23 Dec How do i take home more money?
I’m asked almost daily “how do I take home more money?” We all went to school for years expecting to come out living a certain type of lifestyle, and in order to answer this question, we have to look at what happens to the gross revenue of your practice or business.
In the optometry industry, there are certain perennial benchmarks that have been tossed around for years. While they do provide benefit, we need to look at these and update them to modern times. The days of the solo practitioner and a small staff have become much more challenging to run, due to an increased health insurance burden, and a financial point of view.
First, and most importantly in my opinion, is the expense of your staff. This may shock you, but the staff is as important, if not more important, than the provider/owner. I am not going to apologize, because your staff is the first point of contact your patients encounter. In most cases, they usually spend more face to face time with your patients, guests, and clients.
Staff expenses should be roughly 25% of your total gross revenue. This can vary due to geographical location and higher cost of living, but every benefit to your non-doctor (or non owner) staff should be included! For example, payroll, payroll taxes (FICA), bonuses, insurances, retirement, uniforms, travel, online training, and HIPAA training (if necessary) would be considered staff expenses. Anything you provide to your employees are included in this category. However, don’t include associate practitioners at this time.
The next category would be Cost of Goods. Cost of goods should also be in the same range of 25%. Some exceptions do exist when there are high-end optical products or pharmaceutical-covered costs from surgeons, but any product you sell at retail prices should be included in this category. Here is where, as an owner, you must decide the quality and integrity of the products you are recommending to your patients or clients. Costs from a wholesale side should always be negotiated and analyzed, but never spend too much time on this as it can be counter-productive to growth.
Fixed expenses should not be any more than 20% of your gross revenue. Some examples of these would be rent, taxes, mortgages, utilities, accounting, legal, maintenance, etc. This category is historically called “fixed” but it’s not really fixed. As we know, a number of these expenses continuously rise. I believe that in today’s society there is no such thing as a “fixed” cost. Property taxes, utilities, salaries, and more, they all rise and you have to know how to plan ahead for these unknown increases OR decreases.
The last category would be net revenue. We like to see this around 30% of the gross revenue for a solo practitioner. This includes everything from salary, payroll, taxes, health and dental, retirement, travel, education, and additional write-offs you as the owner may deduct. If you own a group practice, this is where you would include associate doctors and all of their salaries, taxes and benefits. A very important point to consider is that in a group setting, the owner’s percentage is not 30% of the gross In most cases it is less percentage wise, but a lower percentage of more revenue should result in more total dollars going to the owner than if working by themselves.
There are some exceptions to these estimates as well. Specialty practices may generate a lower cost of goods and net a higher revenue. In either cast, your practice’s revenue must be understood in order to maximize your take-home dollars at the end of the day.