Power Hour Optometry: The Hidden Financial Compression Squeezing Optometry Practices in 2025 (with Adam Cmejla)

Podcast: Power Hour Optometry
Host: Eugene Shatsman (Power Practice)
Guest: Adam Cmejla, CFP, Founder of Integrated Planning & Wealth Management
Date: September 3, 2025

Episode Overview

This episode tackles the central theme of financial compression in optometry practices as we head further into 2025. Host Eugene Shatsman and returning guest Adam Cmejla, a certified financial planner specializing in the optometric industry, discuss the day-to-day and big-picture economic pressures affecting eye care business owners. Topics include rising costs (goods, HR), how these trends impact practice value and transactions (OD-to-OD and PE deals), current valuation multiples, and actionable strategies—including the role of technology, AI scribes, and process optimization—to help practitioners thrive despite these compressive forces.

Key Discussion Points & Insights

The Nature of Financial Compression in 2025

• Defining Compression:
  “Compression, I think that would be a word that a lot of practice owners have felt in a variety of different ways. Compression in the sense that labor costs have crept up, the cost of goods have crept up. Compression in schedule and availability.” — Adam [07:05]

• Double Squeeze:

  • Higher expenses from cost of goods and staff.
  • Difficulty increasing revenue without forcing prices higher.

• Strategic Implications:
  Owners must focus on margin protection: either by growing revenue or reducing costs. Notably, “we can't be accidentally successful in this business anymore.” — Adam [44:01]

Market Trends & Transaction Activity

Volatility and “Change is the Only Constant”

• The macro environment is uncertain, but uncertainty is a constant in business ownership.
  “Try and find me a time in our past where there hasn’t been some sort of uncertainty.” — Adam [03:35]

• Micro vs. Macro:
  Owners should not “make tactical business decisions on your practice based off macroeconomic trends… use this as just more data points.” — Adam [06:03]

OD-to-OD vs. Private Equity Transactions

• PE Buyers:

  • Activity slowed due to interest rates affecting the cost of capital.
  • Previous years (2021-2023) saw a buying spree due to low rates.
  • Multiples have come down: “eight times is probably about the high that you’re going to see on the PE side… assuming you have a buttoned-up practice.” — Adam [10:14]

• OD-to-OD Transactions:

  • Multiples are more stable: “we’re still seeing multiples somewhere in that four to six times earnings range.” — Adam [10:14]
  • Seller’s Discretionary Earnings (SDE) deals: “somewhere in the one to three times SDE” [10:14]

Seller Psychology and Deal Nuance

• Multiples & Expectations:

  • Sellers often anchor on PE offers, which aren’t directly comparable to OD-to-OD deals.
  • PE offers often come with strings and contingencies; LOIs often get whittled down post due diligence.
    “It sounds really good on the front end, but they have a lot more power on the back end to say… ‘now this is what you’re going to do for me.’” — Eugene [12:48]

• Agency in OD-to-OD Deals:

  • Offers more say for the seller post-sale.
  • Flexibility on work agreements and transitional roles.
  • Key: “as a business owner listening, you will exit your business at some point, guaranteed… is it going to be on your terms or somebody else's?” — Adam [17:24]

Practice Value: What Drives the Range of Multiples? [27:39–31:49]

• “The more valuable you are to your business, the less valuable the business is to you.”
  — [28:20]

• Predictability & Risk:

  • Practices heavily reliant on the owner are riskier for buyers and thus command lower multiples.
  • Well-systematized practices with tenured staff and diversified providers are more valuable.

• Ability to Service Debt:

  • If multiples and price are too high, buyers risk negative cash flow, pushing deals out of reach for many individual ODs.

Operational Compression: Inside-the-Practice Trends [35:07–44:01]

Cost Drivers

• Top Expenses:

  • Cost of goods (COGs) now “25–27% of every dollar”
  • Non-OD staff compensation: “right around 25 to 26%,” possibly up to 30% in competitive markets
  • Associate OD compensation: “15–18% of production”

• Net Effect:

  • Up to 67% of revenue spent on these three line items [37:27]

• Urban vs. Rural:

  • Small-town (rural) practices face less salary compression due to less competition for talent.

Responding to Rising Costs

• COGs Increases:

  • Driven by tariffs, manufacturer price hikes, and higher input costs.
  • Critical to monitor vendor relationships (e.g., consolidate frame lines for better deals and faster inventory rotation).

• Pricing Levers & Insurance Constraints:

  • Ability to raise prices is influenced by vision plan contracts (Vision Benefit Managers).
  • Emphasis on secondary sales: annual supplies, second pair glasses, and internal process improvements (e.g., in-house edging).

Strategies to Fight Compression

Embrace Technology & AI [45:18–51:03]

• AI Scribes & Virtual Staff:
  “We’re seeing more and more practices look at offshoring human capital and looking at virtual scribes and AI scribes.” — Adam [45:22]

  • Can reduce expenses, increase efficiency, and potentially reallocate staff to higher-value activities.

• Process Review:
  “All you got to do is just walk into your practice with a different set of eyeballs… as a practice critic… or maybe even as a patient and say, what’s up with this particular part of my process?” — Eugene [49:21]

• Phone and Scheduling Bottlenecks:

  • Many practices don’t answer up to 25% of calls.
  • “If there was an AI tool that answered the phone versus not answering the phone, at least we got a win.” — Eugene [49:21]
  • Online scheduling is “table stakes,” but data shows half of appointments are still booked by phone, often due to patients’ desire for clarity, especially on pricing and insurance [53:41].

• Patient Experience:

  • Need for hybrid approaches (AI + human) to address diverse patient needs and maximize capture rates.
  • “There is no substitute for human emotion or for human connection.” — Adam [54:32]

Practical Takeaways

• Use Data & Benchmarks Effectively:

  • Don’t get trapped comparing to benchmarks; “benchmark yourself against yourself.”

• Review Profit & Loss Regularly:

  • Your financials “are the lagging indicator in your business… if you’re not happy with the way the story has been written, now we have to go back and figure out what are the levers I can pull.” — Adam [43:31]

• Innovate with New Tools (AI, Automation):

  • Identify bottlenecks and leverage technology for efficiency and improved patient care.

Notable Quotes & Memorable Moments

• “The only thing that is constant in our lives is change. The only thing that’s consistent about the inconsistency is the inconsistency.” — Adam [03:53]
• “The more valuable you are to your business, the less valuable the business is to you.” — [28:20]
• “We can’t be accidentally successful in this business anymore.” — Adam [44:01]
• “Ownership in private practice is still a good investment… don’t brush off ownership… because you think that it’s unattainable or unaffordable.” — Adam [33:08]

Timestamps of Key Segments

• [00:00] – Introduction & overview of financial compression
• [07:05] – Defining “compression” and its forms
• [08:39] – Transaction trends: PE vs. OD
• [10:14] – Transaction multiples explained
• [17:24] – Exit options and importance of succession planning
• [27:39] – Valuation factors and business value
• [35:07] – Breaking down costs: COGs and HR
• [41:12] – Pricing, insurance constraints and strategies
• [45:18] – AI, technology, and internal efficiency
• [49:21] – Scheduling and patient experience innovations
• [53:41] – Data on phone vs. online bookings
• [54:32] – Maintaining the “human connection” in patient interactions

Episode Tone & Style

The conversation is candid, practical, and solution-focused. Both Eugene and Adam bring in real-world anecdotes, both from their own experience and what they're seeing among clients, keeping the discussion grounded, yet forward-looking. They balance concern about industry headwinds with optimism about the capacity for practices to adapt and thrive.

Final Thoughts

This episode provides a comprehensive look at the “squeeze” felt by optometric practices—covering economics, practice value, and operational realities—while equipping owners with an understanding of what’s driving these trends and how to proactively respond. Practitioners are encouraged to control what they can, embrace technological aids, and think both critically and creatively about business operations heading into the next wave of industry evolution.