Optometry Overhead | Learn How to Cut Costs While Maintaining Quality
When establishing an optometric practice, it is essential to establish a financial baseline to stay on budget. Learn how to cut down optometry overhead.P
Optometry Overhead | Learn How to Cut Costs While Maintaining Quality
When establishing an optometric practice, it is essential to establish a financial baseline to stay on budget. Learn how to cut down optometry overhead.
Did you know that a standard optometric practice has an overhead of 30 to 40%, which can vary depending on the salary of employees, cost of goods, occupancy costs, examination equipment, marketing and promotion, and doctor’s compensation? Whether you own a small or well-established optometric practice, controlling the overhead cost doesn’t only ensure success but helps you in saving a tremendous amount of money for your retirement.
So while in between paying the energy bills, rising rent prices, salaries, and other office expenses, keeping in line with the budget of your optometric practice can be a very challenging task, you can create financial strategies that can decrease the overhead cost and help you save more money. In this article, we will teach you how to keep your optometric practice overhead down. So, without further ado, let’s start strategic cost-cutting.
1. Identify the Pain Points and Develop a Financial Plan
When it comes to cost cuttings and setting a budget for your optometric practice, establishing a financial baseline is rule number one. In order to do so, start by identifying two things; the pain points (financially draining loopholes in your business plan) and areas where you can easily cut costs.
The best way to understand the weak points of your optometric practice is to comprehensively review and analyze the monthly, weekly, and annual optometry overhead costs, understand the trends and utilize the opportunities your medical practice might offer.
Accounting for two-thirds of the optometry overhead, the largest contributors to the financial burden include optometry supply costs, office rent, lab fees, and employment and staffing costs. If you are not good at math, deciphering the price of equipment and services can be a daunting process. This is why it is recommended to partner with a financial advisor, as they can help you not only accurately assess your optometric practice but help reduce costs and save more for your retirement.
Once the pain points have been identified, develop a financial plan to control and minimize the overhead costs. Make a realistic plan, set a timeframe to review the financial returns, and amend your strategy accordingly. While going overboard with drafting a plan and cost cuttings can be very easy, we recommend making small changes and sticking to them as it can help you save hundreds of dollars in the long run.
2. Evaluate Your Staffing Cost
The largest pocket-burning overhead cost for optometric practice is managing staff. Because of the shortage of experienced optometrists and lots of open positions, optometric practices are relentlessly competing with one another to hire good professional employees. However, the consistent shift between optometric practices for better benefits and inflated online rates for different positions has made the staffing process difficult for owners.
Due to the competitive market, many business owners of medical practices have been forced to raise salaries in order to retain workers. As a result of this, the staffing cost might grow out of balance because revenues do not always exceed expenses, and optometrists cannot raise the fee quickly enough to cover rising expenses.
Several factors play an integral role in determining the right salary for each employee, making cost cuttings difficult. However, to control optometry overhead, you should ensure that the total salaries account for 20% of the revenue and not production.
Having a happy and satisfied team of working professionals is essential for the success of an optometric practice. The best way to do this is to develop a strong work culture, try connecting with your staff on a professional and humane level, and organize team activities and training sessions. Doing so will help you in retaining employees, which will ultimately be good for your optometry clinic.
3. Implement the 5K Rule
Considering the fact that the optometry industry is expensive, you need to make money-conscious, smart financial decisions when purchasing new equipment, especially those that exceed the $5000 margin. When setting an optometric practice, an optometrist is tempted to buy all tech-advanced equipment without considering the bigger picture.
Therefore, reviewing your financial plan and budget is advised to determine whether now is the best time to purchase an expensive tool or equipment. This is where the famous 5K Rule comes in. It helps optometrists in making smart financial decisions.
According to this rule, you need to partner with a financial advisor who will analyze your budget and help you in determining whether you can make the $5000 plus purchase while staying on budget or not. While the startling optometry overhead is a major pain point for many new medical practice owners, taking out time to create a financial plan and evaluate your strategies plays an integral role in the long-term success of your business, ensuring that you save enough for your retirement without sacrificing the patient experience or quality of your practice.
So, whether you are planning to hire a new employee or make a new purchase for your optometric practice, running a cost-benefit analysis will help you upgrade while ensuring that you make wise financial decisions, stay on budget, and control the overhead costs.
4. Make Sure to Keep the Optometry Supply Cost on a Strict Budget
Little do people know that calculating the average expenditure is essential if you want to reduce the overall supply cost of your optometric practice. The only foolproof way to reduce the cost of supplies is to thoroughly analyze your optometric practice’s spending for the previous year. Doing this will help you identify the resources and equipment you have spent in the last twelve months and where you went wrong. The general rule of thumb here is to ensure that your optometric practice’s supply expenditure doesn’t cross the 6% gross production baseline. If you don’t know how to calculate your annual supply cost, simply divide the total optometric supply production cost by the gross production.
Although having goals can help you stay on track, the best and most effective way to cut costs is by creating a monthly budget and sticking to it. Furthermore, as the owner of an optometric practice, it is your responsibility to discuss the budget with your team, as this will ensure that everyone stays within the financial parameters and the spending of your practice stays within the pre-set annual budget.
Even though there are several ways to get optometric supplies that you need. We recommend finding a reliable and trustworthy vendor who offers a fair price. Finding cost-effective options without compromising quality is simpler when you have a good working connection with a supplier representative. While many representatives are eager to assist with implementing more efficient ordering procedures, new distributors frequently enter the market. Therefore, you should always keep your options open and deal with the supplier that offers the most profitable price.
5. Don’t Forget to Consider the Cost of Equipment, Lab, and Procedure Fee
The most important part of owning an optometry practice is ensuring that you provide the best patient care possible. To meet this mission statement, your optometry practice should have highly efficient labs and the latest technological equipment.
However, as easy as it might sound, unfortunately, the cost of establishing a state-of-the-art lab can have a significant impact on overhead. According to financial experts, only 10% or less of the optometry practice’s actual production is a safe overhead percentage for lab expenses. In case the lab fees exceed 10%, do not panic. Instead, consider having two labs or multiple labs for different procedures, as it organizes the schedule and saves costs.
Another common error that optometry practice owners make is that they don’t account for the health insurance in a patient’s fee. For example, if a patient’s medical insurance reduces the optometry procedure cost by 30%, you should look for more options to save money. In any case, an optometrist should never sacrifice the quality of work.
Remember that if the overall expense of the lab gets tight, increasing the fee isn’t a good cost cutting strategy. You should look for ways to maintain patient care and experience while separating patient types and ensuring treating insurance-backed and private clients equally. This will help in creating a balance while allowing you to meet your monthly or yearly revenue target.
Wrapping It Up!
Even though these are just a few small changes, they can add up to significant cost-cutting for your optometry practice. From identifying pain points to developing a financial plan, reducing the use of paper, evaluating the staffing cost, implementing the 5k rule, considering the cost of an optometry procedure, sticking to a budget and due diligence are integral to avoiding hidden costs and saving more. Make sure to follow our guide about how to keep your optometric practice overhead down to the tee and save lots of money, thus ensuring a peaceful and comfortable retirement.
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