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The Bottom Line on Edging

Editors of 20/20 and Vision Monday

07-2008

With gas prices skyrocketing and the economy sputtering, many small business owners are looking for ways to recession-proof their businesses. One effective way to do this is to lower the cost of doing business and boost net profits.

In the optical world, setting up a new in-office finishing lab or upgrading an existing lab can help accomplish both financial goals. An in-office lab can lower cost of goods, enhance customer service and attract new patients – all adding up to increased profits. While recessions come and go, a lab is an investment that keeps on growing an optical business.

MORE DOLLARS TO PROFIT

Generally, eyewear sales represent at least 60% of an OD practice’s gross revenue and most of an optical shop’s gross sales. By reducing the costs associated with producing eyeglasses, ECPs can improve their bottom line.

The major cost benefit of operating an in-house lab is a reduction in outside lab fees. A full-featured in-house finishing system can produce virtually all of the popular lenses and frame styles that consumers want, including high-margin jobs like rimless and AR-coated lenses. Instead of paying labs for finished lenses, an edging practice pays only the lower cost for uncut lenses. The savings contribute to profits.

MARKETING TOOL

In addition to reducing costs, an in-office lab can boost profits by helping independent ECPs compete more effectively and grow their customer base. An on-site lab is a marketing tool that helps to attract and retain customers by offering the greater convenience of one-stop shopping and fast job turnaround.

Advertising a “lab on premise” prevents patients from walking away after their exam with a prescription in hand – as many as 12% to 15% according to industry surveys. The ability to make glasses quickly will help capture those customers who might otherwise go to an optical chain down the street. Practitioners with on site labs also maintain tighter quality control over the end products. These customer benefits translate to more business.

PAYOUT PROJECTION

To track your potential lab savings, record the lab fees charged for finished jobs by lens type over several months, and compare these charges with the cost of uncut lenses. The difference is your savings before expenses. An optical shop running 10 jobs a day in-house, 5 days a week, can net as much as $3,000 a month in lab savings.

To determine net profit, subtract the monthly lease or loan payments and allocated operating expenses including staff from savings. Many offices train current employees to do the in-house finishing with flex-scheduling built around their sales and fitting responsibilities, so no new employees are needed. Space requirements are minimal since today’s integrated systems perform all functions in one or two machines with a footprint of just 4 to 6 linear feet.

The leading edger manufacturers will help you develop a cost analysis customized for your practice at no obligation, so it may be worth your valuable time to take advantage of this service. Totally automated finishing systems range in cost from around $25,000 to $65,000 on the high end. A loan or lease payment can vary anywhere from about $600 to $900 a month based on term and purchase price. There are also tax advantages associated with loans and leases that you’ll want to discuss with your tax advisor.

Bottom line: An in-office lab can strengthen your practice for the best and worst of business cycles, both in terms of profit and better customer service.

— Compiled by the editors of 20/20 and Vision Monday

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