9 optical metrics you should be tracking
Eye care professionals need to understand how their retail opticals are performing. It's helpful to track a variety of metrics that paint a clear picture of your optical business to obtain the insight you need.
You don’t have to be a data analyst in order to do this successfully. It's a simple matter of knowing which metrics to track and, at worst, some back-of-the-napkin math skills. That’s everything required to quickly get up to speed. With more understanding of what each benchmark means you can track them in practice management software or a spreadsheet in order to identify trends that paint a clear picture of performance.
The importance of optical dispensary benchmarks
Keeping track of key metrics is essential for a number of reasons, not least of which is arming yourself with the data you need to make informed decisions for your optical business.
You’ll need more than one benchmark. For example: Frame capture rate is valuable, but it doesn’t tell you the whole story. Various trends you see in different key performance indicators will come together into foundational knowledge over time. The sort of understanding you need to make the right decisions for your optical.
Metrics every optical should track
Track more than one metric in order to obtain a full picture of business performance—makes sense. But, what are they?
Below we’ll take a look at some of the key performance indicators your optical should track:
1. Capture rate
Since we mentioned it, let’s start with capture rate. This metric is a strong indicator of how a doctor and their practice’s retail optical work together in order to sell materials.
It’s defined as the number of patients who fill prescriptions at your optical divided by the number of patients who received new prescriptions from your practice. Or the number of patients who purchase frames divided by the number of patients who receive exams.
You can be confident you’re doing well if you’re capturing between half and two-thirds of frame sale opportunities. However, that doesn’t mean you shouldn’t aim to improve your capture rate! There are a number of ways you can improve optical sales performance and boost your capture rate.
In our opinion, one of the best is Anagram Prosper. The patient-facing rebate software is currently free for all eye care professionals. When you add eligible lenswear and frames to your inventory you can use these discounts to help patients purchase independent eyewear that will improve their quality of life.
Not only will this help you make sure you're matching patients with eyewear that's best for them, rather than their vision plans; you'll also see a boost to your capture rate.
Keep in mind that with capture rate, and many other optical metrics, you can measure contact lens sales in a similar way.
2. Patient volume
If you have an OD seeing patients in addition to a retail optical selling materials, then patient volume is an important metric. And it probably seems like a fairly obvious one. But where the magic really happens is when you combine it with other benchmarks in order to identify trends.
For example, higher patient volume isn’t always good. You may notice that your patient volume per month is increasing, but your revenue per patient has been flat. Something is changing in a way that’s affecting your practice’s ability to balance a robust profit margin with a healthy patient volume.
Maybe the vision plans you’re in-network with are adjusting down their fee schedules. Whatever it is, by comparing patient volume and revenue per patient you now know to look for the issue that needs correcting.
3. Revenue per patient
Along with patient volume, you should keep track of revenue per patient. Average revenue per patient can range anywhere from about $150 to $500. If you’re on the higher end, then you may see fewer patients. However, you may also have more time to take off on Fridays or have lunches with your staff.
You can calculate for either revenue per comprehensive exam patient or revenue per all patients. The formula is to divide gross revenue by the number of exams performed. For example, if your gross annual revenue is $600,000 and you see 2,000 patients, your annual revenue per patient is $300.
What sort of revenue per patient will allow you to achieve your vision of practice and optical success?
4. Revenue sources
Where’s your revenue coming from? Understanding this can help you focus more on your most profitable services and materials. Here are some of the ways you can break down your revenue sources:
Medical eye care
Where’s most of your revenue coming from? Can you improve your share of revenue from services or materials with better profit margins? These are the sort of questions you can ask (and answer!) when you’re tracking your revenue sources.
5. Eyewear gross profit margin
As they say, you have to spend money to make money. This benchmark helps you track what you’re making after cost-of-goods. On average eyewear sales produce a gross profit around 61 percent.
Here’s the formula for calculating eyewear gross profit margin: (Eyewear gross revenue minus eyewear cost of goods) divided by eyewear gross revenue.
If you notice your margins are too low you can make several adjustments in order to improve them. For example, if you’re in-network with vision plans, then consider how their fee schedules and reimbursements may affect profit potential.
You might also adjust your prices to boost your margins. Look around at other opticals. Are your own prices more competitive than you need them to be?
6. Multiple pair ratio
Sometimes for patients a single pair of glasses does not equate to a one-size-fits-all solution. Different pairs for different situations is common enough that you should be tracking these transactions. Your optical sales performance will substantially improve if your team can close on more of these opportunities. Multiple pair ratio tracks these multi-pair purchases as a share of all eyewear transactions.
This is another area where Prosper can help. In fact, ECPs using Prosper have an average multiple pair sales rate that's 3x what the other opticals normally average. This can be especially helpful for in-network patients who would benefit from a particular second pair. For example, if Nikon's office lenses are the best option for your in-network patient. Patients can purchase eyewear in-network that's covered by their vision plans. Then they can buy an additional pair of independent glasses knowing you'll send them a rebate.
To find your multiple pair ratio divide the number of people who purchased two or more pairs from your optical by the total number of people who purchased eyewear.
7. Gross merchandise value
Gross merchandise value is a measure of revenue through materials sold. It’s a useful metric for comparing performance over time. For example, reviewing GMV in June 2021 versus June 2020 to track performance as more patients are vaccinated against Covid-19.
To find GMV for a single item you take the sale price per time charged and multiply it by the number of items sold. Say you have a frame that costs $150 and you sell 10 in May. When it comes to that particular frame, your GMV for the month will be $1,500.
8. Patient acquisition cost
A less frequently tracked metric is patient acquisition cost. How much do you have to spend for someone new to either set an exam appointment and then buy frames or visit your retail optical direct to purchase a new pair?
Calculating this metric changes depending on how you acquire patients and optical customers. However, keeping track of it can help you improve your gross profit margin over time.
Patient acquisition cost is found by adding up everything you spend on acquiring patients in a given time period by the number of patients acquired.
The first step is the tricky part: What do you spend to acquire a single patient? There’s plenty to consider here:
Do you spend anything on marketing? Include staff salaries, paid advertising campaigns, marketing vendors and any other marketing costs.
How much potential profit do you give up to vision plans in order to acquire new patients?
The second question is one most in-network ECPs overlook.
“If you’re in-network, then you’re contracted to accept a certain amount—often less than your customary fee,” Nicolas Gilberg, OD, owner of Dr. Gilberg & Associates and a consultant with the Nealberg Consulting Group, wrote. “Let’s say you usually charge $100 for a routine exam, but a vision-plan referred patient generates a contracted amount of $50. You essentially paid a vision plan $50 for a new patient.”
9. Remake ratio
Of all glasses fabricated in the U.S., 15 percent will have to be remade. Remakes are a part of life at an optical. However, they’re a costly part of life. In order to effectively minimize them you have to track them.
Remake ratio is useful since it helps you gauge remakes as a percent of total eyewear purchases. For example, a slight increase in remakes in one month may be nothing more than a corresponding increase in purchases.
To find your remake ratio divide the number of remake eyewear orders by the total number of eyewear orders.
Building a better understanding of key optical benchmarks
The above metrics are an important first step to obtaining a full picture of your practice. But you can go even further. Consider it stepping up from standard definition to HDTV.
Break KPIs up by vision plan to compare and contrast carriers
If you’re in-network with vision plans it is absolutely essential that you break down key metrics by vision plan.
For example, if a bad plan is pulling your eyewear gross profit margin down by a few percentage points, then you should drop the vision plan. However, the only way you'll know for sure is by breaking up eyewear gross profit margin by each customers’ vision plan, as well as private pay transactions. Make sure you break down the benchmarks listed about by vision plan and compare and contrast to see how they’re stacking up.
Dropping vision plans isn’t as tremendous a task as it seems if you have the right help. And if by doing so you’re able to put your optical on a better track toward success, then it’s the right move. The best way you can find out for sure is through plan-by-plan comparisons of your key metrics.
Keep patient demographics in mind
Consider patient demographics as well. Otherwise, it’s easy to take away the wrong message from the data. For example, if you’re comparing samples of patients from two separate vision plans, then review their ages, genders and other demographic data. A cohort of seniors on one plan will look drastically different than a cohort of younger and middle-aged patients on a different plan. If comparing samples, always make sure to get a good mix of patients that’s evenly distributed across each cohort to ensure the results are trustworthy.
Optical benchmarks as a foundation for decision-making
At some point you’ll come across a major decision for your optical. In fact, maybe you’ll find the opportunity hidden in your optical data.
It’s important to be able to make the right choice. The decision that takes your optical on a path toward your vision of success. Whether it’s dropping a vision plan, hiring a new employee or buying new equipment, you can make a better decision by making sure it’s informed by your optical metrics.