PROFITABILITY IN 2004: Part three of a three-part series.
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While most O.D.s are great clinicians, they lack when it comes to donning the business hat. Here are nine simple tips to help you improve your practice's profitability.
BY RICHARD S. KATTOUF, O.D., D.O.S., Warren, Ohio
From a business perspective, our profession does some crazy things. Look at the way we typically operate our
opticals, for example. I've observed a number (9, to be specific) of practices in our optical departments that compromise sales, erode profitability, lower patient satisfaction and harm staff morale. Let me share these with you:
1. The way optometrists present fees in their optical departments creates sticker shock, which can lead to patient erosion or increased styling time.
2. Sending patients into the optical to make a styling decision when they are dilated. Would you buy clothes with blurry vision?
3. Optometrists don't keep adequate tracking of average frame board costs or profit centers.
4. Many O.D.s give bonuses only to opticians and stylists. This decreases morale with other employees.
5. The range of frame fees in the average independent practice is from $90 to $300. This type of inventory lowers the average frame sale and ignores exclusive frames.
6. Many doctors allow staffers to be in total charge of frame purchasing. This opens the office up to embezzlement and significant over buying.
7. The appearance of the optical department in the independent practice is outdated and small. You must be able to match or exceed the competition.
8. When using outside labs, many doctors pay more than three times for their progressive addition lenses compared to the cost of lenses when using an in-office casting system. Keeping cost of goods under control is a significant part of operating a retail optical.
9. No attempt to sell eyewear on the day of dispensing. (Offices are in a selling mode on the day of the exam and in dispensing mode on the day of pick-up.)
Trade (not-so) Secrets
In merchandising frames, base frame fees on what the product will bring in your market. If you look at a frame and decide it will garner $150 retail and your cost is $30, then the merchandising concept says to mark it at $150. Based on current formulas, most O.D.s would mark the frame between $70 and $90.
In my consulting experience, I find that the average multiple sales is only 4%. If you regard the pick-up date as dispensing only, then you're limiting your chances. With proper sales training, you can increase multiple sales to 20%.
Overall, there's a lack of realization that the optical department is the retail entity of a professional practice. Following are nine ways we can turn our optical departments into a profitable, patient-serving operation that improves staff morale.
In 2004, the consumer is fee conscious and is exposed to all sorts of optical ads. Develop a bundling fee presentation that enables you to present the total frame, lens and lens add-on fee each time you present a frame. The typical way of showing a patient a selection of frames for 20 minutes and then surprising him with the total after he chooses one creates sticker shock and could loose the sale.
Rather than sending a patient into the optical to pick a frame while she's still dilated, consider pre-appointing the dispensing and dilate her on pick-up when you attempt additional sales.
COST OF FRAMES
A number of sources exist for frame purchasing. Foreign manufacturers (Asian) avoid the middle man and sell directly to the doctor. When you can purchase a frame of "like kind" for a significant savings, you must learn to merchandise the frame. Don't get caught in the normal formulas of double plus 10. Base fees on the concept of what the product will bring in the retail market.
If you worked for a company that gave financial incentives to only one department, even though you were a part of the team, how would you feel? Without your receptionists, technicians and other staffers, your patient volume would decrease. Consider posting monthly financial targets of either gross or net income. When the company reaches these targets, let all employees share in the commission process. This raises the staff's morale and increases total sales throughout the office.
When presenting retail products to consumers, you should always show your entire line. Start with high-end products and work your way down to the low-end merchandise. Patients usually choose the middle range. (As a consultant to the ophthalmic industry for 22 years, I've personally witnessed this fact in hundreds of offices. I've also read similar facts in retail magazines outside of our profession.) Simply increase your high end to include frames that retail for $900 or more. Show these frames to all adult patients and you've instantly created a new "middle" and increased your unit sale.
It's important that you set budgets for buying and that you don't allow any purchases without your signature. Doctors commonly allow a particular staff member to purchase all frames. These staffers "buddy up" with particular frame reps and receive perks directly from them. These perks (e.g., tickets to sporting events, appliances, money) belong to the doctor. Staffers may also overbuy merchandise to "earn" more perks. Inform frame reps that they'll loose your account if they give employees any manufacturer perks. Set a system of checks and balances to control inventory and generally keep things in order and your practice will benefit.
Take a look at your physical plant from the perspective of a consumer. You have to spend money to make money. There's a correlation between the appearance of an optical and its unit sale. I've witnessed many clients redesigning their
opticals, and the result is usually a 20% increase in sales. Consumers feel more confident and less apt to relate to the optical in the mall. Employees are more confident because of competitive surroundings.
Why pay $75 to $95 for finished progressive addition lenses when you can cast and finish lenses in house and pay only $25 for each pair, including labor.
SELL ON DISPENSING DAY
Simply pre-appoint your pick-ups at non pick-up times and attempt to sell the multiple pair the patient didn't purchase on the day of the exam. Change your mindset from dispensing to selling. You must have time to sell. It's critical that you pre-appoint the patient for this visit.
Room for improvement
In today's ophthalmic market, if you want to thrive financially, then you must prove yourself as a skilled clinician, salesperson and businessperson. In my consulting and managing experience, I've seen a lack of the last two (skilled salespersons and businesspersons) throughout the country.
When It's Time to Design
A redesigned optical can result in a 20% increase in sales.
Below are some companies that offer optical design solutions.
- Delectable Display (Carlsbad, Calif.)
- Ennco Display Systems, Inc. (Redmond, Wash.)
- Eye Designs, LLC (Collegeville, Pa.)
- Fashion Optical Displays (Paradise, Calif.)
- Integrated Construction Services (Scott Depot, W.Va.)
- Modular Design Systems, Inc. (Concord, Ontario, Canada)
- Optical Designs Ltd (Tempe, Ariz.)
- Showall, Inc. Display Systems (Chilhowie, Va.)
- Techno Display (Brisbane, Calif.)
Dr. Kattoufis president and founder of two management and consulting companies. He's also the author of Optometric Management's monthly "Fix This Practice" column. Contact him at
Optometric Management, Issue: March 2004