Dr. Bruce Colton owns a private practice in a booming Dallas suburb. In his first year, he spent $20K on frames, sold two-thirds of them overpriced, and made a ton of gross income, but he yielded very little net income. In his second year, he spent only $3K to refill his entire optical; his patients now pay little to nothing, and he is extremely profitable.
For her part, Dr. Courtney Dryer was able to slash $49,000 from her initial optical and frame board costs by making a smart inventory, design, and sourcing decisions.
Like these optometrists, you might want to profit from your glasses frames, but you feel stuck — the frame companies make you buy too many frames at too high a price. Insurance reimbursement is getting lower. In these situations, many offices resort to overcharging their patients, but that’s not the only answer! Read on for clever ways you can maximize your frame board profit margins and help your patients pay less.
Frame income basics
As a refresher, frame income money comes from only two places:
- What the patient pays out of pocket for frame overage at the time of sale
- What the insurance pays for wholesale frame allowance on the frame
Since the insurance reimbursement amount is fixed, most opticals raise the price of their frames and charge their patients more out-of-pocket to make a profit. They believe it’s the only variable that can be adjusted to increase profits. They’re wrong.
Frame expenses come from two places:
- What you actually paid for the frame
- The cost of leftover frames of the same brand that won’t sell
When opticals have dusty old frames from brands that they’ve otherwise discontinued, they’re left with frames that they still paid money for. This is yet another piece of the frame board profitability puzzle. By minimizing your frame's actual cost and dusty, stagnant inventory, you can dramatically increase profits without hurting your patients.
Profitable—and genius—approaches to frame board inventory
In the following section, Dr. Colton compares four approaches to frame board management based on the following example:
You have a patient who has an insurance benefit of a $150 “allowance towards a frame.” In this scenario, the insurance will actually pay you their wholesale frame allowance of $65. We are also going to assume, for any given frame family, that the minimum buy-in is 12 pieces, of which 8 will sell very easily, and the last 4 do not sell very well. Let's dive in!
The “big brand” model
This is the most common model used by optometrists and opticals, and it is the worst for your business and the least profitable. Under this model, the frame dealer will demand a minimum buy-in and have strict rules about regular purchasing to maintain accounts with them. They will charge you a wholesale price that is nearly equal to what most insurance benefits will pay you for the frame. They will give you a very small discount — up to 20% off of wholesale.
Let’s do the math
Ordering frames and pricing
- What you pay for a frame: $75 (11% off of its Frames Data value of $84)
- What you sell the frame for: $210 (a 2.5x markup from wholesale)
- What your patient pays: $48 (after applying their $150 benefit and the 20% off the $60 balance)
- What the insurance pays you: $65
Per sale
- Money in: $48 (patient) + $65 (insurance) = $113
- Money out: $75 (cost of frame)
- Profit: $38
Totals:
Total investment: $900 (12 frames at $75/frame)
Total profit from the purchase (an average of 8/12 frames sold): $304
Total liability from the purchase (an average of 4/12 frames unsold): $300
Total profit: $4
The only way to survive using this model is to grossly overcharge patients. You’ll be forced to mark up frames by 3.5x and drive them to services like Warby Parker.
Profitable model #1: Pre-wholesale
This is a new model that is shaking up the eyecare industry. Frame manufacturers cut their costs by not marketing to patients and not having many field reps. They sell directly to opticals after manufacturing their products, so opticals get them at the price a wholesaler would pay before selling them to a retailer.
Manufacturers are able to give you brand new, warranted frames at more than 50% off of wholesale frames’ data value. Vision insurance companies have not adapted to this model yet; they assume that you paid wholesale and are simply being reimbursed. You can make a majority of your frame board profit directly from the insurance company, allowing you to keep patient costs down and remain profitable.
Let’s do the math
Ordering frames and pricing
- What you pay for a frame: $10 (Frames Data value of $65)
- What you sell the frame for: $165 (a 2.5x markup from wholesale)
- What your patient pays: $12 (after applying their $150 benefit and the 20% off the $15 balance)
- What the insurance pays you: $65
Per sale
- Money in: $12 (patient) + $65 (insurance) = $77
- Money out: $10 (cost of frame)
- Profit: $67
Totals
Total investment: $120 (12 frames at $10/frame)
Total profit from the purchase (an average of 8/12 frames sold): $536
Total liability from the purchase (an average of 4/12 frames unsold ): $40
Total Profit: $496 (Because there is no minimum buy-in, you can also opt to only buy your favorite eight frames, and sell all eight!)
Total profit from the purchase (8/8 frames sold): $536
Even if you did elect to buy four frames that you don't sell, you’re now missing out on $40 instead of $300. Your total profit is over 100x more profitable that it would be using the “Big Brand” model, and your patient is paying 4x less per frame.
Some companies that currently operate using this model include Eight to Eighty, New York Eye, Modern Optical, and Montana Sun.
Profitable model #2: Consignment merchandise
The consignment model tends to get a bad reputation for producing narrow margins. However, it’s also true that you can buy a large number of frames at discounted rates. If you pick the right consignment company, then you'll hit gold.
You can find a distributor with frames that patients like and still get a significant discount off of wholesale value. The magic in consignment is two-fold:
- You invest nothing upfront
- When you can’t sell some frames, it doesn’t cost you a penny to get rid of them
You pay NOTHING and get 12 frames put on display. When a frame sells, then they charge you.
Let’s do the math
Ordering frames and pricing
- What you pay for a frame: $48 (Frames Data value of $69)
- What you sell the frame for: $172 (a 2.5x markup from wholesale)
- What your patient pays: $17.60 (after applying their $150 benefit and the 20% off the $22 balance)
- What the insurance pays you: $65
Per sale
- Money in: $17.60 (patient) + $65 (insurance) = $82.60
- Money out: $48 (cost of frame)
- Profit: $34.60
Totals
Total investment: $0 (12 frames at $0/frame)
Total investment once frames sell: $384
Total revenue from the purchase (an average of 8/12 frames sold): $660.80
Total liability from the purchase (an average of 4/12 frames unsold ): $0
Total Profit: $276.80
Once you sell eight pieces, and you’re left with four frames that you can’t sell, you can simply send them back because of the consignment model! This model is 70x more profitable than the “Big Brand” model, and your patients are saving more than 50% out of pocket ($20 vs. $48/pair). Some popular consignment companies include Independent Rep, Legre Eyewear, New Millenium Eyewear.
Profitable model #3: Clearance
This “Nordstrom Rack” approach to frame board management is another unique (but very narrow space) that can set an optical up for massive success. There are currently at least two optometrist-owned companies that offer this option online (optometristsunited.com via email specials and wholesaleeyeglasses.com). These distributors take big-brand frame models that are nearly discontinued and offer them at 50-90% off of standard wholesale prices.
This model saves so much money on the up-front cost of frames that if one breaks, you can give your patient an entirely new frame, and you'll still be profitable. Patients are set to expect big brand prices, so low price tags can surprise them and put them at ease. Even if though lower price tags will make patients think you’re undercutting a big brand across the street, you’re able to make triple the profit, and the patients love you.
Let’s do the math
Ordering frames and pricing
- What you pay for a frame: $34 (60% off of its Frames Data value of $84)
- What you sell the frame for: $210 (a 2.5x markup from wholesale)
- What your patient pays: $48 (after applying their $150 benefit and the 20% off the $60 balance)
- What the insurance pays you: $65
Per sale
- Money in: $48 (patient) + $65 (insurance) = $113
- Money out: $34 (cost of frame)
- Profit: $79
Totals
- Total investment: $408 (12 frames at $34/frame)
- Total profit from the purchase (an average of 8/12 frames sold): $632
- Total liability from the purchase (an average of 4/12 frames unsold ): $136
Total Profit: $496
There is no rep, and frames are non-refundable, non-warrantee, and non-exchangeable. Even though you are investing $408 up front, you’re still making over 100x more than you would with the “Big Brand” model, and the patient is paying the same amount.
Other ways to cut costs and boost frame board sales
Get creative with optical design and installation
First things first – if you’re setting up optical for the first time, know that it’s entirely possible to design your optical without the help of a designer. If you have an optical design company assist you in this process, you are looking at costs in the $40,000 range for a typical 800-to-1,000-square-foot optical. If you hire an interior designer, you are looking at an additional several thousand dollars.
Through alternative design routes, you can fill an optical with frame boards and locked cases for less than $15,000. Whether you prefer a traditional optical design or a boutique feel, both settings can be created more cost-effectively and still reflect the desired look and feel of your optometry practice.
Know the science of visual merchandising
How you set up your store and lay out your frame board can have a huge impact on how much you sell. As much as possible, make your optical an immersive experience that appeals to customers’ five senses: sight, sound, touch, smell, and taste. What sort of music are you playing? Is the lighting appealing? Can customers easily touch the frames and try them on? What do the mirrors look like?
Organizing frames by category is another key way to boost profits, since it saves shoppers time and improves their experience. Organize your frame board by brand and then by style and price within that. Also consider offering a mix of colors to keep the eye moving.
Select a strategic inventory mix
Don’t be fooled into thinking you need to stock a massive amount of frames to turn a profit. According to Dr. Courtney Dryer, with a little strategic planning, an optometry practice owner can easily stock a limited inventory of 275 frames for less than $24,000. By stocking your frame board with a varied mix of styles and price points, you can keep patients from shopping elsewhere because you do not have the product the patient wants. Remember that you can buy more frames for less cost, but in order to appeal to patients who prefer high-end frames, you must be willing to invest in luxury eyewear.
Sample frame inventory list
- High-end - Classic Style: $145 x 30 = $4,350
- High-end - Funky Style: $150 x 30 = $4,500
- Name-brand Sunglasses: $125 x 30 = $3,750
- Value Line: $40 x 20 = $800
- VSP Wholesale Frame Allowance (WFA) #1: $75 x 20 = $1,500
- VSP WFA #2: $75 x 20 = $1,500
- Semi-High End: $95 x 20 = $1,900
- Mid-Range: $60 x 60 = $3,600
- Closeout: $15 x 20 = $300
- Additional Sunglasses: $60 x 20= $1,200
TOTAL: 275 frames at a cost of $23,400
Understand lab costs
Asking about lab costs is another way to maximize frame board profitability. When you inquire about lab costs, you are given discounted list price sheets. Obtaining the best lab pricing possible can save you well over 50% a year without sacrificing quality.
The below table illustrates potential savings that can come by asking about lab costs. The table calculates savings for lab costs based on a total of 100 jobs comprised of 65% single vision and 35% progressive lenses. Single vision lens pricing is based on polycarbonate material with premium AR coating and progressives lens pricing is based on premium digital lenses.
Summary
There are a number of effective, ingenious ways to manage your frame board program for maximum profitability. When purchasing frames, do not be bullied by Big Brand frames and their politics. Don’t fall into the trap of “independent” frame companies that charge you the same price as large chains, force you to buy the same number of frames as the chain companies, and offer the same minuscule discounts as the chain companies.
You will spend less and have less risk when you use pre-wholesale, consignment, and clearance models for purchasing frames. You’ll also keep your cash up front, charge less to your patients, and make significantly more total profit. Your patients will love you. Don’t hurt your patients to make money, and don’t commiserate in frame politics. Explode your frame profit and disrupt the industry!
Run a More Profitable Practice with Our Handy Calculators
- Optometrist Time to Hire Calculator—See how long it may take your practice to find a new OD.
- Cost of Hiring Calculator—Determine the costs associated with hiring—or not hiring—a new OD.
- Frame Board Profit Calculator—Maximize the profitability of your optical with this handy tool
- Average Optometrist Salary Calculator—See how you or your employees' salaries stack up.
