Balancing the costs and finding efficiencies

Going into 2025, practice owners should look to improve their ability to supply, become an employer of choice and automate where possible, suggested economist, Roger Martin-Fagg, in a recent webinar.

The online event, A look into the economic future, was hosted by OT in partnership with the Hakim Group and the AOP.

Practice owner, Ian Cameron, moderated the event, which looked at economics in the UK and Ireland, and how practices are navigating some of the current and upcoming challenges.

The current outlook

The webinar began with a presentation by Martin-Fagg, breaking down the economic climate in the UK and Republic of Ireland, discussing the effects of a new UK government, the Autumn budget, and global factors.

Household spending power in the past year has “steadily improved,” from the “difficult” environment of 2023, Martin-Fagg shared.

While there was a softening of confidence in October, he suggested: “Now the [Autumn] budget is over, I think people will have a line of sight and we can expect spending to pick up.”

There are positive signs, with money supply currently at 3.5%, Martin-Fagg suggests, with the potential to reach 4% by February 2025 and 5% by May.

The new government

Martin-Fagg highlighted a key issue for the new government, suggesting: “The Government has a major job to do. Imagine your business changed its managing director five times in seven years, and the average time in post of your key managers is eight months – how well would it be performing? We all know the answer: it would not be.”

“Well, that is the UK. That is the 'business' that Starmer inherited. The consequence of this is that Britain has underperformed all other major economies,” he added.

The previous administration had not raised taxes sufficiently to cover current spending, Martin-Fagg shared: “This government has started to do that, and they are also going to borrow to increase their investment spending.”

Measures announced by the Government, such as borrowing £70bn to finance capital spend on infrastructure, could see an increase in potential growth by 0.4%.

“Contrary to what the press is telling you, the current budget is expansionary. Government will be spending more than it is taking in tax and that difference will be financed by borrowing,” he explained.

Reacting to the Autumn Budget

A key announcement in the Autumn budget was the increase to national insurance contributions for employers. 

This will be a “final straw” for ‘zombie businesses,’ those who “were not really making enough prior to interest rates going up,” Martin-Fagg suggested.

The price makers – those businesses where people value the service provided and so are willing to pay the price – will be able to pass the NIS increases on in higher prices, the economist suggested.

Price takers – those who, perhaps for reasons of local competition, can’t raise prices above the average in the area, might see their margins “stressed” until they increase productivity.

Martin-Fagg commented: “The impact of this tax for entrepreneurs is positive. You’ve been hit by challenges – we all know there have been many – and this demands a response. That response is automation, and improvement in productivity, and entrepreneurs have the energy and they will adapt.”

Labour supply

Labour supply will be a constraint on growth in the coming five years, with fewer people entering the workforce than leaving it.

“If you look out 10 years, labour supply actually shrinks,” Martin-Fagg said, adding: “What this means is – if you want to grow your business, try and do so without employing more people. I know it’s difficult, but if technology can be used to automate the back office, that is what you should do.”

This will also have implications for government. With the number of ‘producers’ (those working and paying tax) decreasing, the tax rate on this group will only increase, he shared.

Unless the UK invests heavily in productivity growth, Martin-Fagg said, maximum growth rate “will be about 1.8% without inflation running ahead.”

Martin-Fagg said: “The future is Gen Z and Gen Alpha – these are the under 30s who have a work ethic that is quite different from 30-40-year-olds and instead of rejecting them, we must learn how to motivate and lead them.”

“Particularly Gen Alpha coming out of school now. They are very tech-savvy and you need to tap into that,” he added.

The Republic of Ireland has “ideal demographics” in terms of labour supply, with a large group of people in work, and while there is a shortage of those under 30, this is projected to rise in 15 years.

It is also one of the very few countries running a budget surplus, Martin-Fagg shared, with a GDP growing at 2% with 3% expected next year and will be one of the only EU countries able to deliver lower taxes without increasing debt.

However, there is an issue with housing supply, leading to inflation of house prices.

Positivity ahead

Forecasting for the end of 2025, the economist suggested: “This time next year we could see a real GDP growth rate of 1.8%. I think Ireland will see just under 3%.

The UK’s inflation rate will be 3%, while Ireland’s will be 2.1%, earnings growth will be 4.5% in both, and unemployment 4% in both.

Interest rates will be 4.75% in the UK, and 3% in Ireland, while house prices will be at 6% in the UK and 10% in Ireland.

There could be record insolvencies in both countries, he suggested, “because the zombie businesses are being squeezed out.”

Overall, the outlook has signs for optimism, with Martin-Fagg commenting: “Next year will be better than the press is telling us. The budget is expansionary. Therefore, you should think of improving your ability to supply, be an employer of choice, and automate, automate, automate.”

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The presentation was followed by a panel discussion, led by Ian Cameron, and featuring directors of independent practice from across England, Scotland, Wales, Northern Ireland, and Ireland.

The panel discussed the costs facing practices, how they look for efficiencies, manage diaries, and seek out new revenue opportunities.

Counting labour costs

Tushar Majithia, senior optometrist and director at Lunettes Eyecare, owns three practices in Lincolnshire and shared that labour costs are going to have a “significant impact” on the cost of running the business.

“We’re going to look to review our practice workflow and explore some opportunities to upskill some of our teams to provide more clinical supporting roles to optimise their contribution,” he shared.

Clodagh McGovern, is a senior optometrist and director of several Hakim Group independent practices in Ireland, and explained that there has been a steady increase in minimum wage over the last two years.

“Between 2020 and 2025 our minimum wage has increased by 34%, so this January it is going to be €13.50 an hour” she said.

“We’ve spent the last few years trying to make our teams lean and reducing hours where we can. With this new increase I can’t make it any leaner,” McGovern shared, explaining that the increase will have to be mitigated in other ways across the business.

Key to this is financial planning, she commented, “We have a very good financial support team in head office and that has really helped. I know where I stand.”

Austin Roberts, senior optometrist and director at Judith Roberts Opticians in Wales, described labour costs as “undoubtedly the biggest cost we have,” suggesting the increase in national insurance and minimum wage has a “triple whammy” effect.

“I’ve always followed the principle that good staff will pay for themselves as long as they have got the right environment to work in so I’m not minded to reduce staff cost,” he shared.

Instead, the practice will need to increase productivity efficiency, and this is something the whole team will be involved in discussing and working through together.

Valuing the team

Cameron asked panellists to share their thoughts on how they ensure practice team staff feel valued.

McGovern said: “I think it’s important we’ve got the right values and culture in the practice.”

“Making sure we have got the team, but also they are playing in the right position. Do we know what their strengths are? Are they working in an area they like and are good at? If they are, they will be happier and more productive,” she added.

Majithia shared: “I think it’s important to offer development opportunities for our teams so they can enhance their roles and get a better sense of job satisfaction.”

Following the pennies

Reflecting on the increased financial pressures of recent years, Pamela Robertson, clinical director at Angus Optix in Scotland, said: “It’s not been easy the past few years with inflation and things like that. We just simply can’t keep putting the prices up.”

“I think now more than ever it’s important to look after where the pounds and pence are going,” she said, adding: “Even thinking about how your incomes comes into your practice.”

Direct debits have been important to the practice since lockdown, providing incremental income.

Roberston said: “It’s the debate about whether you put this up. You don’t want to knock it out of the water completely, because these are the patients that are probably most loyal to your practice, but it does give you a revenue stream every month which will help fund that wages bill.”

Diary management

John Broderick, senior optometrist and director at Fitzsimons Opticians, highlighted the need to support the productivity of the optometrist, as the most expensive practice team member, by keeping an efficient diary and enabling them to undertake more eye examinations.

McGovern suggested that she tries to reduce admin hours out of the practice by working with Hakim Group head office, enabling more time with patients, which in turn increases productivity and reduces costs.

Based in Scotland, Robertson commented that, as optometrists are the first port of call for eye casualty in the community, “it does mean you sometimes have to keep a slot free in your diary, and that goes against the grain when you’re trying to maximise efficiencies.”

One approach is training the practice team to manage the diary as efficiently as possible so that these appointments are scheduled at the first and last points of the day, or before and after lunch.

Looking ahead to the following week can also provide opportunities for creating efficiency, for example, if there is a gap in the diary – is there an opportunity to ask a patient to come in a week sooner, she suggested.

Income streams and building business

Panellists discussed a variety of methods through which they build business.

Majithia has seen a benefit of running events in practice, sharing: “Something that has been really successful for us is hosting brand event open days. It's a really exciting way to boost revenue and create a positive engaging atmosphere within the practice. The staff get on board with it and are excited about it.”

The events also provide an opportunity to demonstrate the technology available within the practice.

Roberts also shared: “We have a legendary open day once a year. We sell bucket loads of frames and it’s great fun for the team.”

Discussing other income streams, he shared the benefits of eye care plans and a direct debit scheme for patients to pay for their glasses over a period of several months.

Robertson spoke of the importance of utilising available space: “We’re lucky we have got two consulting rooms, but we may not have the capacity to always fill the diary for the two rooms, so the days were we are a bit quieter, we use it for dry eye services.

“We also have an audiologist who comes in once a week, which is a great way of building your business for patients that may not have otherwise visited the practice,” she added.

Discussing practice marketing, the practice directors discussed the support available from Hakim Group head office, and the inspiration that the Hakim Group family of practices can offer.

Roberston explained that the practice has delegated social media marketing to one of the team members, sharing: “It’s a really good way of involving younger members of the team.”

Views towards 2025

Panellists were asked to share their feelings heading into 2025, with Broderick sharing: “Overall, I am positive going forward.”

Majithia also commented: “It’s important to have that growth mindset and continue to invest in our businesses so we can provide the best possible eye care. We’re certainly looking to develop our practices, recruit optometrists, grow the business and add clinics.”

McGovern acknowledged that the biggest challenge of the past few years has been the increasing costs, and her goal for the year ahead is to “claw back that bottom line.”

“As business owners, I always say it’s a different challenge every day, and this year is just that one,” she said, adding: “I’m feeling really positive about next year.”

Summarising the discussions of the webinar, Cameron shared: “These changes we’re seeing in 2025 with national insurance and wage rises are going to have an impact on your business.”

Cameron added that “doing nothing is not an option” but that that the panel hopefully inspired some suggestions of what can be done.

“Think about your wage bill, control your costs, get the diary busy, think about new revenue streams, and make the most of peer support,” he said.

Watch the webinar recording here.