One of the concepts the people at Profit First talk about is that the business should serve the owner, not the other way around. Many small business owners feel that they are slaves to their business which defeats the entire purpose of being self-employed. One of the ways our business can enslave us is when we use our personal money to pay for business expenses.
When a business is in the red, instead of cutting expenses or laying off employees, business owners tend to pay for the business out of their personal funds. This is done one of two ways: not paying yourself a paycheck and/or using your personal savings. This isn’t sustainable, but many business owners feel stuck in this place and can’t get out. So how do you save your business without using your personal funds?
Many of you start with the income side of things. What do your accounts receivable look like, what is the percentage over 90-days? How about your schedule? Is the hygiene schedule full? What about the doctor schedule? While it is important to look at income taking a hard look at expenses can have an even more dramatic effect.
What expenses are necessary, and which aren’t. The worse your finances look, the more critical you have to be. Cut out unnecessary subscriptions first; they are the ones that suck the business dry fastest.
The next thing to consider is keeping track of your stock. How often do you buy PPEs only to find you actually had more in the back of a closet somewhere? Organize your supplies to make sure you always know how much you have so you don’t buy supplies unnecessarily. With supplies, dental or office supplies, ask the following question: is this a MUST HAVE to survive and provide proper level of service, does it MAKE IT EASIER to do your job, or is it an EXTRA? Cut the extras. In the must haves can you find them at a better price, or could you use a less expensive item? The make it easier items should not be more then 10% of the total cost in these supply categories.
The last thing to look at is employees. We’re talking about people now, not supplies, so we have to be more sensitive here. You should only change how much you pay your employees as an absolute last resort, but you can let people go who aren’t a good fit for your practice. No one likes to fire people, but an employee who does not share your values or fit your company culture can be costing you more than you think. A grumpy receptionist drives away potential patients, a sloppy hygienist who causes patients discomfort can do the same. It sucks to fire people, but you have to be consistent about what you expect of your employees. With consistency comes clarity and it will help you make these hard decisions.
You should never have to pay for your business out of your own pocket. Don’t let yourself become enslaved by your business. Take a hard look at your expenses and reorganize yourself and you should be ok. If necessary, you may have to reduce the number of employees, but that should be a last resort.