Finances

7 Questions to Ask Before Joining an Optometric Alliance

By Jerry Hayes, OD

An optometric alliance can help build your practice with business education and consulting, as well as with product and lab discounts. But there are many alliances, with distinguishing features and differing cost structures. To determine the right alliance for you, first ask seven essential questions.

Industry sources tell us there are 16,000 to 18,000 offices in the US in which independent optometrists dispense eyewear and contact lenses. It is estimated that over 90 percent of those practices use the services of a traditional buying group. Following on the heels of industry leader Vision Source, a new type of group is emerging in the form of so-called alliances or optical networks.

An optometric alliance can help you build your practice while providing discounts on contact lenses and frames inventory and ophthalmic laboratory services. First you must decide whether an alliance or buying group best suits you. You then can weigh which groups meet your buying and professional development needs.

Alliance-Vendor Partnership ROI: Save $24,000

Practice with $600,000 annual revenues

Spending approximately 30 percent or $180,000 on cost of goods and services.

Spending two-thirds, or about $120,000 of that $180,000 with a preferred vendor via the alliance.

If membership allows a 20 percent discount on that $120,000
=$24,000 in savings on goods and services.

Note that savings on goods and services will need to balanced with the cost of membership.

Cost of membership also is a reason to choose just one alliance to join rather than several or more.

Here are seven things to consider before you join:

1. What do I want from my group?
When I do one-on-one consulting with ODs, I always start by asking the client to define a specific area they most need help with such as staff management, low net, practice marketing, etc.

The question remains the same when it comes to choosing the right optometric group–what do you need the most help with? Product discounts? Marketing? Financial management? Staff training?

Don’t join a group based solely on low membership fees or high product discounts. Give some serious thought to your most pressing needs and look for a group that can support you in those areas.

2. Should I join an alliance or a buying group?
The next step is to decide whether a traditional buying group or alliance best fits the needs of your practice. If you don’t have a strong interest in practice building education, have little time or inclination to network with other practice owners and are just interested in good discounts on frames, optical lab services and contact lenses, then a buying group should work just fine for you.

Alliances like Prima Eye Group, on the other hand, are for doctors who want to actively engage in receiving business building content from practice management experts and trade best practice ideas with other growth minded ODs.

3. Am I willing to invest in practice growth?
While buying groups provide less than alliances in the way of practice management support, they do not charge

Know Your Optometric Alliance Options

Prima Eye Group
http://primaeyegroup.com/

Vision Source
http://www.visionsource.com/

OD Excellence
www.odexcellence.com

C&E Vision Services
http://www.cevision.com/

Professional Eyecare Resource Co-Operative http://www.perc.biz/

IDOC
http://idoc.net/

Click HERE to watch leaders from these groups discussing their group’s strengths at the 2011 VM Global Leadership Summit.

membership fees and do not have minimum purchase requirements. So, if you are looking for the cheapest avenue, join a buying group.
Membership in an alliance, on the other hand, is an investment in practice growth. Vision Source is a good example of a high service group. They charge the highest membership fees I know of. But they also have over 2,000 members. That tells me they do a great job of providing practice building services and product discounts to their members.

4. How can I justify the dues?
Most ODs try to justify their dues based on product discounts. But lowering your cost of goods is not a strategy for practice growth. The real reason to join an optometric alliance is for the quality of the business building education and consulting support available to help you navigate the path toward increasing revenues and profits.

If growth is your mindset, think in terms of justifying your dues with the extra income you’ll earn as your practice grows. Example; how much more will you make if you got enough practice building support to see just one extra patient per week? Answer; around $800 per month. That will more than cover the dues for most high service groups. And more importantly, this will put you on the road to your real goal of practice growth, not just product savings.
Here is how I got that number. Based on a gross margin of 67% (gross – 33% COGS) and $300 per average dispensing patient, your income will increase by $800 per month if you see just one more patient per week. ($300 X .67 = $200 gross profit X 4 weeks = $800 per month.)

5. What’s the track record of the management team?
‘Bet big on the management team’ is an old adage on Wall Street. You need to pay close attention to who owns the group you are considering joining. Do the founders have experience running optometric groups? Are they successful practitioners in their own right? Just as important, do the leaders of your group have a track record of teaching other ODs how to be more successful?

6. Does your group help you network with successful ODs?
Here is a tip for small and mid-size practice owners. I know very few million dollar practice owners who don’t belong to some type of optometric study group for the purpose of trading business building ideas. Small peer groups that meet regularly to trade ideas and support each other are a proven catalyst for growth among not only optometrists, but also auto dealers and investment advisors.
Choose a group that will help you aspire to something greater than you are today. For example, if you’re a growth minded optometrist grossing $600,000 in a solo practice, you want to network and learn from ODs who are doing $1 million in annual revenues. Once you have a chance to learn first hand from someone who is doing it, it’s much easier to get there.

7. Who are the vendors in my group?
While buying groups typically offer products from 50 to 100 vendors, alliances generally have relationships with no more than two to three suppliers in the contact lens and ophthalmic lens lab categories and maybe six to ten frame companies.
That’s because vendors will offer enhanced discounts in exchange for semi-exclusivity in their product category. Many vendors also sponsor part of the educational programs offered by your alliance. For that reason, it’s very important for the members of a group to support the companies that provide them with discounts and program sponsorship.

While traditional optical buying groups have worked well for three decades, a new wave of optometric alliances designed to provide private practice ODs with not just superior product discounts, but also business building education and consulting support is emerging.

Related ROB Articles

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Analyze Your Finances to Determine When to Add an Associate

How to Compute Net Cash Flow

Jerry Hayes, OD, isthe founder of Hayes Marketing, HMI Buying Group and the e-dr. Network. He also is the former owner and senior partner in a successful three-man practice in Vicksburg, Miss. Dr. Hayes, along with Neil Gailmard, OD, and Billy Cochran, OD, recently launched optometric alliance Prima Eye Group. To contact Dr. Hayes: jhayesod@gmail.com

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