Article Date: 3/1/2006

business advisor
How Big Practices Are Different
Can an optometric practice really make a million dollars?
JERRY HAYES, O.D.

I was giving a lecture in Chicago recently when a young O.D. in the front row gave me a quizzical look and asked with perfect sincerity, "How can any optometrist can possibly gross $1 million a year?" Good question, but I was a little stumped.

A lot of things go into building a million-dollar practice that cannot be easily addressed with a short answer, or in a one-page column for that matter. But there is a simplistic response. "All" you have to do to gross $1 million is see 14 exams a day and generate an average of $300 in revenue per patient, five days a week, 48 weeks per year: 14 x 5 x 48 x $300 = $1,008,000.

Of course, I know from experience my readers are disappointed when I give a numbers-based response like that. You generally like more tangible advice such as, "Buy a certain retinal camera; Send thank you notes for referrals and offer one-day service on glasses."

Comparing the million-dollar practice

 Annual revenue $500,000 Gross $1M+ Gross
Exams per hour 0.8 1.7
Revenue per O.D. hour $207 $394
Median exam fee $83 $95
Avg. revenue per exam $210  $324
Source: Hayes Practice Index and CIBA Essilor MBA Program

Big practices are different

No doubt, certain equipment and management activities are vitally important elements of building a large practice. But I do think the numbers can teach us something if we compare the performance of so-called average practices with million-dollar practices in four key areas: exams per hour; revenue per O.D. hour; median exam fee and average revenue per exam. (See chart below.)

It's pretty clear that million dollar practices, as we expect, are busier. But something we possibly didn't expect: they charge more. So what can you take away from this if you are grossing $500,000, but would rather be doing a million?

First, if you want to see nearly two exams per hour, you can't do it all yourself. You have to delegate most steps of the patient care experience. Yet, in their heart of hearts, many practice owners are simply not comfortable with that. They enjoy doing every test themselves or don't trust their staff to provide an acceptable level of care. However, as the numbers clearly tell us, a practice that depends on the doctor to personally perform every test will be hard pressed to grow much past $500,000 in revenue.

Second, you must have the courage to charge fees that support the level of gross you want. The fear, of course, is that if you charge too much, your private-pay patients will seek a less expensive provider. If you plan to compete on price, that's probably true. But for those who choose to compete on quality and service, our chart should reinforce your decision. It shows million-dollar practices tend to charge more per exam and generate more total revenue per patient than small practices. The simple reality is that higher fees don't keep patients away from those practices.

Are your obstacles mental?

It's my experience that obstacles to practice growth are usually internal limitations that won't be alleviated by new equipment or the right recall system. Before you count on any of those tangible things to help you grow, you need to adopt two important mental traits of high volume optometrists: a willingness to delegate more and the courage to charge what your time is really worth.

A REGULAR CONTRIBUTOR TO OM, DR HAYES IS THE FOUNDER OF THE HAYES CENTER FOR PRACTICE EXCELLENCE AT SOUTHERN COLLEGE OF OPTOMETRY IN MEMPHIS. SEND QUESTIONS OR COMMENTS TO JHAYES@HAYESCONSULTING.COM.



Optometric Management, Issue: March 2006