Dr. Steele, back row (fourth from right as you look at photo) with his practice team. He says there are specific metrics he closely tracked to significantly grow his practice.
Optometry practice growth metrics
By Kurt T. Steele, OD
Oct. 2, 2024
In my previous articles, I shared insights on building a successful optometry practice and the importance of exit strategies.
Now, I’ll delve deeper into the specific metrics we tracked to achieve remarkable growth, taking our practice from a modest $350,000 to an impressive $3.6 million annually.
Expense Metrics: The Foundation of Control
We established target percentages for various expense categories:
- Cost of Goods Sold: 28%
- Staffing: 22-25%
- Overhead: 6-9%
- Occupancy: 8-10%
- Patient Care & Equipment: 3-5%
- Advertising: 1%
- OD Compensation: 15-18%
- Profit/Cash Flow: 4-17%
These served as our financial compass, guiding our decisions and ensuring we maintained a healthy balance.
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However, it’s important to remember that each practice is unique. Factors such as location, specialization and target patient demographics can influence these percentages.
For instance, a high-end practice catering to a discerning clientele might naturally have a higher cost of goods sold due to the premium products they offer. Similarly, the cost of living in your area will impact expenses like staffing and occupancy.
In my experience visiting practices, I noticed that frames and occupancy costs are the two areas most prone to imbalance. Keeping a close eye on these expenses is crucial for maintaining profitability.
In general, frames can or should be somewhere between 6-9 percent of overall gross revenue.
Occupancy should be anywhere between 8-10 percent of overall revenue. Once again, it depends on the cost of living in the area, but I have found that “non-rent” occupancy expenses range from 2-3 percent of overall revenue.
So, rent would probably, on the low end, be 4 percent of overall revenue to, on the higher end, 8 percent of overall revenue. If rent gets over 10 percent, or overall occupancy over 12 percent, that really cuts into profitability. I have seen 18 percent of overall revenue in both frames and occupancy alone.
Revenue Metrics: Fueling Growth
Beyond expense management, we also meticulously tracked revenue generation, both at the doctor and staff levels. Two key metrics were instrumental in our success:
- Revenue per day per doctor
- Revenue produced per paid staff hour
Understanding each doctor’s revenue contribution empowers you to create accurate quarterly budgets. For example, if your goal is to allocate 5-7 percent of gross revenue to frames, knowing each doctor’s schedule and projected revenue enables you to set precise budgets for your optical manager.
Similarly, tracking staff productivity in terms of revenue per paid hour allows you to optimize staffing levels and control labor costs.
Controlled Growth: The Key to Success
Our journey to tenfold growth wasn’t accidental. It was the result of disciplined tracking and strategic decision-making based on these metrics.
By maintaining a tight grip on expenses and understanding the drivers of revenue, we were able to expand steadily and sustainably.
My passion lies in empowering fellow optometrists to achieve similar levels of success, but in a fraction of the time it took us.
I believe that by sharing these insights and strategies, we can collectively elevate the independent optometry landscape.
I invite you to reach out with your questions, feedback or success stories. Let’s continue this conversation and build a thriving future for independent optometry together.
Dr. Steele and his wife.
Kurt T. Steele, OD, is a partner of Vision Source of Newport in Newport, Tenn., and the founder of the coaching firm Legit Vision P.L.L.C. To contact him: idoc2316@gmail.com
This article was created using several editorial tools, including AI, as part of the process. Human editors reviewed this content before publication.
