How profitable are optometry practices? (2024)

How profitable are optometry practices?

It's no secret that optometry practices can earn a whopping 30-40% net profit. Especially once the practice has gone through its first year of growing pains and had a chance to be established.

Revenue Stream Method

The Journal of the American Optometric Association notes that the average valuation of an optometry practice is 58.7% of the gross income for the year before the sale of the practice. Valuations generally range between 40% and 70% of the prior year's gross income.

Alaska. Alaska comes in as the top-paying state for optometrists, where the mean hourly wage is a whopping $85.55, adding up to an annual mean wage of $178,640. Alaska has only 50 optometrists for a state that is home to more than 736,000 people. Alaska also ranked in the top 10 on the list of best places to practice.

An optometrist needs to be able to communicate effectively with other colleagues. The seamless transfer of care within a practice, especially when care is being delegated, is vital to ensuring that our patients receive the best care. Communication with colleagues outside the practice is important too.

It's a profitable business. The markup in the optical industry is generally 100%. The most important part of it is making the right purchase from your supplier, as some part of your goods will remain unsold, and your profit depends strictly on the illiquid goods.

A high-performance eyewear gross profit margin is 66-75 percent.

PRACTICE VALUE = Weighted EBITDA x 4.25

To get to EBITDA, take your Adjusted Optometric Net and add to it Interest, Taxes and Amortization. (You already added back Depreciation to get your Adjusted Optometric Net.)

PERCENTAGE REVENUE STREAM is used to determine some sense of value. Currently, good practices are appraising for between 50% to 65% of a year's collected receipts. This means a $500,000 practice will appraise for between $250,000 and $300,000.

The average for owner optometrists is 57, including seven walk-ins/emergencies and 16 new patients. The average for non-owner optometrists is 63, including 20 new patients and nine walk-ins/emergencies.

Is there a optometrist shortage?

In November 2020, over 1,000 hospitals in the U.S. were critically short on staff, and officials only expected this number to grow. ² Similarly, according to The 2021 Optometry Healthcare Business Insights Report, nearly 60% of optometry offices do not have enough staff to operate to their full potential.

Employed optometrists in 2021 received an average salary of $132,524. For practice owners, this number rose to $174,106. Over the last decade, the average optometrist starting salary has increased from $86,875 in 2000 to $109,000 in 2020.

Eyewear sales make up 62% of an optometrist's salary.

It's no wonder you're getting the hard sell after every eye exam. For private practice optometrists, a reported 62% of their salary comes from the sale of prescription eyeglasses and contact lenses.

A mass-produced lens, made from injection-molded plastic at volume 500,000 units, could cost $0.20 per element. At the same time, a glass lens with one element made in a batch of ten could cost $1000 per element.

Approximate Compensation of an optometrist

As per the Bureau of Labor Statistics, the average optometrist pay is $118,050 per year. Although this is a respectable average wage, it is approximately $46,000 less than what dental graduates earn. It's also roughly $90,000 less than the average physician's pay.

The national average annual wage of an optometrist is $119,980, according to the BLS, well above the e average annual salary for all occupations, $51,960. The average optometrist salary can vary significantly depending on the state.

How many practices can an optometrist own?

This bill takes effect January 1, 2019. Optometrists, whether as an individual or a group, will be limited to owning 11 offices total.

Eyewear sales make up 62% of an optometrist's salary.

It's no wonder you're getting the hard sell after every eye exam. For private practice optometrists, a reported 62% of their salary comes from the sale of prescription eyeglasses and contact lenses.

The future of optometry isn't doomed because of technology, it's doomed because of humans, in particular, by the number of graduates finishing optometry school more and more. There is a huge oversaturation problem now in the states and in Canada, it's going to dramatically worsen within 5-10 years.