CHICAGO — There are five common pitfalls in operating an O&P company, and many practices are guilty of falling into at least one — if not several — according to Robert Benedetti, of Promise Consulting, who spoke at the American Academy of Orthotists and Prosthetists Annual Meeting and Scientific Symposium.
To demonstrate how many practices run into pitfalls, Benedetti, who is also controller of De La Torre O&P in Pittsburgh, asked a group of approximately 100 attendees to raise their hands if they had a budget for their practice in place for 2017. Three attendees raised their hands.
“That is horrible,” Benedetti said. “You have to have a budget. You have to know where you are going. If you do not, how can you say whether you are going to be profitable or not, or if you have to make a change, or if you have to make cuts or increase revenue? You are living day-to-day, month-to-month, year-to-year; and at the end of the year, you think you are making money because you were busy, but you are not making money. Most clients that we work with also do not have a budget at first.”
Lack of planning, financial reporting
According Benedetti, the five most common business-related mistakes O&P companies make are a lack of planning, poor financial reporting, a lack of entrepreneurial focus, poor cash management and a lack of leadership. Regarding lack of planning, he noted that O&P practices often sacrifice planning for business or stray far from their business plans. When developing an operating budget, Benedetti said it is vital to understand which costs are fixed vs. variable. Owners should review their budgets line-by-line and cut expenses that have no justification.
Cash in a checking account and a busy office are not equivalent to profitability, Benedetti said, noting that a monthly financial report can detail where a business stands. He said financial reports should include a profit and loss statement, balance sheet, aged trial balance and, if necessary, charges and losses by location.
Lack of focus, cash management, leadership
According to Benedetti, owners of O&P practices should ask the following questions: Are my marketing efforts designed to retain existing customers or generate new ones? Are my marketing efforts focused? How much money have I committed to marketing and is it smart money? Am I aware of what is happening in my marketplace?
The key to money management is discipline, according to Benedetti. He said owners should create cash reserves and compensate employees, and themselves, reasonably. They should use electronic claims, borrow money only when necessary and quickly pay off debt.
Owners of O&P companies should occasionally find time to get out of “day-to-day mode” and examine where their practices are headed, Benedetti said. He added that capable leaders are those who make decisions and properly interpret the current business environment. – by Jason Laday
Benedetti R. At the End of the Day, Numbers Don’t Lie: Staying Profitable in the World of O&P. Presented at: American Academy of Orthotists and Prosthetists Annual Meeting and Scientific Symposium; March 1-4, 2017; Chicago.
Disclosure: Benedetti reports he is a consultant for Promise Consulting.