How do you measure success in your optometry practice? For many it is the satisfaction of meeting the visual and ocular health needs of their patients. For others it is the paycheck that comes at the end of the month. For the businessman or businesswoman in all of us it is the cash flow generated by an efficiently-run practice.
Practice management experts say a good practice net income is between 32-35 percent. I agree. However, many practices are exceeding 40 percent, and there is no reason your optometry practice should not be one of them. Here are three steps to exceeding 40 percent net income.
- Control staffing costs – This is the largest chunk of your expenses that can
decrease the practice net quickly. Many offices are highly inefficient when it comes to staff management and continue to keep staff members who are not productive. Finding the right staff may require you to get rid of current staff who are not meeting your expectations. Monitor overtime hours and keep them to a minimum. All staff should be given a list of job expectations and met with biweekly to review those expectations. - Reassess COGS quarterly – Your lab bills continually increase in small amounts on a regular basis. Just like you, lab companies are running a business and they adjust prices accordingly. You may have to join a buying group or put up with the hassle of negotiating each quarter to keep your costs at a minimum. The most successful practices limit the number of brands of ophthalmic lenses they fit patients with, and then negotiate for deep discounts with their chosen manufacturer. This also has another benefit. Offering patients too many choices has been proven to result in indecision and the patient ends up leaving without buying anything. By giving patients only a few choices, you can increase the probability that they will purchase something, and you will be able to negotiate better costs for you as well.
- Keep occupancy below 7 percent – Many rental properties are based on the local market, so this point may not be within your power to change. However, since people today have many more ways of finding an optometrist than simply driving by a practice location, the need for prime real estate is less important. With mobile technology and a good practice website, you don’t have to be in an expensive location to reap the benefits of exponential practice growth. As a commercial real estate owner, I would recommend that you negotiate lower rental costs by committing to longer terms. This is a win-win for you and the owner of the property. For those optometrists who own their building, congratulations, you are maximizing your potential return on investment.
There is no silver bullet to making an optometry practice net above 40 percent. However, owners who actively manage the details of the practice find that eclipsing 40 percent can be done, and might even be easier than expected. With decreasing reimbursements and Affordable Care Act changes looming, it is even more important than ever to spend time working ON the practice and not just IN the practice.
