BUSINESS

  BY THE NUMBERS

BENCHMARKS AND TRACKING

CALCULATE METRICS TO ENHANCE PRACTICE PROFITS

JAY BINKOWITZ

Q: WHAT ARE STANDARD FINANCIAL BENCHMARKS FOR SMALL PRACTICES?

A: In my experience, it is just as important to understand the relationships that create a benchmark, or performance evaluating metric, as it is to calculate it. This explains how we can impact them and adjust performance in the future. Here are some examples:

1. Gross revenue per exam: This is made up of two components: optical and clinic. The goal is $500 per month, but only if there is a balance between the two. If they are not balanced, then you are leaving lots of money on the table. (For more information on calculating this, see the January 2016 column “By the Numbers”).

2. Operational costs: At GPN we refer to this as the “Monday Morning Number” because each Monday morning, you theoretically write a check for the weekly expenses. If you had no sales and no patients, you would still have payroll, rent, utilities and many other expenses. Your goal is to create enough revenue to generate the profit needed to pay these bills by the end of day on Wednesday. That way Thursday and Friday are for you!

3. Total sales: How many frames do you sell each month? How many pairs of progressive lenses? Tracking these numbers makes it easier to judge the health of your business. (And yes, you should include the frames and lenses patients buy with their vision plans but not necessarily Medicaid plans in which everyone is entitled to free frames and lenses.) The next step is to compare this information with other relational factors: number of refractions; total pairs of lenses sold; revenue for each, frames and contact lenses; total sales per staff member, etc.

All these metrics will provide you with more information on where to focus efforts to increase the performance of your practice.

Q: HOW DO I TRACK PROFIT/LOSS REPORTS BY MONTH, QUARTER AND YEAR?

A: To start, set up your bookkeeping system (for example, QuickBooks) with proper classifications. (Lumping categories of goods sold, such as all sales in a category called “optical purchases,” hides what is and is not generating a profit.)

Next, define your categories to give you as much detail as possible. The following areas can be tracked: revenue from frames, spectacle lenses, contact lenses, optical accessories, nutraceuticals, low vision aids and any other categories of products you provide. In addition, break out your professional services in the same way: revenue from comprehensive exams, contact lens exams, specialty exams, OCTs and any other specialty equipment that generates revenue.

However, based on the method you use for buying frames, the best way to get close to your average cost of goods is through a three-month period. Whereas your lab bill is generally accurate on a monthly basis, since we only buy what we sell when it comes to lenses ­— this can vary if you’re buying banks of lenses, too ­— we also want to make sure we received credit from our exchanges.

Tracking the numbers is critical to the success of a healthy business. Investing just 60 minutes a month can make and save you thousands! OM

Questions are based on reader responses to an Optometric Management online survey, which closed on Dec. 20.

MR. BINKOWITZ is president of GPN, a leading businesss management company based in Farmingdale, N.Y. He has had extensive experience in retail operations, merchandising and marketing. Email him at jay@GatewayPN.com, or to comment on this article, visit tinyurl.com/OMcomment.