Hakim | 13/02/2023
The last normal year that practices had was 2019. When COVID-19 hit, there was fear of the unknown, so frugality kicked in. Practices looked at controlling costs, maximising whatever opportunities arose for turnover, and used some of the Government’s support to ensure they finished 2020 in reasonably good shape.
This behaviour continued into 2021, but the demand and conversion rates were the highest we have seen in optometry. Patients wanted to spend money on themselves, because there were fewer places for them to spend it, and many patients had surplus money in the bank as a result of changes in consumer spending, predominantly COVID-19-related. Many practices had their best year of profitability in 2021.
Practices that had cash on the balance sheet by the end of 2021 then increased spending within the business, and simultaneously in 2022 conversions dropped. While people have still been buying, the cost of doing business has been massively impacted by increased costs in supply chain, labour and double-digit inflation. The result being most independent practices have experienced a growth in turnover but a dip in profitability. This is similar to what many businesses have experienced in other industries as well driven by the macro-economic headwinds in the economy.
In reviewing more than 500 practices over the past year I’ve seen geographical and individual variation. The Republic of Ireland has been very robust and has done well bouncing back from COVID-19, whilst Wales has shown resilience and steady progress. Scotland has been slower to emerge from the pandemic, and had a longer trading period affected by the pandemic than the other nations. England and Northern Ireland are between the two extremes.
We are a fairly resilient industry. However, we are seeing an increasing number of demands on consumers’ pockets, and that means the resilience of the industry is being tested more than ever. Your positioning in the market as an independent practice has to be distinctive and compelling. If it isn’t, then you are at risk of becoming less relevant for a 21st century consumer who is more demanding, knowledgeable and sophisticated than at any time before.
The patients that come in have done their research. They know what they want, they have read reviews on the practice, and meeting their expectations is no mean feat. The things we did 10 or 20 years ago aren’t enough. One example we see increasing in 2023 is the trend for paying in instalments. We have got to make sure we are a destination where consumers want to go to spend money in a recessionary environment.
Remember: a smooth sea never made a skilled sailor
When faced with the sort of turbulence we’re experiencing now, it’s all too easy to make short-term knee-jerk reactions. The ability to navigate a practice in light of the headwinds, whilst balancing the philosophy and ethos of your practice, as well as your approach to delivering eye care and eyewear in the community you serve, will be the yardstick by which businesses will measure their success, as they look to emerge stronger through this period.
The challenges we face will require business skills to be honed just as much as clinical skills. You almost need to be a mini-economist in the current climate, with the multitude of headwinds businesses are facing, and to be well-informed but able to decipher the noise from what matters. This is where community and networks will be more important than ever. Everyone is facing the same kinds of challenges, and like we saw through COVID-19, we are stronger together and eminently capable of navigating exponential change together.
Independent practices are a valued part of the community they serve. Being aware of the challenges we face, and that are faced by our teams as well as our patients, whilst finding ways to support them in this time, is not easy. But the price is huge for getting it right. This time will pass, eventually we’ll be in calmer waters, and people won’t forget how they were treated during the tough times.
It’s okay to feel overwhelmed, but don’t let this consume you. Be aware of the challenges, remove the noise and hype surrounding them, and focus all your energy on controlling the controllable. We will navigate this change together as a profession. But it requires business owners to stay educated on developments, connect with communities and networks, understand their businesses meticulously and not shy away from making difficult decisions. Remember: a smooth sea never made a skilled sailor.
A message for practice owners: navigating an unprecedented time without becoming overwhelmed
Three words I would use to describe the current environment for practice owners are: everything exponential, everywhere. Before we have escaped from one crisis, it seems we have managed to land ourselves in another. I think this can be explained in three points.
The first is that people are exponential. The world’s population is growing exponentially and in 2022 we surpassed 8 billion. By 2050, the population will be 10 billion.
The second is that information is growing exponentially. There are billions of Google searches per day and more than half a million websites produced daily. Imagine how much information that is. The human mind hasn’t evolved to deal with that amount of information.
Finally, change is exponential. Because of devices we are digitally assaulted every day, and we get bad news from all around the world. We wake up, pick up our devices and read a negative headline. You have a build-up of adrenaline and cortisol, and the neurons start firing. You switch on the news and see that the cost for a mortgage is rising. You pick up a newspaper and see that inflation is at double-digits. You get in the car to go to work and hear about a tragedy in Europe. Before you get to the chair to take your first patient through, imagine the turmoil you are already feeling.
As an example: my daughter was born in January 2022. Since then, she has been living through a lingering pandemic, has experienced a recession already, lived through a drought in the summer, and a war in Europe, along with double digit inflation and rising interest rates. She has experienced the rule of a queen and a king, three prime ministers, four chancellors, and she has only just turned one.
The complex cocktail of challenges makes for an unprecedented landscape as we head into 2023
People are overwhelmed because everything is exponential, everywhere. This is what we are seeing within our teams, families and patients. None of us have lived through a period like this. Everything feels that bit heavier and more challenging right now. I want to stress that it is okay to feel a bit overwhelmed by everything that is going on in the world – we are all feeling that way.
We used the word ‘unprecedented’ a lot through the pandemic, but it is certainly an adjective that you can use to describe the current trading environment. Each of the challenges we face would be difficult to navigate in isolation, but the complex cocktail of challenges makes for an unprecedented landscape as we head into 2023.
Many practice owners have never had to face this amount of volatility and uncertainty in the marketplace. But history shows us that we have seen some of this before. There has been high inflation before, for example, and some of the more long-standing business owners will remember when interest rates were much higher. So we can learn lessons from the past about what we can do to navigate this sort of turbulence.
The approach we have taken with our family of independent practices at Hakim Group is: hope for the best, plan for the worst, and open your mind to the many opportunities that are all around us. There are still many opportunities for good businesses to take advantage of in this period.