By Roger Mummert
Review of Optometric Business
August 1, 2018
When it comes to practice growth, there is one place you don’t want to be: on the plateau.
It goes like this: You come out of optometry school, full of beans to apply your clinical skills. You build up your exam volume and increase revenues for the practice that employs you.
At 3-7 years, you buy into a practice, purchase an existing practice or start one cold, while (ROB advises) you add business skills in finance, marketing and staff management to run it.
And there, a lot of ODs get stuck. On the plateau.
An OD “on the plateau” sees one-plus patient per hour, about 10 per day. Working 200 days a year, you top out at about 2,000 exams—which generate, on average $306, according to the Management & Business Academy database of 1,900 ODs. Annual gross revenue: $612,000.
And try as you might from the three available options—raise fees, increase volume, cut costs–you can’t seem to go much higher.
Well, some ODs do. In this article, you will hear success stories of smart ODs–ROB contributors!–who got off the plateau because they made good decisions and focused on practice growth goals.
First, the cold hard facts, according to 2018 ECP Compensation Study from Jobson Optical Research.
An employed OD with less than five years in their position earns $101,785; at 5-10 years, that rises to $108,720; at >10 years that reaches $123,878. In other words, your salary increases about 2 percent a year, on par with inflation.
You’re on a plateau.
If you are an OD-owner, or partner, the picture is slightly better. With less than five years as owner/partner, average compensation is $99,045, actually 3 percent less than an employed OD. But at 5-10 years, that rises to $131,050; then at >10 years to $153,053 or 24 percent more than an employed OD. If you view this $29,175 differential times 30 years of practice ownership, you will retire with $875,250 more–or rather, far more, as you benefit from saving and investing this sum or part of it.
But you’re still on a plateau, albeit a higher one.
How can you make more money? Increase the size of your practice.
An OD owner/partner of a practice with $1-1.5 million in revenues earns $169,325. Grow that practice to >$1.5 million and compensation rises to $174,414. Then take that $21,361 differential and….
OK, I suspect at this point most readers already are doing the math on timeline of ownership and compounded interest from investing in a 401K, annuities or real estate.
You’re blasting off the plateau.
But not so fast. There are good decisions and bad decisions when it comes to expanding your practice. Over the past eight years, and hundreds of articles and videos from ODs like you, we have seen the following two principles contribute the most to practice success:
Clarity. Have a clear practice mission and guide decisions by it.
Focus. A focused business leader beats a smart, but undisciplined, business leader every time.
For proof of this, here are examples by ROB contributors of good decisions and sustained focus that lead to practice success.
Hire staff before ODs. Peter Cass, OD, took over an older practice and supercharged revenues by adding staff before adding ODs. More staff (well trained and focused on service) enables him to see many more patients efficiently. More ODs would, too, but net profits would then be divided. Adding and training staff adds profits with far less expense.
Expand before you absolutely need to. Kristin O’Brien, OD, expanded her office before she needed to–because the space next door in her medical building opened up, and she had wisely added a “first right of refusal” on the space in her lease. And with new houses being built right outside her window, growth and opportunity made the move a no-brainer.
Build your own building. Jason Ortman, OD, built a new building across a busy main street from his old location, along with a pediatric dentist, a sports orthopoedist, and other non-optical medical specialists. They all feed one another patients; some patients schedule their dental cleaning an hour before their annual eye exam. Synergy!
Watch for an upcoming ROB video with Dr. Ortman at his Denver office.
Be the OD-CEO. Ryan Powell, OD, watched his father toil at refracting patients all his life, and decided to go another route. He taught himself business skills, took some advice from his banker brother, and now is CEO of a ring of a dozen family-based practices. And he sees as many patients as he likes.
Analyze and adjust to your market. Miki Lyn Novicki, OD, wanted to practice in her hometown, along with SUNY-OD friend, Jessica Fulmer, OD. But that hometown was over-saturated with optical shops. So, they opened a practice with no optical, specializing instead on vision therapy and pediatrics. At the start, they both worked part-time at other offices, and alternated hours until they could fill their schedule.
Good, clear concepts and sustained focus; the combination wins out every time.
Roger Mummert is Content Director at Review of Optometric Business. Contact: email@example.com