Comparison

Let’s take a look at this practice with a side-by-side, two-year comparison. We’ll start with the top line number receipts. This practice grew from $500,000 to $600,000 in one year. An increase of $100,000. Which is pretty impressive, right? But let’s look at the rest of that equation. As we not only have receipts in our practice, but we have expenses as well, so that's the rest of that picture and to my point in the previous slide that you must control your existing costs or you will end up with a reduced net. So, let's look at that. So, you have your receipts and then you have your expenses. That next line item is cost of goods. Typically, the largest expense in the practice and that would represent contact lenses, frames, and ophthalmic lenses for the most part. In this particular practice, one year, $150,000 in cost of goods expense and the next year $186,000. Now, we would expect as a practice grows, you’re going to see more patients, that those expenses will go up from a dollar perspective. So, you're seeing more patients, you’re going to sell more contacts and eyewear, so your lab bills will increase. But that's why we’ll always look at this from a percentage as well. So, when we look at from year one to year two, you'll see an increase from a percentage perspective of 1% year to year. And then we have other expenses in our practice. Pretty much those categories would be your fixed, your wages, and your variable expenses. This particular practice stayed completely stable in fixed expenses, which is no surprise. Then the wages increase by 1% point, k? So, they had an increase of wages, they got busier. We probably need to either hire more staff, increase staff hours and represented there you can see that, but from a percentage perspective against your revenue, everything is always against your revenue, this practice increased their wages by 1%. Then your variable expenses, pretty much all the other expenses in the practice, increased from 6% to 8%, so 2%, pretty big jump there. So, overall total expenses increased from $180,000 to $233,000. Remember, we would expect expenses to go up because your receipts did. But look at the percentage. So, this practice increased by 3% from one year to the next. If this practice had maintained that same profitability or 34% profitability the first year and the second-year down to 30% net profit, if that 34% profit had been maintained, it would have been an extra $24,000 to the bottom line, for net profitability. So, just really a great illustration of controlling and really watching those expenses all the time.