July 13, 2016
As years in the position increase the compensation goes up significantly for both employed ODs and practice owners, but even more significantly for owners, findings from Jobson Optical Research’s 2015 ECP Compensation Study suggest. The average compensation for employed optometrists with less than five years in the position was $99,136; $106,001 for 5-10 years in the position and $123,061 for more than 10 years in the position. The average total compensation for owner/partners with less than five years in the position is $102,048, $128,047 for 5-10 years and $156,561 for over 10 years in the position.
Click HERE to purchase Jobson Optical Research’s 2015 ECP Compensation Study.
There is a $3.8 million difference between a practice owner and an employed optometrist over a 40-year career. Here’s how we arrived at that number. We started with Jobson Optical Research’s 2015 ECP Compensation Study. It provided the information in the following chart.
We then calculated the differences over a 40-year practice career.
For the first five years, the practice owner makes $2,912 more per year than an employed optometrist. Then, for the next five years, the practice owner makes $22,046 more per year. And for the next 30 years, the practice owner makes $33,500 more per year.
Over a 40-year career, the practice owner makes $1,129,790 more than the employed optometrist. Let’s go a step further and calculate what would happen if the practice owner simply invested the difference over the 40 years with an average 7 percent return on investment. This investment results in $3,829,536 more than the employed optometrist.
$3,829,536. Let that number sink in for a minute. Even in a 50 percent tax bracket, that leaves you with $1,914,768 to spend. (Apologies to our friends in California and New York who are in 60 percent tax brackets, but this even works for you.)
So what is our take-home message? There are two, one for the practice owner and one for the employed optometrist:
TAKE HOME MESSAGE #1 – FOR THE PRACTICE OWNER
First, for the practice owner. Based on how many years you’ve been in that position, compare your last year total compensation package to the results of the Jobson research. You should be doing better. If not, there are many consultants out there willing to help you achieve better results.
TAKE HOME MESSAGE #2 – FOR THE EMPLOYED OD
Now, for the employed optometrist. You are making a lot of money for your employer, so this might be a good time to ask for a raise. But if you want to make even more, this might be the year you decide to switch teams and become an owner. There are many groups out there willing to help you make the switch. Pick one and act today.
For those who want to run the numbers, here is the web site that we used to calculate the investment over time: http://www.bankrate.com/calculators/retirement/roi-calculator
Set inflation to 0 and the tax rate to 0 because we are not compensating for inflation and we are just calculating the pre-tax difference for the purposes of this discussion.