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7 Questions to Ask Before Adding a New Service or Technology to Your Optometry Practice

Adding a new service can be a great way to grow your practice. It can create a new revenue stream, meet a patient need, or help you get more out of your team, technology, and clinical space.

But a new service does not automatically mean more profit.

I see practice owners get excited about new opportunities all the time. You go to a conference, see a new technology, hear what another doctor is doing, or start thinking about a service that could be great for your patients and your bottom line.

That’s the exciting part.

Then comes the business part.

Before you invest, step back from the excitement and look at the opportunity from several angles.

1. Can You Actually Provide This Service in Your State?

Start here.

Before you run projections, rearrange the schedule, or sign a purchase agreement, confirm that the service—and how you intend to use the equipment—is within the approved scope of practice in your state.

This gets missed more often than you might think.

You see a demonstration at a conference. Another doctor tells you how successful a new service has been. Or a sales rep takes you to a fancy dinner and shows you the shiny new thing you suddenly cannot imagine practicing without.

Before you sign anything, check.

Optometric scope of practice varies by state. What a colleague can do in another state may not be something you can do in yours. And just because someone can sell you the equipment does not mean you can use it for everything discussed during the sales process.

I have seen practices discover this after signing the purchase agreement. They cannot use their shiny new object for the services they intended—and they cannot get out of the contract.

Now it sits in a back room gathering dust while they continue making payments.

We call that the stupid tax.

Verify first. If there is any question, get the appropriate regulatory or legal guidance before you commit.

Once you know you can provide the service, then decide whether you should.

2. Is There Enough Patient Demand?

Start with the patients you already have.

Are they asking for a service you do not provide? Are you regularly referring patients elsewhere for something you could potentially offer in-house? Does your patient population suggest an unmet need?

That could point to dry eye treatment, myopia management, specialty contact lenses, aesthetics, additional diagnostic testing, or another service that fits your practice.

Do not add something just because everyone at the conference is talking about it.

Look at your practice.

Your demographics, referral patterns, current services, and utilization data can tell you whether the opportunity is really there.

The business question is simple:

Are enough of my patients likely to use this service to make it worthwhile?

3. Do the Numbers Work?

Revenue is not profit.

It sounds basic, but that distinction can disappear quickly when someone starts talking about how much revenue a new service could generate.

Look at the full cost:

  • Equipment and technology
  • Supplies and cost of goods
  • Staff training
  • Provider time
  • Additional payroll
  • Marketing
  • Financing and maintenance
  • Reimbursement and collections

Then work backward.

How many patients do you realistically need each month to cover those costs? How long will it take to reach that volume? What if adoption is slower than expected? What does the service contribute after the expenses are paid?

Run different scenarios and challenge your assumptions. Today’s analytical and AI-assisted research tools can help us evaluate opportunities faster and from more angles, but a great projection built on bad assumptions is still a bad projection.

The tools are better. Judgment still matters.

4. Do You Actually Have Room in the Schedule?

Sometimes demand is not the problem. Capacity is.

If your schedule is already full, adding another appointment type may simply move production around instead of creating growth.

Where will these patients go? How much doctor time will the service require? What can be appropriately delegated? Will these appointments displace another profitable service?

You may have patient demand and a great projected margin, but if delivering the service pushes out something more productive, the economics change.

A full schedule does not necessarily mean you are maximizing the schedule.

5. Can Your Team Support It?

A new service almost never affects only the doctor.

Your front desk has to explain and schedule it. Technicians may need training. Billing staff may have new coding or reimbursement requirements. Someone may need to handle additional patient education and follow-up.

If your team is already stretched thin, adding another responsibility can create problems elsewhere in the practice.

Look at your staffing, payroll, productivity, and workflow—but also pay attention to what is happening behind those numbers.

Do you have the right people in the right roles? Can parts of the new service be delegated? Will it create a new bottleneck?

Good decisions require both the data and an understanding of the people and processes behind it.

6. Does This Fit the Practice You Want to Build?

Not every good opportunity is a good opportunity for your practice.

Does it fit your patients, clinical interests, team, brand, and long-term direction?

Ask yourself:

Do I actually want this to become a meaningful part of my practice?

Practices get into trouble when they add something because another doctor is doing well with it, it was the hot topic at a meeting, or a vendor presented a compelling opportunity.

A year later, the equipment is sitting there and the service never really became part of the practice.

There are plenty of ways to grow. You do not need to pursue all of them.

7. Are You Getting Everything You Can From What You Already Have?

Before making another major investment, take a hard look at the practice you already have.

You may have:

  • Underutilized existing services
  • Inconsistent coding or CPT utilization
  • Low revenue per patient or exam
  • Scheduling inefficiencies
  • Staffing that does not align with patient volume
  • Cost-of-goods issues hurting margins
  • Technology or equipment you are not fully utilizing

Improving one of those areas may produce a better return—and require far less investment—than adding something new.

New is exciting. Better execution is not always as exciting, but it can be a lot more profitable.

Old-School Business Discipline. New-School Tools.

There is no single number, software program, AI prompt, or industry benchmark that can tell you whether adding a service is the right decision.

You have to put the pieces together.

Can you legally provide it? Do your patients want it? Do the economics work? Can your schedule and team support it? Does it fit where you want to take the practice? And is it a better opportunity than improving something you already have?

Those are classic business questions.

What has changed are the tools we can use to answer them.

At Williams Group, we combine decades of experience working with optometric practices and a team with broad business expertise with today’s analytical tools, industry research, video collaboration, and AI-augmented research and analysis.

Technology helps us work through more information, test assumptions, and examine a problem from different angles.

Experience helps us know what questions to ask, what doesn’t look right, and what might happen next.

We use both.

Make Your Next Investment With Better Information

If you are thinking about adding a service, buying a new piece of equipment, or deciding where your practice has the greatest opportunity for growth, start with the practice you already have.

A Practice Performance Analysis brings together the financial, operational, scheduling, staffing, CPT, cost-of-goods, and patient information that can help you see where the opportunities—and potential problems—really are.

Old-school business discipline. New-school tools.

Because the goal isn’t to chase the next opportunity.

It’s to make the right investment for your practice.

See if a Practice Performance Analysis is a fit for your practice or learn more about what a Practice Performance Analysis includes.

Bess Ogden

Director of Education and Training
Email Bess

 

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Most optometry practice owners did not enter the profession because they were passionate about reconciling bank accounts or categorizing expenses. 

Your attention is naturally focused on patient care, employees, scheduling, billing, inventory, and the daily demands of running a practice. Bookkeeping can feel like something that only matters at tax time—especially when collections are strong and there is enough money in the bank to cover expenses. 

But the numbers in your accounting system affect far more than your tax return. 

Clean books can help you claim legitimate deductions, avoid costly surprises, identify unnecessary expenses, manage cash flow, secure financing, and increase confidence in the value of your practice. Disorganized books can quietly cost you money year after year. 

 

What Does It Mean to Have “Clean Books”? 

Clean books are complete, accurate, current, and organized. 

That generally means: 

  • Business and personal transactions are kept separate 
  • Accounts are reconciled regularly 
  • Income and expenses are categorized correctly 
  • Payroll, loan, and owner balances are accurate 
  • Significant financial records are organized and accessible 
  • Financial reports reflect what is actually happening in the practice 

The goal is not simply to make the accounting software look tidy. The goal is to produce financial information that can be trusted. 

The IRS allows businesses to use a recordkeeping system that suits their needs, but the system must clearly show income and expenses. Good records also help owners monitor the business, prepare financial statements, track deductible expenses, and prepare tax returns. 

 

1. Clean Books Help You Capture Legitimate Deductions 

A deductible expense cannot help reduce your taxable income if it is forgotten or miscategorized. 

An optometry practice may incur expenses for: 

  • Clinical and office supplies 
  • Equipment and software 
  • Continuing education and professional dues 
  • Marketing 
  • Payroll and employee benefits 
  • Rent, utilities, and insurance 
  • Professional services 
  • Business travel and financing costs 
  • And more 

When expenses are recorded consistently and categorized correctly, your tax advisor has a clearer picture of what the practice may be able to deduct. 

Supporting records are particularly important for significant transactions such as large asset purchases, new loans, and asset sales. That does not mean every routine invoice or receipt needs to be attached directly to its corresponding transaction in your bookkeeping software. The important thing is to maintain organized records that can be located when needed. 

Business owners are responsible for maintaining appropriate records to support the income, expenses, deductions, and credits reported on their tax returns. 

Consider a practice credit card with dozens of transactions categorized as “miscellaneous.” Some may be deductible software fees, equipment purchases, staff training costs, or advertising expenses. Others may be personal transactions. 

Without clear descriptions and consistent categorization, your accountant may need to spend additional time researching transactions or take a more conservative approach when an expense cannot be adequately identified. 

Clean books make it easier to identify legitimate deductions without improperly treating personal expenses as business expenses. 

 

2. Clean Books Reduce Expensive Tax Surprises 

A large bank balance does not necessarily mean the practice has a large amount of spendable cash. 

Some of that money may already be needed for payroll taxes, loan payments, vendor invoices, retirement contributions, upcoming payroll, insurance renewals, or owner income taxes. 

If the books are several months behind, an owner may not know how much profit the practice has earned or how much should be reserved for taxes. That uncertainty can create an unpleasant surprise when quarterly estimates or annual tax returns are prepared. 

Current books allow your tax advisor to base tax planning on actual year-to-date performance rather than outdated reports or rough estimates. 

This becomes especially important when the practice experiences a major change, such as hiring an associate, purchasing equipment, paying off debt, adding a location, or experiencing significant growth. 

When your financial records reflect those changes promptly, you have more time to prepare for their financial and tax impact. 

 

3. Clean Books Reveal Where Money Is Leaking 

Not every financial problem is dramatic. 

Practices often lose money through small, recurring expenses that receive little attention, including: 

  • Duplicate or unused subscriptions 
  • Automatic renewals 
  • Excessive processing or late fees 
  • Increasing laboratory costs 
  • Unprofitable vendor arrangements 
  • Incorrect payroll deductions 
  • Insurance payments posted incorrectly 

A single unnecessary expense may not seem significant. But several small leaks repeated every month can meaningfully reduce annual profit. 

Clean books allow expenses to be compared across months and years. An unusual increase becomes easier to spot when transactions are categorized consistently. 

For example, suppose optical laboratory costs increase while optical collections remain relatively flat. That may be a signal to investigate vendor pricing, remake rates, product mix, staff discounts, or collection procedures. 

The accounting system will not tell you the entire story. It will tell you where to start asking questions. 

 

4. Clean Books Help You Understand Whether the Practice Is Truly Profitable 

Revenue and profit are not the same. 

A practice may produce strong collections while struggling to generate enough profit for the owner. Growing revenue can even conceal growing expenses. 

Reliable financial reports can help an owner determine whether: 

  • Payroll is growing faster than collections 
  • Services are producing adequate margins 
  • Marketing investments are paying off 
  • The practice can afford additional staff or equipment 
  • Owner compensation is sustainable 

An income statement shows the practice’s income and expenses over a period of time. A balance sheet shows its assets, liabilities, and equity at a particular point in time. Both depend on accurate underlying records. 

Clean reports allow owners to move beyond one basic question—“How much is in the bank?”—and ask better questions about profitability, efficiency, spending, and future decisions. 

 

5. Clean Books Make Budgeting More Useful 

A budget built from inaccurate historical numbers is simply an organized guess. 

Reliable bookkeeping gives you a realistic starting point for planning expenses such as staff compensation, rent increases, equipment replacements, technology upgrades, marketing, insurance, and loan payments. 

It can also help you anticipate seasonal changes. 

If collections typically slow during certain months, the practice can build a larger reserve beforehand. If annual expenses tend to cluster in one quarter, those costs can be planned for rather than unexpectedly placed on a credit card or line of credit. 

Clean historical data cannot guarantee that a forecast will be correct, but it makes the forecast far more useful. 

 

6. Clean Books Can Reduce Accounting and Cleanup Costs 

Professional accounting services cost money, but disorganized accounting can cost more. 

When records are incomplete, your accountant or bookkeeper may need to spend additional time: 

  • Researching unidentified transactions 
  • Separating personal and business expenses 
  • Reconciling old accounts 
  • Correcting payroll, loan, or prior-period errors 
  • Requesting additional information from the owner 

The cost is not limited to professional fees. 

The owner and staff may also lose hours searching through emails, paper files, online accounts, and old records. That is time that could have been spent seeing patients, training employees, improving collections, or planning for growth. 

Keeping the books current is usually easier than reconstructing an entire year shortly before a tax deadline. 

 

7. Clean Books Help Protect You During an IRS Examination 

Good bookkeeping does not guarantee that a tax return will never be examined. It does make it easier to respond if the IRS requests information. 

Business owners are responsible for substantiating certain expenses, deductions, and other amounts reported on their tax returns. Depending on the transaction, relevant records may include receipts, invoices, bills, account statements, contracts, canceled checks, or other documentation. 

This does not mean every routine receipt or invoice must be attached to a transaction within your bookkeeping software. The goal is to maintain appropriate records and make sure important documentation can be located when needed. 

When the books are organized, your tax advisor can trace reported amounts back to the practice’s financial activity more efficiently. 

Clean books create a financial trail that helps show that the numbers reported on the tax return came from actual business activity rather than estimates made at the end of the year. 

 

8. Clean Books Improve Your Ability to Borrow Money 

An optometry practice may need financing to purchase a practice or building, add an exam lane, buy diagnostic equipment, renovate the office, refinance debt, or fund expansion. 

Lenders want to understand whether the practice can repay that debt. Their evaluation may include tax returns, income statements, balance sheets, cash-flow information, and other financial records. 

If your books are several months behind—or if your financial statements do not match other records—you may face delays, additional questions, or difficulty demonstrating the practice’s financial strength. 

Clean books will not turn an unprofitable practice into a strong loan applicant. They allow a financially healthy practice to demonstrate its strength more clearly. 

 

9. Clean Books Can Support a Stronger Practice Valuation 

A buyer is not purchasing your collections alone. 

The buyer is evaluating the future economic benefit of owning the practice. To do that, the buyer and their advisors need to understand the practice’s revenue, expenses, cash flow, assets, debts, and owner-related adjustments. 

Disorganized books create uncertainty. 

A prospective buyer may question whether expenses are complete, liabilities are missing, reported profit can be verified, or internal financial reports match the practice’s tax returns. 

Uncertainty creates risk. Buyers, lenders, and advisors may respond by asking more questions, extending due diligence, reducing their valuation, or becoming hesitant about the transaction. 

A practice owner who plans to sell “someday” should not wait until the year before retirement to clean up the books. 

Several years of consistent, credible financial records can make it easier to demonstrate trends, explain unusual expenses, support adjustments, and show the true earning capacity of the practice. 

 

10. Clean Books Help Future Owners Make Safer Buying Decisions 

Clean bookkeeping is just as important for someone preparing to purchase an optometry practice. 

A future owner should not rely solely on the seller’s reported revenue or asking price. The buyer needs to understand the practice’s operating expenses, employee compensation, debt, owner compensation, recurring costs, and actual cash flow. 

Accurate books make it easier to determine whether the practice can support the acquisition loan, provide the buyer with a reasonable income, and fund necessary improvements. 

Messy books do not always mean the practice is a bad investment. They do mean the buyer may need more extensive due diligence before relying on the reported financial performance. 

 

Warning Signs That Your Books Need Attention 

Your bookkeeping may need attention if: 

  • Accounts have not been reconciled in several months 
  • Loan or payroll balances do not match outside records 
  • There is a large “miscellaneous expense” category 
  • Personal purchases regularly appear in business accounts 
  • Equipment or owner transactions are categorized incorrectly 
  • The practice cannot produce current financial statements 
  • Financial reports change significantly after tax preparation 
  • The owner does not understand what the reports are showing 

These issues do not necessarily indicate misconduct or financial distress. They indicate that the reports may not be reliable enough for decision-making. 

 

How to Keep Your Practice’s Books Clean 

Good bookkeeping does not require the owner to personally enter every transaction. It requires a consistent process. 

 

  • Separate Business and Personal Finances: Use dedicated business bank and credit card accounts. Personal expenses should not routinely be paid through the practice. Separating the accounts reduces confusion, makes reconciliation easier, and creates a clearer record of business activity.
  • Reconcile Accounts Monthly: Bank accounts, credit cards, loans, and payment-processing accounts should be compared with outside statements regularly. Reconciliation helps identify missing, duplicated, or incorrectly recorded transactions. 
  • Use Meaningful Categories: Your chart of accounts should reflect how an optometry practice operates. Expenses should be categorized with enough detail to support tax preparation and management decisions without creating hundreds of categories that no one can use consistently. 
  • Keep Important Supporting Records Organized: Maintain organized records for significant transactions such as large asset purchases, new loans, asset sales, and other financial events where additional documentation may be important. This does not require attaching every invoice or receipt to every transaction in your bookkeeping software. Instead, establish a system that makes important records easy to locate when needed. 
  • Review Financial Reports Regularly: Review the income statement, balance sheet, and other important reports throughout the year—not only when your accountant requests them. Ask questions when something appears unusual. 
  • Close the Books Promptly: Create a monthly close process with clear responsibilities and deadlines. This may include reconciling accounts, reviewing uncategorized transactions, confirming payroll and loan balances, and preparing financial reports. 
  • Work With Professionals Who Understand Practice Operations: Healthcare practices have financial issues that may not appear in every small business, including insurance receivables, optical inventory, associate compensation, clinical equipment, owner-doctor production, and medical billing. A professional who understands optometry is better positioned to recognize when the numbers do not align with the way the practice actually operates. 

 

The Bottom Line 

Clean books do not directly create revenue. They help you keep more of the money your practice earns. 

Accurate financial records can help you capture legitimate deductions, prepare for taxes, control expenses, manage cash flow, reduce cleanup costs, secure financing, make stronger decisions, and prepare for a future transition. 

They also give you something every practice owner needs: confidence. 

You should be able to look at your financial reports and understand whether the practice is improving, where the money is going, and what decisions you can afford to make next. 

Your books should not simply satisfy a filing requirement. They should help you run a stronger, more profitable, and more valuable optometry practice. 

This article is intended for general educational purposes and does not constitute tax, accounting, legal, or financial advice. Consult qualified professionals regarding your practice’s specific circumstances. 

 

 

 

Get optometry-specific support to keep your books clean and your practice finances on track by scheduling a call with Patrick McReynolds or learn more about our tax and accounting services, specific for ODs, on our website.

Patrick McReynolds

Operations Manager

Email Patrick

 

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As an optometry practice owner, you may have heard that electing to be taxed as an S corporation can reduce your taxes. You may even have been told that every successful practice owner should make the election. 

The reality is more nuanced. 

 

An S corporation can provide meaningful tax advantages for the right practice. However, it also creates payroll requirements, additional tax filings, recordkeeping responsibilities, and rules governing how the owner is paid. Whether it makes sense depends less on the practice’s revenue and more on its profitability, the owner’s role, and the amount of income remaining after paying the owner a reasonable salary. 

 

Before making the election, practice owners should understand both the potential savings and the added responsibilities. 

 

What Is an S Corporation?

An S corporation is a federal tax classification. It is not a new type of business entity. 

A corporation—or an eligible limited liability company—can elect to be taxed as an S corporation by filing Form 2553 with the IRS. To qualify, the business must meet several requirements, including being a domestic corporation, having no more than 100 shareholders, having only allowable shareholders, and having only one class of stock. All shareholders must consent to the election. 

 

S corporations generally do not pay federal income tax at the corporate level. Instead, the practice’s income, losses, deductions, and credits pass through to the shareholders and are reported on their owner’s individual tax returns. 

 

This pass-through treatment is one reason S corporations are popular among privately owned healthcare practices. 

 

Why Do Optometry Practice Owners Consider an S Corporation?

The primary potential advantage is the way an owner’s compensation can be divided between wages and shareholder distributions and the related self-employment tax savings. 

 

An optometrist who works in an S corporation is generally both a shareholder and an employee. The practice pays the owner a W-2 salary for the work the owner performs. That salary is subject to applicable payroll taxes. 

 

If the practice earns more than the owner’s reasonable compensation and its other expenses, some of the remaining profit may be paid to the owner as a shareholder distribution. Non-wage distributions are not subject to employment taxes, although the underlying pass-through income remains subject to federal and potentially state income taxes. 

 

Consider a simplified example: 

An optometry practice earns $250,000 before paying its owner. After evaluating the owner’s clinical duties, administrative responsibilities, experience, location, and other relevant factors, the practice pays the owner a $160,000 salary. 

 

The remaining $90,000 is treated as pass-through business income and distributed to the owner rather than being paid entirely as wages. 

 

The potential savings come from the difference in employment-tax treatment. The remaining income does not become tax-free. 

 

This example is intentionally simplified. Actual results depend on payroll-tax limits, deductions, retirement contributions, state taxes, the owner’s other income, and several additional factors. 

 

The Reasonable Compensation Rule Is Critical

Practice owners cannot simply choose an artificially low salary and take the rest of the practice’s earnings as distributions. 

 

The IRS requires an S corporation to pay a shareholder-employee reasonable compensation for the services that person provides. The IRS can reclassify distributions as wages when it determines that an owner was underpaid. The reclassified amount may then be subject to payroll taxes, penalties, and interest. 

 

This issue is especially important for optometry practice owners. 

In many practices, the owner personally generates a substantial share of the revenue by examining patients, prescribing treatment, performing medical eye care, and overseeing the clinical team. The owner may also manage employees, evaluate equipment purchases, review financial performance, and make strategic decisions. 

 

The IRS indicates that revenue generated by a shareholder’s personal services generally supports wage treatment. Revenue generated through non-owner employees, equipment, and invested capital may provide greater support for non-wage distributions. 

 

That does not mean every dollar an owner produces must be paid as salary. It does mean that an owner-doctor who generates most of the practice’s revenue usually needs a defensible salary that reflects both clinical and managerial responsibilities. 

 

A reasonable-compensation analysis may consider: 

  • The owner’s duties and responsibilities 
  • Hours worked in the practice 
  • Clinical production 
  • Management and administrative work 
  • Experience and training 
  • Compensation paid to comparable optometrists 
  • Local employment-market conditions 
  • The amount of revenue generated by associates, staff, equipment, and other practice assets 

The practice should document how the salary was determined rather than selecting a number based only on the desired tax savings. 

 

Other Potential Benefits of an S Corporation

Pass-Through Taxation 

Because income generally passes through to the shareholders, an S corporation can avoid the traditional double taxation that may occur when a C corporation pays corporate income tax and then distributes taxable dividends to its owners. 

 

A More Structured Owner-Pay System 

Operating as an S corporation requires the owner to distinguish among salary, distributions, expense reimbursements, and personal withdrawals. 

 

Although this creates more work, it can also encourage better financial habits. Owners may gain a clearer understanding of what they earn as practicing optometrists versus what they earn from owning a profitable business. 

 

Potential Tax Planning Flexibility

An S corporation may create opportunities to coordinate owner compensation with retirement planning, health insurance, estimated taxes, equipment purchases, and other business decisions. 

 

However, these areas are closely connected. Changing the owner’s salary can affect payroll taxes, retirement-plan contributions, the qualified business income deduction, and personal cash flow. 

 

The decision should therefore be modeled as a complete tax strategy—not treated as a single tax-saving tactic. 

 

What Are the Drawbacks?

Additional Payroll and Filing Requirements

An owner-employee must generally be placed on payroll. The practice may need to: 

  • Calculate and deposit payroll taxes 
  • File quarterly and annual payroll returns 
  • Issue a W-2 
  • Maintain payroll records 
  • File a separate Form 1120-S tax return 
  • Provide Schedule K-1 information to each shareholder 
  • Track owner distributions and shareholder basis 

 

For a calendar-year business, Form 1120-S is generally due on the 15th day of the third month after the end of the tax year. Form 2553 generally must be filed no later than two months and 15 days after the beginning of the tax year in which the election is intended to take effect, although late-election relief is often available. 

 

Accounting, payroll, and tax-preparation costs can reduce or eliminate the expected savings for practices with modest profits. 

 

You May Owe Tax Without Receiving the Cash

Shareholders may owe income tax on their allocated share of S corporation income even when the practice does not distribute all of that income to them. 

 

For example, the practice may retain cash to purchase equipment, cover operating expenses, repay debt, or build reserves. The owner may still need personal funds to pay the tax associated with the retained income. 

 

This makes cash-flow planning and a clear distribution policy important, particularly when a practice has multiple owners. 

 

Shareholder Basis Must Be Tracked

An S corporation shareholder’s stock and debt basis changes as the practice earns income, incurs losses, makes distributions, and receives additional capital. 

 

Basis affects whether a distribution is taxable and whether an owner can deduct certain losses. The IRS places the responsibility for tracking basis on the shareholder, not the corporation. 

 

Poor basis records can create problems years later, especially during a practice sale, ownership transition, audit, or large distribution. 

 

Distributions Do Not Support Retirement Contributions

S corporation distributions are not considered earned compensation for retirement-plan purposes. Owner contributions and employer contributions to a 401(k) are generally based on W-2 compensation, not shareholder distributions. 

 

Paying a lower salary may reduce payroll taxes, but it may also reduce the amount the owner can contribute to a retirement plan. That tradeoff should be included in the analysis. 

 

The Qualified Business Income Deduction Can Complicate the Decision

The qualified business income deduction generally allows eligible taxpayers to deduct up to 20% of qualified business income and was made permanent under legislation enacted in 2025. 

 

However, reasonable compensation paid by an S corporation is not included in QBI. In addition, healthcare services are treated as a specified service trade or business, which can limit or eliminate the deduction for owners whose taxable income exceeds the applicable thresholds. 

 

Because optometry is a healthcare profession, practice owners should evaluate how an S corporation election and the proposed owner salary may affect the QBI deduction rather than assuming the election will always lower the total tax bill. 

 

State Treatment Varies

Not every state follows the federal S corporation treatment in the same way. A state may impose franchise taxes, minimum taxes, entity-level taxes, separate elections, or additional filing requirements. 

A federal tax benefit may therefore be reduced by state-level costs. 

 

When Might an S Corporation Make Sense?

An S corporation may be worth considering when: 

  • The practice consistently earns more than a defensible market-rate salary for the owner 
  • The expected tax savings exceed the additional payroll, accounting, and filing costs 
  • The owner is prepared to run payroll and maintain accurate records 
  • The practice has stable cash flow 
  • The ownership structure satisfies S corporation requirements 
  • The election fits the owner’s retirement, benefit, and long-term transition plans 

There is no universal profit threshold at which an S corporation automatically becomes worthwhile. 

The relevant number is the practice’s expected profit after paying reasonable owner compensation—not its collections, production, or gross revenue. 

 

When Might It Not Be the Best Choice?

An S corporation may provide limited benefit when: 

  • The practice is new and has little or no profit 
  • Nearly all of the practice’s profit represents reasonable compensation for the owner’s work 
  • The owner does not want the added payroll and compliance responsibilities 
  • The additional professional fees would consume most of the projected savings 
  • The practice expects to add an owner who is not an eligible S corporation shareholder 
  • The owners need an economic arrangement that does not fit the S corporation’s ownership restrictions 
  • State taxes or fees significantly reduce the federal benefit 

A new practice owner does not necessarily need to make an S corporation election immediately. 

 

For a startup, the first priority may be reaching sustainable profitability. For someone purchasing an established practice, the projected cash flow may make it appropriate to evaluate the election as part of the acquisition and entity-formation process. 

 

Questions to Ask Before Making the Election

Before moving forward, ask your tax advisor: 

  1. What will the practice’s annual profit be before owner compensation? 
  1. What salary would reasonably reflect my clinical and administrative work? 
  1. How much profit would remain after paying that salary? 
  1. What are the projected payroll-tax savings? 
  1. What additional payroll, tax-preparation, and state costs will the practice incur? 
  1. How will the election affect my QBI deduction? 
  1. How will my salary affect retirement contributions? 
  1. How should health insurance and other owner benefits be handled? 
  1. What records should we maintain to support reasonable compensation? 
  1. How could the structure affect a future associate buy-in, partner addition, or practice sale? 

Your advisor should be able to show you a comparison of the projected total taxes and expenses under each available structure. A recommendation based only on a broad rule of thumb is not enough. 

 

The Bottom Line

An S corporation can be an effective tax-planning tool for a profitable optometry practice, but it is not automatically the right answer for every owner. 

 

The strongest candidates are practices producing consistent profit beyond what would reasonably be paid to the owner for clinical and management services. Even then, the potential payroll-tax savings must be weighed against additional compliance costs, retirement-plan effects, QBI limitations, state taxes, and long-term ownership goals. 

 

Do not make the election simply because another practice owner did. 

 

Review your actual numbers, establish a defensible salary, and work with an advisor who understands the financial realities of private optometry practice. The right structure should support both your current tax strategy and the future of your practice. 

 

This article is intended for general educational purposes and does not constitute tax, legal, or financial advice. Tax laws and individual circumstances vary. Consult a qualified advisor before selecting or changing your business’s tax classification. 

 

Get optometry-specific financial support by scheduling a call with Patrick McReynolds or learn more about our tax and accounting services, specific for ODs, on our website.

Patrick McReynolds

Operations Manager

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For many independent optometrists, selling a practice isn’t just a financial transaction.

It’s personal.

Your practice represents decades of early mornings, late nights, relationships with generations of families, and a commitment to providing exceptional eye care. When it’s time to retire, most practice owners don’t simply want to sell. They want to know that everything they’ve built will continue to thrive.

That’s why mentorship sales are becoming one of the most rewarding ways to transition an optometry practice.

It’s About More Than a Purchase Price 

Of course, receiving fair value for your practice is important. You deserve to be compensated for years of hard work.

But many sellers tell us that what matters just as much is knowing:

  • Their patients will continue receiving excellent care.
  • Their employees will have a secure future.
  • Their reputation in the community will live on.
  • The practice they’ve built won’t lose its identity.

A mentorship transition makes all of those goals much more achievable.

Passing the Torch, Not Just the Keys 

Imagine a new doctor walking into your practice.

They’re excited, motivated, and eager to own a practice of their own.

But like every new owner, they have questions.

How do you manage staff?

Which marketing strategies have worked?

Who are the key vendors?

What makes your patients so loyal?

Where are the hidden opportunities for growth?

As the selling doctor, you’re uniquely qualified to answer those questions.

During a mentorship period, you become more than the previous owner. You become a trusted advisor.

Instead of handing over the keys and walking away, you’re passing along decades of knowledge that can’t be found in a procedure manual.

Your Legacy Continues 

Every practice has a personality.

Maybe it’s the way your staff greets patients by name.

Maybe it’s your commitment to pediatric care.

Maybe it’s the culture you’ve intentionally built over the last 30 years.

Those things have tremendous value.

A mentorship transition gives the next doctor time to understand what makes your practice special before making changes.

That continuity creates confidence for employees, reassurance for patients, and a smoother transition for everyone involved.

Your legacy doesn’t end on closing day.

It continues through the doctor you’ve helped prepare.

The New Owner Starts Stronger 

Buying a practice can be exciting, but it can also feel overwhelming.

Even experienced clinicians suddenly become responsible for payroll, inventory, staffing, vendor relationships, insurance contracts, and business decisions.

Having the previous owner available for guidance dramatically shortens the learning curve.

The new owner gains confidence faster because they’re learning from someone who has already solved many of the same challenges.

That often leads to:

  • Greater employee retention
  • Better patient retention
  • Faster operational success
  • Increased confidence as a business owner

Everyone wins.

Why Mentorship Sales Work So Well 

At Williams Group, we’ve seen firsthand how mentorship transitions create successful outcomes for both buyers and sellers.

The seller gains peace of mind knowing their life’s work is in capable hands.

The buyer gains confidence from having an experienced mentor during one of the biggest milestones of their career.

Patients experience continuity.

Staff experience stability.

The practice continues to grow.

That’s a powerful combination.

Williams Group Helps Make It Happen 

Finding the right buyer is only the beginning.

A successful transition requires thoughtful planning, careful communication, and a shared vision for the future.

At Williams Group, we help facilitate mentorship transitions by:

  • Matching sellers with buyers who fit their culture and goals.
  • Structuring transition timelines that benefit both parties.
  • Coordinating financing and negotiations.
  • Providing financial analysis and tax planning.
  • Guiding the entire process from introduction through closing.
  • Helping create a mentorship plan that supports long-term success.

We don’t just help practices change ownership.

We help practices continue their story.

Your Legacy Deserves to Live On 

Retirement doesn’t have to mean saying goodbye to everything you’ve built.

With the right buyer and the right transition plan, your practice can continue serving your community for years to come while giving a new doctor the opportunity to fulfill their dream of ownership.

That’s more than a sale.

That’s a legacy.

If you’re beginning to think about retirement, let’s start the conversation. Schedule a call today with Brad Rourke, CPA, ABV.

Brad Rourke, CPA, ABV

President + CEO
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One of my favorite parts of consulting is when we can answer big questions with data instead of opinions.

I recently completed a CPT Practice Potential Analysis for a practice owner who simply wanted to know, “Are we maximizing the professional services we’re already providing?”

 

The doctor wasn’t looking to overhaul the practice or dramatically increase patient volume. Instead, they wanted an objective review of whether their fees, coding patterns, and service mix were aligned with the needs of both their patients and their local market.

That’s exactly what this project is designed to answer.

 

Unlike a broad operational consulting engagement, a CPT Practice Potential Analysis focuses on one specific area of profitability: your professional services.

 

We analyze:

  • Your most frequently billed CPT codes
  • Current usual and customary fees
  • Patient demographics
  • Community demographics
  • Actual utilization patterns
  • Medicare fee comparisons
  • Opportunities to appropriately adjust fees or expand services you already provide

 

Sometimes the analysis uncovers significant revenue opportunities. Other times, it provides something equally valuable: confidence that your fees and coding are already in a strong position.

 

In this particular practice, the findings were reassuring. The fee schedule was generally well aligned with the market, coding patterns were appropriate, and there were only a handful of modest opportunities worth considering. Rather than recommending sweeping changes, our discussion centered on a few targeted fee adjustments, continued annual fee reviews, and evaluating whether additional specialty services would be a good fit for the practice’s patient population.

 

That’s a successful outcome.

 

Sometimes the Best Recommendation Isn’t Another Analysis

Not every practice needs a CPT Practice Potential Analysis.

In another recent consultation, a doctor was preparing for a practice transition within the next three to five years. After discussing the practice, it became clear that professional fees weren’t the biggest opportunity.

Instead, the greatest potential return would come from tightening operational systems—controlling cost of goods, improving insurance and billing procedures, and strengthening overall profitability before a future sale.

In that case, we recommended targeted hourly consulting rather than another formal analysis.

Why?

Because our goal isn’t to fit every practice into the same consulting program. Our goal is to help you invest your consulting dollars where they’ll generate the greatest return.

 

Is a CPT Practice Potential Analysis Right for You?

This project is a great fit if you’ve ever wondered:

  • Are our professional fees keeping pace with today’s market?
  • Are we underutilizing certain CPT services?
  • Are we providing the care our current patient base—and the surrounding community demographics—are asking for?
  • Are there opportunities to increase profitability without simply seeing more patients?
  • Are we coding consistently and taking advantage of services we’re already equipped to provide?

 

If those questions sound familiar, we’d love to help.

 

 

CPT Practice Potential Analysis

$1,450 if you provide the requested reports from your practice management system.

$1,900 if you’d prefer a Williams Group consultant to meet with you via screen share and gather the reports together.

 

Your completed analysis includes a customized review of your CPT utilization, fee schedule, patient and community demographics, and professional service opportunities, along with practical recommendations tailored specifically to your practice.

 

Sometimes the biggest value comes from identifying new opportunities. Other times, it’s the confidence that you’re already well positioned and can focus your energy elsewhere.

 

Either way, you’ll know your next step is based on data—not guesswork.

See if the CPT Analysis is a fit for your practice or learn more about a CPT Practice Performance Analysis.

Bess Ogden

Director of Education and Training
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Proper expense categorization does more than keep the books organized. It affects how accurately a practice owner can evaluate profitability, monitor overhead, plan for taxes, manage debt, and understand where the practice’s cash is going.

When transactions are placed in the wrong categories, financial statements may still balance, but they can present a misleading picture of the practice. Loan principal may be mistaken for an expense, payroll costs may be recorded twice, or owner payments may be mixed with staff compensation. Accurate categorization turns financial statements into useful management tools rather than reports reviewed only at tax time.

The WGF Reporting Approach

To give practice owners fuller financial insight, WGF accountants prepare management reports that show material cash-based activity in one place.

Items such as loan principal payments, owner distributions, personal transactions, and other balance-sheet activity may be included in clearly labeled sections of the management report. This allows the doctor to see where the practice’s cash went without having to compare the profit and loss statement with several balance-sheet accounts.

At year-end, those transactions are reorganized according to their proper accounting and tax treatment.

This approach provides the best of both worlds: a practical monthly view of cash activity and accurate year-end financial statements for tax preparation.

The important distinction is that a transaction can affect cash without being an operating expense. A loan principal payment, for example, reduces available cash but does not reduce accounting profit.

Separate Operating and Non-Operating Activity

A well-organized financial statement should clearly separate the practice’s core operating expenses from associate doctor compensation, financing activity, ownership activity, and other transactions shown below operating income.

Operating expenses generally include:

  • Staff compensation
  • Payroll taxes and staff benefits
  • Rent and occupancy costs
  • Clinical, optical, and laboratory supplies
  • Software and technology
  • Marketing
  • Insurance
  • Professional fees
  • Office and administrative expenses

Items that should be separated or shown below operating income may include:

  • Associate doctor compensation
  • Owner doctor compensation and distributions
  • Loan interest
  • Loan principal payments
  • Personal expenses paid through the practice
  • Income tax payments
  • Equipment purchases
  • Gains or losses from equipment sales
  • Unusual or one-time activity

Associate doctor compensation is a recurring cost of providing patient care, but presenting it below operating income gives the practice owner a clearer view of the performance of the practice’s core operations before doctor compensation.

This structure allows the owner to evaluate operating income before associate and owner doctor compensation, debt repayment, owner withdrawals, and other activity that may otherwise obscure the performance of the practice’s day-to-day operations.

Divide Loan Payments Between Interest and Principal

Recording an entire loan payment as an expense is a common bookkeeping error.

A loan payment normally includes:

  • Interest, which is the cost of borrowing and is generally recorded on the profit and loss statement
  • Principal, which reduces the loan balance and belongs on the balance sheet

For example, if a $4,000 payment includes $700 of interest and $3,300 of principal, only the $700 should normally be recorded as interest expense. The remaining $3,300 reduces the outstanding liability.

Recording the full payment as an expense understates profit and leaves the loan balance inaccurate.

The full payment may still appear in a WGF management report to show the effect on cash, but the principal and interest should remain separately identified.

Separate Payroll Into Three Categories

Payroll is often one of the largest costs within a practice, yet many financial statements group all compensation into one general payroll category.

For better visibility, compensation should be divided into at least three groups.

Staff Compensation

This includes wages paid to technicians, opticians, front-desk employees, billing staff, administrators, and other support team members.

Separating staff wages allows the owner to evaluate staffing costs compared with revenue, patient volume, and operating hours. Staff compensation should generally remain within the operating expense section of the financial statements.

Associate Doctor Compensation

Associate doctor compensation should be kept separate from staff payroll and presented below operating income for management-reporting purposes.

This allows associate compensation to be compared with doctor production, collections, scheduled hours, and patient volume without distorting the practice’s staff compensation or core operating expenses.

When associate and staff compensation are combined, it becomes difficult to determine what is driving payroll changes or whether the practice’s support staffing is operating efficiently.

Owner Doctor Compensation

Owner compensation should also remain separate. Depending on the practice’s entity structure, owner payments may include wages, draws, distributions, guaranteed payments, reimbursements, or benefits.

Combining owner payments with staff or associate compensation can distort staffing costs, doctor compensation, and operating profitability.

Record Equipment Sales and Trade-Ins Correctly

When a practice sells or trades in equipment, the transaction involves more than recording the replacement purchase.

The accounting records may need to reflect:

  • The original cost of the equipment
  • Accumulated depreciation
  • The remaining book or tax basis
  • Cash received
  • The assigned trade-in value
  • Any related loan payoff
  • The resulting gain or loss

A taxable gain can occur even when equipment is sold for less than its original purchase price because depreciation may have reduced its tax basis.

Failing to record the disposal correctly can leave old equipment on the balance sheet and cause the related gain or loss to be omitted from tax records.

Practice owners should provide their accountant with purchase records, depreciation schedules, trade-in documents, sales agreements, and loan payoff information.

Record Liability Payments on the Balance Sheet

Payments toward an existing liability should generally reduce that liability rather than create another expense.

This issue commonly appears with:

  • Payroll taxes
  • Employee tax withholdings
  • Health insurance
  • Retirement contributions
  • Credit card payments
  • Sales tax
  • Loans

For example, a payroll system may record payroll tax expense and create a payroll tax liability when payroll is processed. When the practice later sends the payment, it should reduce the liability. Recording the payment as another expense would count the same cost twice.

Credit card payments work the same way. The individual purchases are categorized when they occur. Paying the credit card later reduces the balance owed; it does not create another expense.

Before categorizing a payment, determine whether the underlying expense has already been recorded and whether the payment is simply satisfying an existing liability.

Keep Personal and Business Activity Separate

Personal expenses are not ordinary practice expenses and should not be hidden within office supplies, travel, meals, repairs, or other business categories.

When a personal purchase is paid through the practice, it should be recorded as an owner draw, distribution, shareholder activity, receivable, or another appropriate balance-sheet category based on the entity structure. The transaction should not be deleted because cash still left the business. It simply needs to be classified correctly. Keeping separate personal and business accounts remains the best practice. It simplifies bookkeeping, reduces questions at tax time, and makes financial statements easier to interpret.

Reconcile Bank and Credit Card Accounts Monthly

Accurate categorization cannot be confirmed until every bank and credit card account has been reconciled.

A complete monthly reconciliation should:

  • Match deposits and withdrawals to the statement
  • Identify missing or duplicate transactions
  • Record bank fees and interest
  • Review credit card charges
  • Confirm payments were applied to the correct liabilities
  • Investigate old outstanding checks or deposits
  • Resolve uncategorized transactions
  • Eliminate unexplained reconciliation differences

There should be no unresolved difference when the process is complete. Unreconciled accounts can hide duplicate expenses, missing deposits, unauthorized charges, deleted transactions, and payments posted to the wrong accounts.

Review the Financial Statements Monthly

Practice owners should review their financial statements regularly rather than waiting until tax season.

A monthly review should include:

  • Revenue and operating income
  • Staff compensation
  • Associate and owner doctor compensation
  • Occupancy costs
  • Supply and laboratory expenses
  • Marketing
  • Debt payments
  • Equipment purchases
  • Owner payments
  • Personal activity
  • Uncategorized expenses
  • Unusual month-to-month changes

Unexpected increases should be investigated before the accounting period is considered complete.

Common Warning Signs

Bookkeeping may need additional review when financial statements show:

  • Large miscellaneous or uncategorized balances
  • Entire loan payments recorded as expenses
  • Credit card payments on the profit and loss statement
  • Payroll tax payments recorded twice
  • Associate doctor compensation combined with staff payroll
  • Owner distributions included in payroll
  • Personal transactions included in operating expenses
  • Equipment purchases recorded as routine supplies
  • Sold equipment still listed as an asset
  • Negative liability balances
  • Old unreconciled transactions

These issues do not always indicate a major problem, but they should be explained and corrected.

The Bottom Line

Expense categorization directly affects how well a practice owner can understand profitability, staffing costs, doctor compensation, debt obligations, owner compensation, cash use, and potential tax issues.

The strongest reporting systems provide both visibility and accuracy. They allow owners to see where their cash is going while preserving the proper distinction between operating expenses, doctor compensation, assets, liabilities, financing activity, and owner transactions.

When accounts are categorized consistently, compensation is separated into meaningful groups, liabilities are handled correctly, equipment activity is recorded properly, and bank accounts are reconciled monthly, financial statements become practical tools for making better business decisions.

This article provides general educational information and is not a substitute for tax or accounting advice based on a practice’s specific circumstances.

Get optometry-specific financial support by scheduling a call with Patrick McReynolds or learn more about our bookkeeping services, specific for ODs, on our website.

Patrick McReynolds

Operations Manager

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Running a successful optometry practice requires more than providing excellent patient care — understanding the financial engine beneath the surface matters just as much. Many practice owners are unknowingly undercharging, underutilizing their procedure codes, and missing out on significant medical revenue. A Practice Performance Analysis is designed to address all three. 

 

An Objective Look  

A Practice Performance Analysis offers an objective, data-driven evaluation of your practice’s financial and operational health and uncovers the opportunities most practices never see coming.  It integrates data from your bookkeeping financials, practice management system, and payor reports to give practice owners a clear view of where they stand and where improvement is possible. The evaluation delivers actionable recommendations across three core areas: CPT procedure code utilization, medical optometry services expansion, patient and community demographics optimization. 

 

Are you coding — and charging — correctly? 

CPT procedure code utilization is one of the most overlooked areas of practice performance. Many practices underutilize their CPT procedure codes and their fee schedule pricing. A thorough analysis benchmarks fees against Medicare CMS standards and evaluates exam ratios — from comprehensive to problem-focused — to ensure coding reflects the full scope of care being delivered. Many practices find they’ve been leaving money on the table simply by not optimizing how patient encounters are documented. Small adjustments here can have an outsized effect on monthly revenue without affecting the quality of care. 

 

Medical Optometry: Where the Real Growth Lives 

Practices focused primarily on routine eye exams and optical sales often have an untapped revenue stream available to them: medical optometry. 

Conditions like glaucoma, dry eye disease, diabetic retinopathy, and macular degeneration fall within the scope of a well-equipped optometry practice, and, unlike revenue from optical sales, revenue from medical services carry little to no cost of goods sold. The result is higher revenue per patient encounters, better margins, higher net operating incomes and stronger long-term patient relationships. 

 

The Key: Your Patient Demographics 

Patient demographics and financial performance are closely connected. Understanding the age-related needs of a patient population helps align a practice’s service mix with actual demand. An older patient base, for example, points directly toward expanded medical optometry services, a shift that benefits both the practice financially and patients receiving more targeted care. 

 

Better Information Means Better Revenue 

The practices that thrive long-term understand their financial data, patient demographics, code appropriately, and identify growth opportunities.  A Practice Performance Analysis provides the foundation to do that — combining financial data, operational benchmarks, and patient demographics into a single evaluation that supports both profitability and high-quality patient care. 

Explore how a Practice Performance Analysis can uncover missed revenue opportunities, or schedule a call with Brad Rourke, CPA, ABV to learn more.

Tammi Sufficool, MBA

President Practice Start-Ups / New Business Advisor

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Let’s be honest about something most optometry career conversations avoid: California is expensive, and it’s getting more so. 

 

According to the U.S. Bureau of Economic Analysis, California’s overall price level was about 11% higher than the national average in 2024, giving the state the highest regional price parity of any state in the nation. Housing is even more extreme: BEA data shows California had the highest housing-rent price level among states in 2024, with rents about 54% above the national price level. (U.S. Bureau of Economic Analysis, BEA 2024 Real PCE/RPP Release) 

 

For California ODs employed in corporate or associate positions, that math creates a quiet but serious problem. Salaries may be high compared to many other states, but are they rising fast enough? More importantly, is a salary alone the right vehicle for building financial security in one of the most expensive states in the country? 

 

The data suggests salary alone may not be enough. And for ODs willing to look at the full picture, practice ownership makes a compelling case, not just as a career milestone but as a financial strategy. 

 

The Salary Trap: When Higher Pay Still Isn’t Enough 

California does pay employed ODs more than the national average. According to Salary.com, the average California optometrist earns about $153,683 annually as of May 2026, among the highest state averages listed. (Salary.com) On paper, that sounds solid. In California, it’s a much tighter story. 

 

According to the California Association of Realtors, a household needed a minimum annual income of $213,200 to afford the median-priced California home in the fourth quarter of 2025. That is nearly 1.4x Salary.com’s listed average salary for California optometrists. (California Association of Realtors, Salary.com) California also carries one of the lowest homeownership rates in the country, at about 55.3% in 2025, reflecting the gap between wages and housing costs. (First Tuesday Journal) 

 

In a state where housing and rent costs run far above national price levels, even a strong OD salary does not stretch the same way it would in Texas, Florida, or the Midwest. It may cover expenses, but it may not build wealth at the pace many doctors need. That distinction between covering expenses and building wealth is exactly where ownership changes the equation. 

 

Ownership Income: A Different Category Entirely 

The income gap between employed and owner ODs is well documented. According to the AOA’s 2022 Income from Optometry report, owner doctors in private practice reported average net income of $198,023, compared to $145,432 among non-owner doctors employed in optometry practices. (AOA Income from Optometry Executive Summary) 

 

Review of Optometry’s 2024 income survey shows a similar pattern. Self-employed ODs who responded to the survey reported average earnings of $243,650, while ODs in employed settings reported average salaries of $156,819. (Review of Optometry) That kind of income difference matters anywhere. In California, it matters even more. 

 

Higher ownership income can make the state’s cost of living more manageable, but income alone does not capture the full picture. Ownership can also open up financial planning opportunities that salaried employment typically does not. Practice owners may have more flexibility around retirement contributions, business deductions, entity structure, and long-term tax strategy, depending on how the practice is structured and managed. In a high-tax, high-cost environment, the ability to control more of your financial picture is not a minor benefit. It is a core part of the financial case for ownership. 

 

The Asset Nobody Talks About: The Practice Itself 

Here is the dimension of ownership that salary comparisons cannot capture at all: a practice is an asset. A salary is not. 

When a corporate or employed OD retires in California, they walk away with whatever they have managed to save from a paycheck after taxes, cost of living, housing, student loans, and everyday expenses. When a practice owner retires, they may have something else to show for their years of work: a business that can be sold.  That business, built through patient relationships, clinical reputation, operational systems, and years of community presence, can carry resale value based on revenue, profitability, patient base, location, equipment, staff, and transferability. 

 

The average optometry practice has about $973,500 in annual revenue, according to Vertical IQ industry data. (Vertical IQ) For a well-run California practice with strong patient retention, clean financials, and a well-positioned optical, that business can represent a meaningful retirement asset. It may not just provide income during ownership. It may also create transferable value when the owner is ready to exit. That is equity. And it is something no corporate employment contract, no matter how generous the signing bonus, can fully replicate. 

 

What the Numbers Are Really Saying 

California is a demanding financial environment. It rewards those who build assets and puts pressure on those who rely only on salary. Its tax structure, housing market, and cost of living all create financial strain that a fixed OD salary, even a strong one, may struggle to fully absorb over time. Practice ownership does not make California cheap. But it can change the financial math in ways employment simply cannot: higher income potential, more financial flexibility, and an exit asset that can turn years of clinical work into transferable wealth. 

 

For California ODs who are serious about not just practicing here but thriving here financially, the data makes a consistent case. Ownership is not just a career milestone. In this state, it may be one of the shrewdest financial decisions an OD can make. 

Browse California practice opportunities or schedule a call with Brad Rourke, CPA, ABV

to learn more about practice ownership.

Brad Rourke, CPA, ABV

President + CEO
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Not every great practice looks impressive on paper.

In fact, many high-potential practices get overlooked because buyers focus too heavily on surface-level metrics — revenue trends, staffing costs, or outdated systems — without asking the more important question:

“Is this broken… or just underutilized?”

Because there’s a big difference.

Some red flags signal real risk. Others signal opportunity, especially for buyers who are willing to improve operations, modernize systems, or expand services.

 

Here’s how to tell the difference.

 

1. Declining Revenue

The Red Flag: Three consecutive years of declining revenue is typically a major concern when reviewing a practice.

 

Why It Matters: Revenue trends often reflect patient demand, operational consistency, and overall practice health.

 

The Opportunity: Not all revenue decline is demand-driven. In many cases, it’s tied to:

• Reduced doctor hours

• An owner preparing to retire

• Limited appointment availability

• Minimal marketing or community presence

In other words — the practice isn’t being fully operated.

 

How to Evaluate It:

• Compare patient visit counts vs. revenue decline

• Look at the provider schedule (Are there unused appointment slots?)

• Review recall systems and patient retention

• Assess local competition and population trends

 

The Fix:

• Expand hours or add provider days

• Implement a structured recall system

• Improve online presence and local marketing

• Optimize scheduling (reduce gaps, increase efficiency)

A declining practice with strong fundamentals can often rebound quickly once consistency is restored.

 

2. Lower Gross Revenue

The Red Flag: A practice generating lower gross revenue (e.g., ~$500K) may be perceived as “too small” or not worth the investment.

 

Why It Matters: Gross revenue impacts valuation, loan approval, and perceived stability.

 

The Opportunity: Lower-revenue practices often have untapped capacity. Smaller practices can present more growth potential than larger ones that are already optimized.

These practices may be limited by:

• Outdated equipment

• Narrow service offerings

• Inefficient patient flow

• Underpricing

 

How to Evaluate It:

• Revenue per patient (Are services being fully utilized?)

• Appointment volume vs. available capacity

• Types of services currently offered

• Equipment limitations preventing expansion

 

The Fix:

• Introduce higher-value services (medical optometry, dry eye, specialty lenses)

• Upgrade key diagnostic equipment

• Improve optical merchandising and pricing strategy

• Increase patient throughput with better workflows

Growth doesn’t always require more patients — sometimes it just requires doing more with each visit.

 

3. Weak Net Income

The Red Flag: A practice with strong revenue but low take-home income for the doctor.

 

Why It Matters: This directly affects your personal income and long-term ROI.

 

The Opportunity: This is often one of the clearest signs of operational inefficiency, not lack of demand. Two practices with similar revenue can produce dramatically different income depending on how they’re managed.

 

How to Evaluate It:

• Expense categories as a percentage of revenue

• Rent and occupancy costs

• Payroll structure and productivity per employee

• Vendor contracts and supply costs

• Pricing vs. market benchmarks

 

The Fix:

• Renegotiate leases or vendor agreements

• Adjust staffing structure based on productivity

• Eliminate redundant expenses

• Reevaluate pricing strategy

Fixing profitability is often faster than growing revenue and has a more immediate impact.

 

4. High Cost of Goods (COGS)

The Red Flag: COGS approaching or exceeding 50% of revenue (well above the ideal ~30–35%).

 

Why It Matters: COGS is one of the biggest drivers of profitability in an optometry practice.

 

The Opportunity: Unlike many other issues, COGS is highly controllable.

High COGS often results from:

• Poor vendor pricing

• Lack of buying group participation

• Overstocked or outdated inventory

• Inefficient product mix

 

How to Evaluate It:

• Frame and lens margins

• Inventory turnover rates

• Vendor pricing and rebate opportunities

• Product mix (premium vs. low-margin items)

 

The Fix:

• Join buying groups for better pricing and rebates

• Introduce private-label or higher-margin frames

• Reduce slow-moving inventory

• Train staff on optical sales strategies

Even a 5–10% improvement in COGS can significantly increase take-home income.

 

5. Outdated Technology and Staffing Inefficiencies

The Red Flag:

• No EHR system

• Paper charts

• Outdated equipment

• Overstaffed or poorly structured team

 

Why It Matters: These issues affect efficiency, patient experience, and scalability.

 

The Opportunity: Practices with outdated systems often come at a lower purchase price — and offer a chance to rebuild with modern infrastructure. Many older practices lack EHR systems, but this creates an opportunity to implement better systems from day one.

 

How to Evaluate It:

• Staff cost as a percentage of revenue (benchmark: ~25–30%)

• Workflow bottlenecks (check-in, pretesting, checkout)

• Technology gaps limiting efficiency or services

• Staff roles and redundancy

 

The Fix:

• Implement an EHR and digital workflow system immediately

• Digitize patient records and improve recall tracking

• Cross-train staff to increase flexibility

• Align staffing levels with actual patient demand

Modern systems don’t just improve efficiency, they increase practice value long-term.

 

A Realistic Perspective: Not Every Opportunity Is Right for You

People sometimes gloss over the fact that fixer-upper practices require effort.

They’re best suited for buyers who:

• Want to build equity and grow a business

• Are comfortable making operational changes

• Have support (consultants, mentors, or strong systems)

 

They may not be ideal for buyers who:

• Need immediate, stable income

• Prefer minimal operational involvement

• Are risk-averse early in their careers

 

The Key Takeaway

A polished, high-performing practice offers stability but often limited growth potential. A less-than-perfect practice offers something different: control, flexibility, and a custom journey. The goal isn’t to ignore red flags, it’s to understand them.

Because in many cases, what looks like a problem on a P&L statement is actually a reflection of:

• Underutilized capacity

• Outdated systems

• Or inefficient management

And those are things you can fix and even turn into great opportunities.

Get help evaluating practice opportunities by scheduling a call with Brad Rourke, CPA, ABV.

Brad Rourke, CPA, ABV

President + CEO
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In our last conversation, we focused on an area that can create confusion in many practices: how to evaluate a new practice management system without emotional bias.

That conversation points to a broader truth: financial clarity doesn’t come from one system. It comes from how your systems, reporting, and accounting work together.

 

Financial Structure Shapes Decision-Making

Most practice owners think of bookkeeping and tax preparation as compliance tasks, necessary and important, but separate from operations. In reality, your accounting structure influences nearly every decision you make.

It determines:

  • How clearly you see cost of goods
  • How payroll is categorized and evaluated
  • Whether associate performance is measured accurately
  • How reliable your reporting and forecasting can be

If the structure isn’t aligned with how your practice actually operates, clarity is limited, even if the numbers are technically “correct.”

 

Systems Create Data. Accounting Creates Meaning.

Your systems generate information:

  • Your PMS tracks patients, services, and receipts
  • Bank accounts reflect deposits and cash movement

But your accounting system organizes that information into something usable. A well-built chart of accounts is what turns raw transactions into answers to questions like:

  • Where is the practice actually making money?
  • Where are margins tightening?
  • What trends are developing over time?

Without thoughtful structure, those answers are difficult to see.

 

Compliance Is the Baseline — Not the Goal

The IRS cares that your tax return is accurate. But leadership requires more than accuracy.

It requires:

  • Consistent reconciliation
  • Clear categorization
  • Reporting that reflects real operations
  • Alignment between accounting and decision-making

When accounting is treated only as tax preparation, strategic planning becomes reactive. When it’s structured intentionally, it becomes a tool for leadership.

 

Why Industry Familiarity Matters

Optometry has specific financial patterns:

These nuances affect how financial data should be categorized and interpreted. An accounting partner who understands the industry can structure reporting in a way that supports decision-making — not just compliance.

 

The Connection to Growth and Stability

When accounting, operations, and reporting are aligned:

  • Budgeting becomes more realistic
  • Forecasting becomes more reliable
  • Margin changes become visible earlier
  • Financial discussions become less emotional

Clarity doesn’t eliminate challenges. But it allows you to respond to them with confidence and to benchmark your practice against industry standards from sources like the AOA’s Survey of Optometric Practice with greater accuracy.

 

A Practical Consideration

Many practices work with generalist bookkeeping or tax providers. That approach can work — especially for straightforward compliance needs. But as practices grow or become more complex, the connection between accounting and operations becomes more important. Some practices find value in working with accounting teams who are familiar with optometry-specific structures and reporting needs. The goal isn’t just clean books. It’s clarity that supports better decisions. Financial oversight is not separate from your business strategy. It is part of it. When your accounting structure reflects how your practice actually operates, your numbers become more than reports. They become tools.

Get help aligning your accounting with your operations by scheduling a call with Brad Rourke, CPA, ABV or learn more about our consulting services specific for ODs on our website.  

Bess Ogden

Director of Education and Training
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