What is a Good Profit Margin for Optometrists?
Operating and managing a successful optometric practice certainly has its rewards. Not only do doctors who open up a private practice have the joy and privilege of caring for their patients and growing a dedicated and tight-knit team, but they also generally enjoy substantial profits from their efforts. Today, we’re talking about what kind of profit your optometry practice should expect to make, how to evaluate your performance, and some ways to boost your profits in order to run an even more profitable optometric practice.
First, let's talk about optometry profit margin benchmarks.
How do you know if your practice is successfully reaching your goals if you have nothing to compare it to? Benchmarking your practice’s profitability is a key step towards determining whether or not your practice is meeting expectations when it comes to profitability. It’s also a key step in strategically planning and setting goals for the future. An ideal net profit for most optometry practices is between 30-40% of revenue, though there are many factors that impact this number. Where you are located, how long your practice has been open, and what specialty services you offer can all determine where your benchmark should fall.
How long does it take for optometry to be profitable?
There is no right answer when it comes to how long it will take for your firm to become profitable. For some practice owners, profitability happens within their first months of operating. For others, it can take years to finally become profitable enough for doctors to pay themselves a full salary that meets their needs. During this time, it’s important to manage any financing activities appropriately and to keep your focus on reaching your break even point, while paying yourself a reasonable salary.
Because start up costs range from $150,000-$500,000, excluding monthly operating expenses, it’s important to plan in advance for the times when you are not yet profitable and to ensure that you manage your financing activities in a way that allows you to continue funding your growth while paying off any start-up debt.
How to increase profit at optometry practice
If your profit margin isn’t at benchmark or just isn’t where you want it to be for your lifestyle, there are some steps that you can take to increase your profitability and ensure that your practice continues to grow and thrive.
Here are some tips for running a more profitable optometry office:
Narrow Your Insurance Preferences
Not all insurance companies pay out the same. You can boost your profitability by analyzing which insurance companies pay the most for services and narrowing your patient base to those who have that specific insurance. Just be careful with this tactic because you don’t want to exclude a large sector of your patient base. If you want to take this action but do not want to lose any of your current patients, consider applying this criteria only to new patients.
Reduce Costs
Another key step toward greater profitability is to ensure that your spending is under control and producing positive ROI for your practice. We recommend working with a professional, specialized bookkeeper for optometry practices to set up a budget and determine where costs can be cut to strategically increase profits. Some good ways to reduce cost include joining buying groups for frames, outsourcing certain tasks to contractors instead of in-house staff, and participating in optical buy back programs.
Tighten up your eyewear sales
Industry benchmarks suggest that product sales account for 61% of an optometric practice’s gross revenue. In a time when many patients are taking their prescription to cheap, online eyewear retailers, it’s important to make sure that your inventory is competitive and that your turnaround time for frames is more attractive than etailers. This step alone can help you shore up profits significantly!
How can I improve my optometry profit margins?
If you want a unique plan for improving your profitability,it’s best to work with a professional to analyze your finances and help you make a plan for future scalability and success. At Bookkeeping for Optometry, we help optometrists dive deep into their practice financials and create strategies that simplify and accelerate their growth.