August 12, 2015
Practice owners/partners still have the more profitable career track, findings from Jobson Optical Research’s 2015 ECP Compensation Study suggest. The average compensation reported for ODs who are employed was $107,712. The average total compensation of optometrists who are owner/partners for 2014 was reported as $143,317. The compensation for this group would include any salary they may have assigned themselves.
Click HERE to purchase Jobson Optical Research’s 2015 ECP Compensation Study.
Are Jobson Optical Research’s 2015 ECP Compensation Study numbers reasonable? Let’s calculate the numbers to see.
First, let’s take the perspective that we are going to pay all optometrists working in a practice a maximum of 20 percent of the gross revenue. For a practice taking in $500,000 in collected revenue in one year, then 20 percent of that would be .2 x $500,000 = $100,000. With that $100,000 you could buy one full-time optometrist or multiple part-time optometrists. It is important to understand that the $100,000 includes everything it costs you to buy all the optometrists for that practice–wages, bonuses, benefits, continuing education, malpractice insurance, lab coat … everything.
What do the owners get in the example above? If the average “optometric net” is defined as the true net of the practice, plus what the optometrists are paid, then we have a way of calculating owners’ total pay. In the example above, we have 20 percent to pay the optometrists working in the practice and 10 percent for the owners.
Here are the numbers for the practice bringing in $500,000 in gross revenue: The employee optometrist receives 20 percent of the gross revenue, which equals $100,000. The owners would receive 10 percent of the gross revenue, which equals $50,000. But, what if the owner of the practice was also the optometrist who worked in the practice? The owner-doctor in this case would receive $100,000 + $50,000 which equals $150,000.
What if your practice was bringing in $1,000,000? The same formula still works: .2 x $1,000,000 = $200,000 to buy all the optometrists working in the practice. If there are two optometirsts, each working 40 hours a week to bring in that combined total of $1 million, then you can think of this as the first example just doubled. Each of the two employee optometrists would receive $100,000.
What if the two optometirsts working in the $1 million practice were 50-50 partner/owners? Then, each of them would receive $100,000 for working in the practice and each would also receive half of the $100,000 true net. The owner/doctors would each receive a total of $150,000.
So, the answer is yes, Jobson Optical Research’s 2015 ECP Compensation Study numbers are reasonable for the average practice. But what if you are not average? Will your numbers be different? Here are two more cases to consider.
What if the owners of a practice negotiated with the employee optometrist to only accept 15 percent of the gross revenue? For a practice bringing in $500,000, .15 x $500,000 means the employee optometrist would receive $75,000. The difference between $100,000 and $75,000 drops straight down to the net of the owner.
What if you have a really exceptional optometrist who is able to bring in $1 million in gross revenue all by him or herself? Are they worth $200,000? That’s a judgement call you need to make. (Just so you know, we would hire them in a heartbeat for that compensation for that production.)
Even as we think about doctor wages, we should never forget what Henry Ford said: “It is not the employer who pays the wages. Employers only handle the money. It is the customer who pays the wages.”
