Optometry revenue and profit usually split for one of four reasons, and each one shows up in a different report.
When revenue rises and profit falls in an optometry practice, the cause is usually one of four things. Optical capture may have slipped while exams grew. The optical mix may have moved toward lower-margin products. Overhead may have grown ahead of volume. Frame buying may also be running through the P&L as an expense.
Each cause has a different fix, so the first job is to find the one that applies. Cutting staff will not help if the real problem is a frame board that grew faster than sales.
The four usual causes
- Exams grew but optical sales did not keep upEach exam carries chair time and staff cost. When fewer exam patients buy eyewear at the practice, less optical margin is left to cover that cost. Measure capture as eyewear sales divided by exams over a full quarter, and compare it to the same quarter last year.
- The optical mix moved toward lower-margin productsFrames, lenses and contact lenses earn different margins. A shift toward plan-covered basic lenses can hold revenue steady while margin falls. One blended optical margin hides that shift, so margin needs to be split by category.
- Overhead grew faster than revenueA new lane, more staff or new equipment often arrives before the volume that pays for it. Read overhead as a percentage of revenue. Overhead in dollars always rises when revenue rises, so the dollar figure tells you little.
- Frame purchases are booked as expensesWhen frames are expensed at purchase, a large order cuts profit in the month it lands. Profit then follows buying patterns instead of sales. Carrying frames as inventory matches their cost to the month they sell.
How do I tell which cause it is?
A standard P&L cannot separate these four causes. On that statement, revenue is up, expenses are up and profit is down. Nothing on it shows whether the problem is capture, mix, overhead or buying.
Four reports can separate them. You need optical capture rate by quarter, gross margin by product category, overhead as a percentage of revenue, and frames carried on the balance sheet with turns tracked. Our optometry practice accounting splits optical from exam revenue and reports capture rate, margin by category and frame turns each month.
Frequently asked
Why is my optometry practice revenue up but profit down?
It is usually one of four causes. Optical capture may have fallen while exams grew, the optical mix may have moved toward lower-margin products, overhead may have grown ahead of volume, or frame purchases may be booked as expenses. Capture rate, margin by category and overhead as a percentage of revenue will show which one applies.
Can more exams lower optometry practice profit?
Yes, it can happen. Each exam carries chair time and staff cost. If the added exams come with lower optical capture, or they need a new lane and more staff, revenue rises while profit falls.