KPIs of Optometry Practice

In the previous post, we emphasized what is valued in a small business valuation. We also underlined the methods, standards, and approaches that are mostly applied to perform an accurate valuation. There are important Key Performance Indicators (KPIs) that we track for an accurate valuation. Almost all eye care providers track and understand practice growth KPIs on daily basis. Electronic Health Records (EHR) can accurately report information that we utilize and that is vital to the practice growth. EHR reports are customizable and can help in analyzing patients, staff, business, as well as financial data. When it comes to valuation, some regular KPIs are employed, and more customized reports may be needed to provide an accurate valuation.

KPIs that eye care providers frequently use:

Eye care providers’ daily KPIs relate to strategic business goals, staff, the conversion rate of patients, and the health of the practice operations. Even though many don’t relate directly to valuation but they are all great KPIs. A quick look at what KPIs eye care professionals and Optometrists employ includes:

Gross Revenue per Exam, Gross Revenue per OD hour, Inventory Turnover, Sales by Employee, End of Day Report, Top Products;

Revenue per Patient, No shows, Capture Ratio, Optometrist Productivity per Hour, Optical Productivity;

Patient Wait Time, Patient Follow-up Rate, Missed Appointments.

The Total number of Patient Visits, Number of New Patients, No-Shows, Referrals Tracking, Drugs Dispensed History, Insurance Analysis, Productivity report by Payer and Procedure, A/R Aging Report.

Revenue per Encounter, Revenue per Contact lens fitting, Revenue per eyewear pair, Percentage write-offs.

In calculating value many rely on the EBITDA or the Earnings Before Interest Taxes Depreciation and Amortization.

KPIs needed for a business valuation include:

Business valuation companies like BizEquity employ KPIs that relate to practice outcomes, size, profitability, and growth. Those KPIs include:

Return on Equity over time (RoE);

Receivables (Conversion) Over Time; similar to A/R Aging Report

 Inventory Turnover Over Time;

Fixed Assets Turnover Over Time;

Debt-to-Equity Over Time;

Interest Coverage Over Time;

Cash-to-Debt Over Time;

Income-to-Revenue Over Time;

Cash Flow-to-Revenue Over Time;

Receivables-to-Income Over Time;

Inventory-to-Income Over Time;

Fixed Assets-to-Income Over Time;

Total Debt-to-Income Over Time;

We will explain later the importance of each of those KPIs. However, once the way to value a practice becomes clear, the purpose of understanding how valuation is made is to be able to enhance the value over time by monitoring and improving components that constitute those KPIs.