Maximize Your Optical's Profitability
Maximize Your Optical's Profitability
Follow these tips to achieve and maintain a successful dispensary.
John R. Scibal, O.D., Morehead City, N.C.
The most successful practices are diligent in tracking financial and production statistics within their practice, always comparing and analyzing their numbers in order to improve their profitability. This is commendable, as it has been clearly shown that those who measure their performance are the ones who improve their performance. But while many practices track items, such as staff salary expense, cost of goods and revenue per patient for their office, very few examine the profitability of the optical and professional sides separately—a huge mistake considering eyeglass sales are typically responsible for 40% to 50% of revenues.
Rectify this mistake, and determine whether your optical is in need of a serious overhaul. Specifically, allocate fixed overhead expenses to each side of your practice based on their square footage. Next, allot staff expense based on the number of hours staff members work in each side of the practice. Finally, allocate cost of goods for frames and lenses to the dispensary.
If your profitability is high in the clinical side but low in the optical side, or you're interested in how the best practices maximize the profitability of their opticals, check out these four tips:
1 Obsess about customer service
Consumers now have several choices of where to purchase their eye-wear. Therefore, in order to get them to buy from us, we must offer them something they can't get anywhere else—unparalleled customer service. Just because you think your optical staff is nice, that doesn't mean they know how to deliver excellent customer service, or for that matter how to properly communicate with your patients/consumers. Best practice optometrists are obsessed with customer service and realize two things: (1) Customer service doesn't just happen—it requires work, and (2) customer service can never be good enough. In other words, there is always room for improvement.
Excellent customer service starts at the top—namely with you, through staff training and your own attitude toward patients. (If you roll your eyes at a disgruntled patient, don't expect your staff to act differently.)
To teach staff how to provide unparalleled customer service, first share your desire to provide the best experience for your patients at weekly staff meetings. Creating a desired culture in one's practice doesn't happen by accident—it should be the focus at every staff meeting. Next, administer patient surveys, and make a point of reviewing these surveys at the aforementioned weekly meetings. Honestly assess the staff's strengths and weaknesses, and openly discuss service breakdowns. Instead of pointing fingers and finding blame—something that will negatively affect staff morale—discuss ways in which the entire staff can improve on areas of weakness or problem-solving. One highly effective means of improving customer service is to develop, refine and constantly review scripts for common and potentially confrontational situations that can arise. Role-playing during office meetings affords a safe and often fun way to practice these scripts and provides staff members with the necessary experience when they are confronted with a real patient.
2 Organize your frame boards
“Product is King” in the retail world. Therefore, you must pay careful attention to the product mix in your dispensary. I think Jay Binkowitz, president of GPN (www.gatewaypn.com), an optometric consulting company that specializes in enhancing optical profitability, hits the nail right on the head with his philosophy regarding frame boards. Specifically, he says he thinks of each frame board slot as an apartment, and if one or more frames doesn't pay the rent, they're evicted.
Mr. Binkowitz recommends you assemble your product mix based on gender, price points and categories (e.g. high-end fashion, mid-level fashion, niche product, budget, etc.) The reason: Wide selection captures consumers.
Mr. Binkowitz recommends you place inventory on a “one-in, one-out” basis from within each category. Based on your sales each month, he says you should adjust your percentages. Specifically, increase the percentage for frame categories that contribute heavily to sales, and reduce those that do not.
To give yourself an excellent chance of moving product fast, choose frame vendors carefully. Specifically, make sure the frame vendor is willing to exchange stale inventory and educate your staff on their products. Also, rely heavily on their expertise regarding which frames to display. After all, it's in their best interest to provide fast-selling frames. Limit the number of frame vendors you use to provide them with clout and some exclusivity, and give each one a certain number of slots to maintain. Limiting the number of vendors makes each one of them a bigger account. Besides better discounts, in general the bigger the account, the better service you get from a frame vendor. It is in everyone's best interest to replace best sellers immediately. Reward the frame vendors who have the best sales with more slots. To further strengthen your partnership with your frame vendors and sell product, have them work with you on trunk shows.
3 Use lens menu pricing
With the increasing number of lens technologies available today, patients rely on you, their eyecare provider, for recommendations and advice on which lenses to purchase. Lens menu pricing facilitates your ability to prescribe the best product.
Following the exam, your recommendation can be something as simple as:
“I am prescribing the latest lens technology for your eyewear, including customized lenses designed for your prescription that are non-glare and the thinnest and lightest on the market. Mary can show you the savings available with our lens package programs.”
From here, your optician would present the patient with a menu that includes three packages for progressive and single vision lenses. This way, the patient can compare and contrast between what is “good, better, best,” or “premium, standard and budget,” or whatever descriptions you choose. (See “Lens Menu Example,” below.)
To create further patient interest, have the menu include package bundling based on combinations of lens treatments (AR, UV, edge-polish, etc.), lens types (wavefront vs. standard surfacing) and materials (CR-39, polycarbonate, high index, etc).
In addition, have the menu include brief descriptions of the features and benefits of each item in a package. Finally, have the menu show a comparison of the total price of lenses with the individual “unbundled” price for each feature vs. your discounted bundled package price.
Should the patient have a vision plan that offers across-the-board discounts on lenses, use that discount on the actual retail, or “unbundled” price of the lens package. The reason: With savvy pricing on your part, you can provide the patient a package value that exceeds the discount their insurance company provides. Your optician could say:
“Mrs. Smith, you're in luck! The discount using your insurance benefits totals $85. Our package discount offers you $125. Let's use that!”
Combining your recommendation with that of a knowledgeable optician and lens menu increases your sales of premium products, and, therefore, maximizes profits.
4 Hire an optical retail manager
Once your optical dispensary generates $400,000 or more, I feel it is time to hire an optical retail manager. The reason: At this point, the optical is a business entity unto itself, and, therefore warrants full-time attention. Not only are you probably too busy with the clinical side of your practice to devote the required amount of attention to the optical, but you most likely don't have the correct skill set to manage the optical. You went to school to learn how to examine eyes, not how to manage a retail store.
A retail manager can be hired from within your own ranks, but often times, it is desirable to bring in someone from the outside. The reason: Even an office that has great employees rarely has any with professional management skills. In addition, hiring from within often evokes resentment and ill will among the staff.
More important than optical skills, a retail manager should possess basic business skills that apply to any retail industry. These skills include an understanding of finance, human resources and inventory management. Their job description includes hiring and firing within the optical, inventory control and training, along with financial tracking and reporting. Finding this person can be a challenge. But, the time and effort you spend on this endeavor will pay off many times over. Imagine having someone who's able to run the retail end of your business. You provide the guidance, but they provide the day-to-day effort to make sure the opticals' goals are met.
A caveat: Remember that in addition to clinician, you're the CEO of your practice. As a result, it's imperative you set up a system of checks and balances with regard to this employee.
With the increasing trend toward medical eye care in private practice, the optical dispensary is becoming overlooked. This, in turn, is causing this important profit center to decay. You can nip this problem in the bud, however, by following the aforementioned best practice tips. Then, you'll have a successful dispensary in addition to a thriving medical practice. OM
||Dr. Scibal is a practice management consultant at Blackwell & Scibal Consulting (http://blackwellandscibalconsulting.com). E-mail him at firstname.lastname@example.org. Or, send comments to email@example.com.|
Optometric Management, Issue: March 2011