Sick of Being a Doormat? Here’s How I Stopped (and Doubled My Income)
April 10, 2019
By Dr. John E. Ormando
"I don’t think it’s worth buying an edger." I can’t tell you how many times I’ve heard this statement from colleagues. The in-office finishing lab is one of the most lucrative departments in my practice. It's perplexing to me when small ($500K+) to large practices continue to "back burner" this simple addition. Let me repeat those last two words…SIMPLE ADDITION.
I really want to get right into the numbers here to prove its worth. You may have heard that cost of goods sold (COGS) are approximately 30% of your gross sales. First of all, this in itself is a tragedy. I really don't know who made up that number. It should NOT be this high! If you want my conspiracy theory, the 30% was made up by the companies that sell you your goods! We can do much better, and by better, I mean to the tune of 15% to 20% better. This is not an exaggeration (unless you are at the complete mercy of vision plans who make your patients’ glasses). I will give you the numbers of my practice as a quick example.
Our gross sales in 2018 were about $5.8 million. Our COGS were about 12%. This is 18% better than the “brainwashed” 30% average. My calculator says that 18% of $5.8 million is $1,044,000. So, if I blindly agreed that 30% should be the COGS number to shoot for, my practice would be losing over $1 million dollars each year! I am not okay with that. So why are so many other ECPs okay with this? I don't know. This is why I am so perplexed. Now some of you are thinking, well John, you have a large practice and probably get better deals because of your volume. Yes and no. Frame pricing can be negotiated only so much. Contact lens pricing is a joke and I save very little on bulk buying here. The bulk of the savings is in optical lenses.
There is no mystery here. There are a few "new kids on the block" lens wholesalers that are selling SV stock poly lenses with premium AR coating for less than $7 a pair! Now maybe you drink the brand-name Kool-Aid. That's fine (spoken in the tone of my wife). But for those of you who realize that all of these lenses pretty much come from the same place (and same machines), and it ain’t the good ol’ USA, that’s when you’ll be able to seriously cash in. Now here is my favorite part.
For those ODs who talk about lens "quality" being a concern, I strongly advise those ODs to test out the non-branded lenses vs. the branded lenses. I have done it and I’m an 8.00D myope with some cyl. I notice no appreciable difference, period. Not a believer yet? What if I told you my patients (we see over 35,000 patients/year) are also overwhelmingly satisfied with NO difference in remakes! The key here is to charge the SAME PRICE as you do for the "brand name" lenses. Yes, that’s right, the same price.
The brand name companies may make you feel guilty. I’m here to tell you that’s ok (especially when I’m sitting on the beach with their dime). The reason why I’m so passionate about this is because the amount of money we are leaving on the table is absolutely ridiculous. We are making everyone else rich except for ourselves! Even in the small practice case scenario, a $500,000 practice can conservatively save $50,000 a year by reducing the cost of goods from 30% to 20%. Yes, you have to figure in the hidden costs of your employee labor and edging system costs and maintenance. I will save you the agony of doing the micro financing on this. The answer is: it is still worth it.
Having an in-office finishing lab will save you drastically on lab bills and edging fees, to the tune of up to 70%. Is it worth your staff’s time? Yes. It should only take about 10 minutes for one of your employees to edge a pair of lenses. Yes, you have to train them. This is what your edging companies are for. You purchased an expensive machine from them. Allow their representatives to train your staff. If the employee who normally edges quits, call the edging company and have them come back and train the new hire. I'm saying this to weed out those of you who use these situations as excuses for not getting in-office finishing labs. The edging companies have no problem doing this for us.
Finally, let's not forget about the customer service improvements. Your speed of spectacle delivery will improve, resulting in happier patients. Our office is now offering a one-hour service for $10 extra and our patients love it! I love independent optometry, and this is one of the simplest ways for us to double our personal income. Let’s stop being the doormat and start being rewarded for our hard work. I’d like to dedicate this article to John Colonna, a great man and the original "King of the Numbers". Take it easy, Mr. C.
Dr. John E. Ormando is a senior partner at Uppercut Consulting and Westminster Eyecare Associates. He received his Bachelor’s Degree in Biology at Seton Hall University, and completed his Doctor of Optometry degree at the State University of New York College of Optometry. Dr. Ormando completed a three-month internship with world-renowned glaucoma specialist Murray Fingeret at St. Albans Veterans Affairs Medical Hospital in Queens, NY. He also completed a three-month internship in Corneal Disease and Specialized Contact Lens Fitting at the State University of New York College of Optometry. Dr. Ormando, along with Dr. Scott Colonna, founded Westminster Eyecare Associates which now has one of the largest single-office patient bases in the country. For questions or comments about this article, please contact firstname.lastname@example.org.