Podcast Summary: "The Economic Forecast & Cost Strategies Every Optometry Practice Needs with Dr. Jason Lake"

Podcast Information:

• Title: Power Hour Optometry
• Host/Author: The Power Practice
• Episode: The Economic Forecast & Cost Strategies Every Optometry Practice Needs with Dr. Jason Lake
• Release Date: January 29, 2025

Overview

In this insightful episode of Power Hour Optometry, host Eugene Shotsman welcomes Dr. Jason Lake, General Manager of PERC and Optiport, to discuss the latest economic forecasts and effective cost strategies essential for optometry practices. Recorded live amidst a backdrop of industry concerns such as tariffs, inflation, and economic uncertainties, this episode delves deep into navigating the optometric landscape over the next five years. The conversation seamlessly transitions from macroeconomic trends to micro-level practice management, providing actionable strategies for optometrists aiming to thrive in a dynamic market.

1. Introduction and Context

[00:00 - 05:17]

Eugene Shotsman sets the stage by introducing Dr. Jason Lake, highlighting his multifaceted role in the optometric industry. Dr. Lake's unique perspective—stemming from owning a practice, advising thousands of member practices, and negotiating with industry suppliers—positions him as an invaluable resource for navigating current economic challenges.

Notable Quote:

"What we have to do is focus on increasing their market share within their communities or expanding, buying more offices, whatever."
— Eugene Shotsman [05:17]

2. Economic Forecast for the Optometry Industry (2025-2029)

[07:56 - 09:47]

Dr. Lake shares insights from ITR Economics, emphasizing a bullish outlook for the optometric industry from 2025 through 2029. Contrary to predictions of an imminent recession, the forecast suggests sustained growth driven by the essential nature of eye care services.

Key Points:

• Bullish Outlook: Despite global economic uncertainties, the demand for optometric services is expected to remain strong.
• Resilience of Eye Care: Unlike other sectors, eye care is considered a necessity, ensuring stability even during economic downturns.
• Return to Normalcy: The year 2025 is anticipated to mark a return to normal economic patterns after the unusual fluctuations of recent years.

Notable Quote:

"I think if you're the doom and gloom-er, you might say, well, if there's going to be pullbacks... Icare survives and eyewear survives simply because it's a need."
— Dr. Jason Lake [07:56]

3. Inflation's Impact on Optometry Practices

[10:51 - 14:46]

Inflation remains a pressing concern, with Dr. Lake explaining its multifaceted impact on optometry practices. He distinguishes between general consumer inflation and the specific inflation rates affecting the eye care sector.

Key Points:

• Higher Inflation Rate in Eye Care: ICARE experiences an inflation rate of 3.9%, surpassing the general U.S. CPI of 2.7%. This disparity is largely due to rising wage costs, a significant expense for practices.

Notable Quotes:

"If your practice is not growing at greater than 3%, you are actually losing money."
— Dr. Jason Lake [17:53]

"Inflation's not necessarily going away and in fact it looks like over the next couple of years it might do the opposite."
— Eugene Shotsman [10:51]

4. Strategies to Navigate Inflation and Economic Growth

[14:46 - 26:08]

Dr. Lake and Eugene discuss proactive strategies to leverage economic growth while mitigating the effects of inflation. Raising prices is debated, with Dr. Lake advocating for strategic adjustments rather than fear-driven stagnation.

Key Points:

• Raising Prices: Contrary to fears, modest price increases (e.g., 5%) do not typically deter patients from seeking services. Instead, they help practices keep pace with rising operational costs.

• Maximizing Cost of Goods Sold (COGS): Dr. Lake emphasizes the importance of understanding and managing COGS to maintain profitability. He advises practices to track and analyze COGS meticulously, segmented by category (frames, lenses, contact lenses).

Notable Quotes:

"You don't get two sides of the same coin. Right. It's opposite sides that you deal with."
— Dr. Jason Lake [16:15]

"If your practice is not growing at greater than 3%, you are actually losing money."
— Dr. Jason Lake [17:53]

5. Optimizing Cost of Goods Sold (COGS)

[38:38 - 56:01]

A significant portion of the discussion centers on understanding and optimizing COGS. Dr. Lake provides a detailed framework for practices to assess their expenses accurately, highlighting common pitfalls and actionable strategies.

Key Points:

• Segmentation of COGS: Break down COGS into frames, lenses, and contact lenses to gain a granular understanding of expenses and profitability within each category.

• Rebate Accounting Mistakes: Many practices incorrectly categorize manufacturer rebates as revenue instead of deducting them from COGS. Proper accounting practices can reveal a more accurate financial picture.

• Benchmarking and Trends: Regularly track COGS over time and compare them against industry benchmarks to identify areas for improvement. Dr. Lake advises practices to consider their unique demographics and operational models when benchmarking.

Notable Quotes:

"Cost of goods needs to be tracked three ways plus that one. You need to take your total contact lens spin and divide it by the total amount of money you collect in contact lenses."
— Dr. Jason Lake [46:20]

"The number one bookkeeping mistake that I see that screws up cost of goods... They should be recorded as cost of goods. It's contact lens rebate cost of goods, contact lenses would be actually deposit."
— Dr. Jason Lake [50:35]

6. Practical Takeaways and Recommendations

[53:09 - 56:01]

Dr. Lake offers actionable recommendations for optometry practices to enhance profitability and efficiency:

• Aggressive Planning: Utilize the current growth phase to set and achieve comprehensive 1-year, 5-year, and 10-year goals.

• Diverse Product Portfolio: Maintain a balanced mix of high-margin frames and contact lenses to optimize overall profitability.

• Effective Sales Techniques: Implement strategies such as open-ended questioning and personalized recommendations to increase sales without alienating price-sensitive patients.

Notable Quotes:

"If you have a practice for 20 years, you were up 8% a year up into including the pandemic, and it's been capitulating wildly over the last four years. I would say if you've traditionally grown 7, 8% and you have capacity to grow, which is a huge thing, then I think I'd go back to 7 or 8%."
— Dr. Jason Lake [12:36]

"Ask questions. And I say the same for the optician... You’re asking open ended questions. You the doctor, your job is to serve them."
— Dr. Jason Lake [34:26]

7. Conclusion

[56:01 - End]

The episode concludes with Eugene emphasizing the importance of deep-diving into key metrics like COGS to drive informed decision-making. He invites listeners to engage by suggesting future metrics for detailed analysis, reinforcing the podcast’s commitment to serving the optometric community with practical insights and strategies.

Notable Quote:

"We have to be able to present the options well to the patient as well."
— Eugene Shotsman [23:05]

Key Takeaways:

• Optimistic Industry Outlook: The optometric industry is poised for growth from 2025 to 2029, with a resilient demand driven by essential eye care services.

• Manage Inflation Proactively: Understand how inflation specifically affects your practice, particularly through rising wage costs, and implement strategic price adjustments to maintain profitability.

• Detailed COGS Analysis: Segment and meticulously track COGS across different categories to identify and address inefficiencies. Correct accounting practices, especially regarding rebates, are crucial for accurate financial assessments.

• Enhance Sales Techniques: Employ customer-centric sales strategies that focus on understanding patient needs and offering tailored solutions without compromising on service quality.

• Continuous Benchmarking: Regularly compare your practice’s metrics against industry standards, considering your unique demographics and operational model, to identify areas for improvement and capitalize on growth opportunities.

Final Thought: Dr. Jason Lake’s comprehensive analysis and practical strategies provide a roadmap for optometry practices to navigate economic challenges, optimize operational efficiency, and capitalize on growth opportunities in the coming years.