Page 29 - 2015 Key Metrics-Assessing ECP Practice Performance

Frames

The frames component of eyeglass sales accounts for 20% of total practice revenue. Upgrading patients from lower cost frames to
branded, designer frames results in large increases in practice revenue.

Frames Inventory
The median MBA practice had 850 frames in inventory, valued at $49,240, and reported dispensing 1,634 complete pairs of spectacles
(including new frames) during the previous calendar year. This translates to a median frames turnover of 1.8 annually. Larger practices
enjoy much higher frames turnover than do smaller practices. Compare the number of frames you inventory to the median for practices
of your size.

Frames Inventory and Turnover

Annual Annual Value of
Frames in Complete Frames Frames
Price Size Decile Inventory Spec. Rxes Turnover Inventory
$2,133,000 or more 1,250 3,950 2.8 $70,550
$1,695,000-$2,132,999 1,125 2,781 2.4 $66,035
$1,432,000-$1,694,999 1,025 2,370 2.2 $54,450
$1,200,000-$1,431,999 905 1,893 2.0 $55,020
$1,026,000-$1,199,999 915 1,673 1.9 $58,630
$883,000-$1,025,999 852 1,467 1.7 $50,095
$767,000-$882,999 750 1,212 1.7 $43,500
$642,000-$766,999 750 1,052 1.6 $38,000
$493,000-$641,999 650 897 1.3 $35,090
$492,999 or less 600 639 1.1 $32,175

Total MBA Practices 850 1,634 1.8 $49,240

Larger practices have larger frames inventories than do smaller practices, but inventory requirements do not grow in a linear fashion
as practice size expands. For example, the smallest 10% of MBA practices, with median annual gross revenue of less than $493,000,
carried a median of 600 frames, while the largest 10% of practices ($2,133,000 or higher gross revenue) inventoried just twice as
many frames (1,250 median).

The MBA database provides a quantitative basis to estimate the ideal number of frames that practices of different sizes should carry in
inventory to achieve the right balance between achieving a high annual frames turnover and a high ratio of complete eyeglass sales to
complete exams performed.

As might be expected, the MBA data show that annual frames inventory turn is greatest when the amount of frames inventory is
kept low. But the data also show that when inventory is minimized, annual eyewear Rxes per complete exam are lower. When frames
selection is insufficient, patients are more likely to shop elsewhere for eyewear. It is a false savings to minimize inventory cost, when
the result is a lower capture rate of eyeglass sales.

The following table provides guidelines for frames inventory by practice size. The ideal frames inventory guideline assumes overage
frames turnover for each practice size but brackets the inventory range for practices achieving above average eyewear Rxes per exam.

Key Metrics: Assessing Optometric Practice Performance 2015 27