Dec. 21, 2016
Compensation by practice revenue varies more among optometrists who are owners/partners than employed optometrists, according to Jobson Optical Research’s 2016 ECP Compensation Study. The average compensation for an owner/partner is $124,134 for a practice with revenue less than $500,000, and $166,827 for a practice with revenue of more than $1,500,000. This compares to employed optometrists who earn an average of $99,663 at the low-level practice revenue, and $117,757 at the high-level practice revenue locations.
To put this another way, for a practice generating less than $500,000 per year, an owner/partner OD makes on average $24,471 more than an employed OD per year. That works out to be almost 25 percent more than an employed OD. For a practice generating more than $1,500,000, the owner/partner OD makes $49,070 more than an employed OD per year. That works out to be almost 42 percent more than an employed OD.
Those are per-year numbers. What happens if we look at the difference over a 40-year career between an owner/partner OD versus an employed OD. The numbers are shown in the next chart.
Those are just raw numbers. Those numbers do not even consider investing the difference. If the owner/partner just simply invested the difference in compensation each year for 40 years with a conservative return on the investment of an average of 7 percent, the difference is significant. Using a free calculator found at investor.com , the input is shown in this screenshot.
These numbers didn’t include the base wage. They only included the difference in compensation between the owner/partner and the employed OD.
What lessons should we learn from this?
1) Owner/partner ODs make more – a lot more – per year than employed ODs.
2) Over a 40-year career, the difference between what an owner/partner OD makes compared with an employed OD is, on average, approximately $1-2 million.
3) The power of investment is significant. If the owner/partner OD simply invests the difference in income between the owner/partner OD and the employed OD, the return on investment at a conservative 7 percent compounded annually is approximately $5-10 million.
Take this week to review your long term professional career plan. Are you on the best path?