In any Optometry practice or business, it is imperative to monitor and track expenses, patient [customer] flow, and where your profits are coming from.
These figures will allow you to know the inner workings of the practice and when to make the appropriate changes so that your business is consistently growing.
Step 1: Understanding your NET profit:
Accountants will say this: Gross Profit – Expenses = Net Profit
In layman’s terms: Money In – Money Out = Money Made
Money In: How are you bringing in money?
- Exam Fees (private pay, vision plans, medical optometry, specialty services)
- Goods: contact lenses, spectacles, low vision devices, other products
All of these things should be tracked separately so that you know exactly how much each different area is bringing in.
Money Out: Where is all of your money going?
- Monthly fees (IT services, security, merchant services, etc…)
- Maintenance (exam room, bathroom, staff room)
Again, the more detailed you are in the breakdown of costs, the easier it will be to identify areas that you are spending too much money in.
What you are left with is how much money you made.
So, how often should you check in on your profits/losses?
Personally, I keep track of the business’ income (monies collected vs. what was billed to insurance) on a daily basis, but track the overall profit/loss on a monthly basis.
At any given time, I have a pretty good estimate on how we are doing because of this system. However, I know of some businesses that outsource their accounting services so they only receive a quarterly profit/loss statements.
Step 2: Keeping Keymetrics:
Keymetrics refers to tracking things like:
- Your chair cost:
- Fixed Costs / Complete Annual Exams = Chair Cost per Exam
- Fixed Cost/ Hour = Chair Cost per Hour
- Gross revenue/complete exam
- Median: $306*
- Exams/ODs hour
- Median: 1.01/hour*
- Gross Revenue/OD hour
- Median: $330*
- Gross revenue/ staff hour
- Spectacle/contact lens capture rates
- Recall rates
- New patients/month
- Average spectacle sale/patient
- Second spectacle sales
- Staff compensation (bonuses, increases)
With opening cold you have a clean slate and can track everything from the ground up.
I started by just calculating my hourly chair cost and then tracking the other areas as we grew. Established practices can retrospectively calculate these numbers and use this to improve areas that are lacking, and then set goals!
At the end of each month I set aside time in my schedule, just like an exam-slot, to calculate and review the keymetrics and our profits/losses.
If you remember nothing else, take this point home with you:
For those of you that are associates, you can also track your progress and growth within the practice you are working for. This will allow you to discuss with the senior doctors future raises, bonus incentives, schedule changes, additional staff for you, etc…
As an owner, I would be impressed if my employee came to me with figures showing how many patients they see an hour, average profit/patients, and postulations for how to improve profits.