Page 44 - 2015 Key Metrics-Assessing ECP Practice Performance

Expenses and Net Income

Ultimately, the performance metric that looms largest for most independent optometrists is net income – the amount of money left
after all expenses are paid that goes into ODs’ pockets. The MBA database provides detailed statistics on expenses by category and net
income, which are useful in assessing a practice’s financial health.

Expense Category % of Gross Revenue by Practice Size
Compare your expense ratios to the averages for practices of comparable size to yours. Larger practices enjoy somewhat lower cost-of-
goods ratios, on average, offset by somewhat higher staffing costs. Occupancy, equipment, general overhead and interest cost ratios
tend to decline as practice size increases. It is these lower fixed cost ratios enjoyed by larger practices that makes them somewhat
more profitable, on average. Marketing expense ratio does not vary by practice size, except that the smaller practices tend to spend a
slightly higher share of revenue in this area.

Expense Category % of Gross Revenue by Practice Size

$537,000 $803,000 $1.1 MILLION $1.5 MILLION $2.1 MILLION TOTAL
st
th
th
th
th
th
th
th
th
th
1 -19 percentile 20 -39 percentile 40 -59 percentile 60 -79 percentile 80 -99 percentile (median)
Cost-of Goods (% of gross revenue)
30.3% 30.3% 29.3% 29.0% 27.2% 28.8%
Non-OD Staff (% of gross revenue)
18.8% 18.9% 19.8% 20.4% 21.4% 19.7%
General Overhead (% of gross revenue)
8.1% 7.8% 7.3% 6.7% 6.0% 7.1%

Occupancy (% of gross revenue)

8.5% 7.2% 6.9% 6.0% 6.1% 6.9%

Equipment (% of gross revenue)
2.4% 2.3% 2.0% 2.0% 1.6% 2.0%

Marketing (% of gross revenue)
1.5% 1.2% 1.1% 1.1% 1.1% 1.2%

Interest (% of gross revenue)
1.4% 1.3% 0.9% 0.7% 0.7% 1.0%

42 Key Metrics: Assessing Optometric Practice Performance 2015