Why practice owners should create a simple business budget

December 18, 2019

While creating a budget may not get you excited, it does not negate the fact that, if you own your own practice, it is a critical component to your business's success.

The views expressed here belong to the author. They do not necessarily represent the views of Optometry Times or MultiMedia Healthcare.

If you are like most OD practice owners, the idea of creating a practice budget ranks up there with getting your first colonoscopy or spending a long weekend with an obnoxious brother-in-law.

For most ODs, managing detailed spreadsheets, financial reports, and business metrics is not in our wheelhouse. And if you think about it, that makes sense. What attracted most of us to the profession likely had more to do with our love of science and the desire to help and serve others. That is a far cry from our accountants, who often sit at a cluttered desk with stacks of forms and large computer screens meticulously adding and subtracting numbers all day.

While creating a budget may not get you excited, it does not negate the fact that, if you own your own practice, it is a critical component to your business's success.

In fact, I believe it is the foundation for a healthy practice, creating the framework that supports all other financial measures in the practice.

Related: 5 marketing tips to grow a practice without breaking the bank

Why we don’t budget
There are two fundamental reasons why we do not budget.

The first has to do with mindset. ODs often do not understand or appreciate the importance of a budget and the critical planning purpose it serves. ODs might also believe a budget provides limited useful information, or we might just be afraid of what we will find out.

The second obstacle to budgeting is mechanical. That is, ODs simply do not know how to do it. While ODs might understand fundamentally that a budget is intended to predict and plan our income and expenses, we often don’t have access to the right tools to make budgeting a simple, straightforward process, therefore neglecting it.

Why should we budget
There are three critical reasons why we should budget:
1. It’s what all successful companies do
Could you imagine if Amazon, Apple, or Google didn’t manage with a budget? Instead, what if every engineer, software programmer, receptionist, and janitor had the discretion to spend the company’s resources at free will? It’s highly likely that these companies would no longer exist today, having run out of cash long ago.

The most healthy companies operate with strict financial controls giving every dollar a purpose and instructions on how it should be utilized to grow the business.

2. Budgeting creates peace of mind
It might seem odd to think that something as dry as budgeting could have an impact on emotions, but in my experience, ODs who budget often find the most financial peace simply because they have a plan. One of the leading causes of emotional stress is money. When ODs create a plan for their businesses, they take back control, thereby reducing anxiety.

3. Budgeting improves relationships
When ODs have a plan, and peace of mind, they are just better people.

ODs are less grumpy with spouses and kids, more patient with staff, and more forgiving in the grocery store line when the mom with four kids in front of us can’t find her wallet.

Related: 8 common cash flow pitfalls to avoid: Part I

Bonus reason
There is a fourth added bonus to budgeting that is sometimes forgotten.

Businesses that budget are more financially healthy and likely have the means to be more generous.

I have never met an OD who wouldn’t give more if he could. In all my years, I have never encountered a more serving profession than optometry. ODs support many causes and charities, and when we are financially healthy, there is no doubt that we will give more.

So, if the first three reasons don’t convince you that budgeting is important, then consider how you might be able to increase your generosity when your business has the means to give more.

How I budget now
Like most ODs I didn’t budget for years for all the reasons mentioned above. Several years ago, I created a handwritten sheet of paper tracking my income and expenses in a very simplistic format. That led me to create The Simple Budget, and spreadsheet that I use every month to project my income and expenses.

Download Dr. Kling’s budget here

I share this spreadsheet with my coaching clients to provide them with structure to make sure they are not only projecting for the future but also taking a backward glimpse to where they have been. By simplifying the process, I can now create a budget in less than 10 minutes each month that provides valuable insight into where the money is going in my practice. Without it, I would surely be financially lost.

Budgeting is not fun, but it is a critical part of what successful businesses do. Trying to run a business without a plan leads to frustration, stress, and anxiety for the owner and can jeopardize long-term viability as a company.

Take the time now to reconsider how a budget should fit into your business strategy.

More by Dr. Kling: 8 common cash flow pitfalls to avoid: Part II