As practice owners, it is important to compensate ourselves for more than working in the practice. We must find ways of paying ourselves for working ON the practice while also acknowledging our role in capturing optical sales. Here is how I ensure my time is spent both on serving patients, as well as finding ways to make my practice run better and more profitably.
Change in Practice Owner Mindset
Most practice owners pay themselves whatever is leftover in the practice’s budget at the end of each month. A doctor-owner has $10,000 leftover at the end of the month, for example, and says, “wow, I’m a great businessman,” but they did not pay themselves first for their clinical work.
If they paid themselves first for their clinical work before calculating how much they had left over, they might find that the business did not make any money. It paid all the bills and compensated the doctor fairly with nothing left over in profits. That is a lot of extra work (beyond clinic) that the doctor owner is doing to receive no profits. This happens more than you think.
Why It’s Important to Work ON Your Practice
Many doctors are in the clinic from 8 a.m. to 5 p.m. during a typical workday. They then chart and work on the practice, including meeting with staff, acting as a controller in accounting, directing operations, overseeing optical decisions, managing human resources and ensuring the practice web site is generating new patients, among other management tasks
There are many practice owners who have not broken out their clinical compensation and calculated the overhead that they would be paying a manager, CPA or HR professional to manage their business. Instead, the doctor-owner is “working on the business” by managing the hottest fires when they have time and hoping that they can juggle all the management balls. And guess who usually loses with this haphazard approach? Loved ones, significant others, key staff–and yourself.
Organizing Your Time & Compensation
The practice owner should think in terms of three buckets.
One bucket is clinical, pay for doctor time at a percentage of net receipts, i.e.: 15-21 percent of net production (amount collected).
The second bucket is for high-level executive roles (15 percent of what remains in the month after paying all liabilities and bucket #1).
Then, if money remains, it is distributed to practice partners. This is your third bucket. This would only be the practice owner if a single owner, but the system will be in place for adding ownership.
This system allows you to see how profitable you are or are not. Once the practice grows large enough you would then look at compensating practice partners/executives on a salary basis. When you are small, there typically is not a full-time position of CEO, CFO, COO, so you act those roles out yourself and pay yourself a percentage of “reward” when the practice has money left over at the end of the month.
Formalize Organizational Structure of Practice
I would recommend that you research hierarchical organization and payment structures of the “c-suite” in corporations outside of optometry. I put my practice’s organizational structure together after doing this kind of research. Let’s face it, we are optometrists, not corporate executives, so look at what corporations do outside of optometry, and emulate the structural aspects that make sense for your practice.
Organizational activities are going to be: HR, optical, clinic, facilities, accounting, marketing, IT). You would then divide your organizational chart up based on owner’s strengths–the tasks the owner can do themselves and those that should be delegated.
Once you determine the owner’s management tasks across the organization, you can calculate how much related compensation you are truly owed.
Remember the OD’s Role in Capturing Optical Sales
Among the eight ODs in my practice, there is a wide difference in what patients end up doing in the optical based on the ability for the doctor to, not only prescribe product, but communicate in a manner that results in patients executing on the prescription. If a patient doesn’t understand the importance of optical products they will default to choosing based on pricing and what they can learn themselves.
The patient pays you for prescribing the best solutions for their needs, so do that. Many colleagues stop at medical and do not optically prescribe. Ninety percent of your patients should have a prescription for a specific ophthalmic lens, coatings and types of frames. They should also be prescribed device glasses and sunglasses with specific products and details of those products.
Base Compensation on Net Receipts
Base compensation, whether your own or an associate’s, on net receipts, money that makes it into the bank. Review this often on your own and with your partners and associates. In my practice, we have meetings with all the ODs once a month. I lead these meetings in which we go over the metrics of what is working and what is not in serving patients and growing profitability.
Then, I match doctors in high-performer and low-performer categories in specific areas to try and figure out what the differences are in execution and communication. I look equally at my own role in contributing to profitability as that of my partners and associates.