Optometric Management Tip # 198   -   Wednesday, November 02, 2005
Staff Issues: Useful Benchmarks

Comparing statistics from your practice with other practices is a very useful business tool. The AOA, eye care publications and consulting firms often compile useful benchmarks from practices all over the country. The benchmark Iím asked about most often is staffing. Frequent questions include: Do I have enough staff or too much staff? Am I paying too much in salaries and benefits?

I will share my take on three important national benchmarks that can help you analyze your staffing situation.

Payroll as a percentage of gross

Iíve long held the position that the old standard of 17 to 19% of practice gross revenue is out of date. After analyzing my own practice and many other practices, I believe that amount would be too low to attract and retain the high quality people we need to properly staff a high service / high fee practice. We should look for that percentage to be 20 to 23%. To be clear, many consultants are not recommending the 17% figure Ė but rather are simply reporting what the data actually shows on average. That does not make it optimum -- just the mean or the median.

Itís important to review the definition of the payroll category, so youíre comparing apples to apples in this benchmark. You should include all costs related to employees, such as benefits, uniforms, and payroll taxes. You should not include associate doctors; those salaries and benefits should be placed in the practice net income category even if the doctor is an employee. You should not include lab technicians who make glasses; that amount belongs in the cost of goods sold category. If you have a person who works in the lab part time and works with patients part time, prorate the lab time and move that part to cost of goods sold.

I would be concerned if your payroll percentage is under 20%, because you may not be offering a high enough level of patient service or may not be delegating enough. I would be concerned if your payroll is over 23% because you may be overstaffed or paying too much. Another important consideration is that your professional fees may not be keeping up with the cost of living.

Staff productivity per hour

A good number to shoot for here is $80 per staff hour, or higher. To calculate your current number, simply take your gross revenue for a month and divide it by the total number of staff hours worked during that month. Use the same definition for staff as above; do not include doctors or lab techs.

If your number is lower than $80 per staff hour, there could be several factors to examine. Staff productivity per person

This is a rough rule of thumb, but I find that the optimum gross revenue per full-time staff member is $125,000. There are many factors that can cause exceptions to this, so donít take it too literally, but the rule is pretty darn close in most cases. So, if your practice grosses $1 million, you would need about eight full time staff members. If you gross around $400,000, you would need 3.2 staffers. If you have some part-timers, just add them together to come up with a full time equivalent or use decimal points to quantify fractions.

Best wishes for continued success,

Neil B. Gailmard, OD, MBA, FAAO
Chief Optometric Editor, Optometric Management