Understanding Profit

Let’s say that we brought in just over $1,000,000 in receipts, but, we spent over $500,000 on overhead and overhead is considered our rent, electricity, utilities, staff, internet, and our practice management software.

Then, we spent over $400,000 on cost of goods sold, which of course is our contacts, our frames and lenses, and any other products we buy to resell to our patients.

This leaves us with only $100,000, most of which is to be used for paying our loans and any practice debt. Then we need to pay our doctors and we need to reinvest into our practice, which can mean our team and our future technology. Keep in mind, if our expenses are high, then the profit is low.

It is important to explain this so everyone understands that we may not be profiting as much as we think we are for the amount of time we spend with each patient.

To be successful, we want to help you gain a foundational understanding of why it is important to understand the cost of doing business.

By understanding the fundamentals of doing business, you can have a positive influence and a better grasp on how to help your practice succeed. It all begins with the knowledge of calculating your chair cost per patient.

​Now just so we are clear, there are multiple ways to calculate the chair cost. You can calculate your chair cost per hour, per patient, or per exam. Due to the low reimbursements of vision plans, at times we must subsidize clinic vision plan reimbursements with optical sales and by following clinical care guidelines. To help you get the best understanding of this program, we will be calculating the chair cost per exam.

If you are stand-alone clinic profit center, you may decide you want to calculate your chair cost per hour. Now a stand alone clinic profit center, means either

a) you do not sell glasses and contacts
b) your business model is set up so that each profit center (i.e. clinic, optical, contacts) is intended to be self-supporting financially.