A well-run single-doctor optometry practice tracks payroll, optical cost of goods sold, and occupancy as percentages of collections or revenue each month. Optical COGS typically runs 25 to 35 percent of optical revenue in a well-managed dispensary; payroll and occupancy each have their own target ranges covered in the sections below. The gap between a practice managing these ratios well and one that isn't often shows up as $100,000 or more in the owner's pocket, on identical revenue, without anyone quite noticing where it went.

The problem is that most practices only see these numbers once a year, which is too late to do anything useful with them.

Why One Combined Ratio Is Not Enough

Optometry practices have two revenue streams with completely different cost structures. The clinical side (exams, medical visits, contact lens fitting) has almost no cost of goods sold. The optical side (frames, lenses, contact lens products) is inventory-heavy by definition. When you look at a single blended expense ratio, the two sides average each other out.

A practice with high optical COGS and strong clinical collections can look fine on a combined basis while quietly losing margin on the dispensary side. The reverse is also common. This is the same two-margin principle covered in Your Optometry Practice Has 2 Margins: the clinical and optical lines need to be read separately, or the signal disappears in the blending.

Optical COGS: The Ratio That Moves the Most

Optical COGS covers the frames, lenses, and contact lens inventory that goes out the door when a patient makes a purchase. In a well-run dispensary, this ratio runs 25 to 35 percent of optical revenue per industry practice data. Below 25 is uncommon and usually reflects a lens pricing structure that has run ahead of costs or a frame mix weighted heavily toward low-cost house product. Above 35 starts cutting into optical gross margin; above 40 percent usually means the frame board is aging, lens pricing is not keeping pace with lab cost increases, or there is a vendor contract worth revisiting.

The math is direct. At 30 percent optical COGS on $500,000 in optical revenue, you are keeping $350,000 in optical gross before overhead. At 40 percent COGS on the same revenue, you are keeping $300,000. That $50,000 difference flows almost entirely to owner compensation or practice reinvestment. On a practice with $1.2 million in total collections, it is often the single largest swingable number in the financials.

Frame board turnover is the culprit more often than not. Slow-moving frames do not show up in COGS immediately, but write-downs and the revenue lost to dead board space accumulate in the ratio over time. A board review and open-to-buy discipline typically bring this back into range within two or three buying cycles.

Payroll: The Largest Controllable Expense

In most optometry practices, payroll is the single largest expense after optical COGS. The right comparison ratio depends on what is included (staff-only versus total compensation including the owner-OD), on practice size, and on payer mix. Industry and practice management resources from the AOA provide baseline ranges worth knowing before drawing conclusions from your own numbers.

Where practices run into trouble is when payroll as a percentage of collections climbs for months without a corresponding increase in revenue or a planned staffing investment. If payroll dollars are flat and the ratio is rising, collections fell. If payroll dollars increased and the ratio is rising, you added headcount or compensation ahead of the volume that should support it. The fix is different in each case, and you need the monthly number to see which situation you are dealing with.

Our KPI benchmarks article for optometry practices covers what the operational numbers look like across different practice sizes and what typical benchmarks are for each revenue tier.

Occupancy: The Fixed Cost That Does Not Move

Rent, common area maintenance, and utilities land in occupancy. The target range for a well-located practice is 5 to 8 percent of total collections. Some urban practices with premium locations run higher; some lower-rent rural practices run lower. For most single-doctor practices in suburban markets, above 10 percent means the location cost is outpacing the volume it supports.

Occupancy is mostly a lease decision made 5 to 10 years ago. You cannot renegotiate it next month. What you can do is identify when it is dragging on the bottom line, which changes how you evaluate other decisions: adding equipment, bringing in an associate to build capacity, or whether to extend hours before considering a second location.

A practice with 6 percent rent and 12 percent total occupancy because of high utility costs has a different problem than one at 12 percent purely from a premium lease. The ratio points to the category. The line-item breakdown tells you where to look.

What the Numbers Look Like in a Practice Hitting 20 Percent Net

Here is a composite single-doctor practice (illustrative figures, not based on any individual client):

  • Total collections: $1,200,000
  • Optical revenue: $500,000 (roughly 42 percent of total)
  • Optical COGS at 30 percent of optical revenue: $150,000
  • Payroll at 32 percent of total collections: $384,000
  • Occupancy at 6 percent of total collections: $72,000
  • Supplies, lab fees, and other overhead: roughly $95,000 (this varies more by practice type than most expect)

That leaves approximately $499,000 before owner compensation, debt service, and taxes. With the right entity structure and tax planning, a well-compensated owner-doctor takes home a meaningful combination of salary and distributions from that number.

Now adjust the same practice to payroll at 43 percent and optical COGS at 38 percent. Payroll goes from $384,000 to $516,000, and optical COGS goes from $150,000 to $190,000. That is roughly $172,000 less to work with, on identical revenue. This is the math that explains why some practices with $1.2 million in collections feel just as cash-constrained as practices doing half that.

When Your Ratios Are Outside the Benchmarks

Ranges are comparison points, not rules. Legitimate reasons to run outside them are common.

A startup-phase practice will carry higher occupancy ratios until patient volume builds; a newly added associate doctor typically drives payroll above 40 percent for 12 to 18 months while their schedule fills. A premium dispensary may run higher optical COGS and still produce better gross margin in dollar terms if the revenue per patient visit is high enough to support it.

The signal is not the number itself. The signal is an unexplained trend: a ratio that held steady for three years and has been climbing for four months. That is when the monthly numbers are telling you something is changing, and you still have time to respond before it shows up as a cash problem or a year-end surprise.

The Ratio Most Practices Miss

All of the above are expense-side metrics. There is also a revenue-side ratio that moves the expense ratios without any change in spending: revenue per patient visit.

If payroll dollars are flat but visits fall 15 percent, the payroll ratio rises. If optical COGS dollars are unchanged but optical revenue per patient visit has declined, the COGS ratio rises. Every expense ratio gets worse when revenue per visit falls, even if no spending decision changed. A practice that averaged $340 per visit two years ago and is at $295 today has had a pricing or payer-mix shift. It shows up as apparent inefficiency across every expense ratio even though operations have not changed.

Benchmarking revenue per visit is harder than tracking it internally because it depends on payer mix, optical pricing, and scope of services. But if your expense ratios are moving in the wrong direction and you cannot find a spending driver, check this number first.

Putting It Together

Practice valuation is partly a function of these ratios. A practice with tightly managed expense ratios and growing revenue per visit is worth more to a buyer because the margin is there and it is demonstrably maintained. A practice with revenue growth masking ratio deterioration is a riskier acquisition and typically sells at a lower multiple. We cover what drives valuation in detail in How Much Is Your Optometry Practice Worth.

The monthly numbers are where you catch ratio drift early enough to act. If you are reviewing these annually, or only when your accountant puts together the year-end, the conversation is happening nine months too late. Our KPI white paper walks through the reporting structure we use for the optometry practices we work with, including which ratios we track and what the benchmarks look like at different revenue levels. You can download it on the optometry practice page.

Questions owners ask about this

What percentage of revenue should an optometry practice spend on payroll?

Payroll benchmarks vary significantly depending on whether owner-OD compensation is included in the figure, and on practice size and payer mix. The AOA and other practice management resources publish data ranges that serve as useful starting points. The most reliable signal is trend: a payroll-to-collections ratio that was stable for years and is now climbing consistently warrants a closer look at collections and staffing levels.

What is a healthy optical COGS ratio for an optometry practice?

Optical COGS (frames, lenses, and contact lenses) typically runs 25 to 35 percent of optical revenue in a well-managed dispensary. Ratios above 40 percent often point to slow-moving frame board inventory, lens pricing that has not kept pace with costs, or a vendor contract worth renegotiating. The optical gross margin flows directly from this ratio: a 10-point swing on $500,000 in optical revenue is $50,000 in gross margin.

How much should an optometry practice spend on occupancy?

Occupancy costs (rent, common area maintenance, utilities) typically run 5 to 8 percent of total collections for a well-located suburban practice. Above 10 percent suggests the location cost is outpacing the patient volume it supports, particularly in a single-doctor practice. Because occupancy is largely a lease decision made years in advance, tracking this ratio monthly gives you lead time to plan rather than discovering the drag at year-end.

What net profit margin should an optometry practice target?

Net profitability in an owner-operated optometry practice depends heavily on how owner compensation is structured, the entity type, and payer mix. A practice that pays the owner-OD a market-rate salary first reports a very different net figure than one that treats owner distributions as the profit line. What matters most is whether net is trending in the right direction as revenue grows. It is also a key input to valuation, since buyers pay a multiple of normalized earnings.

Why do my expense ratios look different from the benchmarks I have seen?

Several legitimate factors explain differences. A startup-phase practice with lower volume will show higher occupancy ratios until patient volume builds. A practice that recently added a second doctor will have elevated payroll ratios for 12 to 18 months while the associate's schedule fills. And a premium dispensary may run higher optical COGS while generating higher optical revenue per patient visit, which changes the gross margin picture entirely. The benchmarks are a comparison point, not a ceiling.