the investment.”
Making money in the O&P profession requires creativity and discipline. “This is a profitable industry despite all of the pressures that we face,” Benedetti concluded. “There are still opportunities to take advantage of.” — by Anthony Calabro
Disclosure: Benedetti has no revelant financial disclosures