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practices get overlooked because buyers focus too heavily on surface-level metrics — revenue trends, staffing costs, or outdated systems — without asking the more important question: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• Outdated equipment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.
