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Thread: Mark-Up: A warning

  1. #1
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    Mark-Up: A warning

    Having recently changed from managing retail to private (MD) practice, I have some observations that might be useful to someone else in the same boat.
    I inherited a bunch of utter crap, low-quality frames, all from two vendors who obviously offered a "deal" and probably a gift to get them sold. The Dr. (owner) and others thought this was fine, as the margin on these frames is HUGE, even selling them cheap. But here's the thing...
    It doesn't matter if I sell something at an 800% markup if the profit is only 30 bucks or so. I have to generate 160 in profit a day just to pay my base salary. So, yes, I could brag and say I got frames for $1.00 and sold them for $50, but why take forty bucks when I could buy a frame for 90 and sell for 210 (these numbers are made up by the way, I'm not giving away "secrets").
    Really, this is just a warning for new buyers to ignore what reps tell you and realize you're there to make money. Mark-up without volume is useless, and in a small practice the "deals" will kill you. Just my opinion.

  2. #2
    OptiWizard OptiJim's Avatar
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    I agree with your statement in part.....BUT...if your customer base cannot or will not pay $210 for a frame plus lenses then you may have a problem. I think the most important part of having control on your buying dollars is to know what your customer base can support and having a good business model that covers all the bases. Also, perceived value is a strong tool. Just my 2 cents

    Jim

  3. #3
    ATO Member HarryChiling's Avatar
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    Quote Originally Posted by Mr_Mitchell
    Mark-up without volume is useless, and in a small practice the "deals" will kill you. Just my opinion.
    If you mark up your frames according to style and quality you will see a big difference. Often you can pick up a great quality frame for a low price and still mark it up for a decent price. For instance, imagine that frame you are selling for $xxx.xx being picked up for half what you said the cost is. Now your cost of goods are lower and you have more profit and it's easier to hit your breakeven point. Of course, it's not to say that you should mark up crap quality frames for ridiculous margins.

    The frame reps will try to make this seem, like you are practiceing trickery with your patients, but keep in mind they are doing the same thing by taking frames and branding them then selling them for 100% more becasue they are branded.

    Another great way of getting rid of those frames that you have that are low cost is to give them away for free with lens purchase (full price), or offer them as second pairs and give frames away with lens purchase.
    Last edited by HarryChiling; 03-15-2007 at 07:49 AM. Reason: posting violation
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  4. #4
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    This is the problem with selling less expensive items.

    I could probably make a lot more profit percentage wise selling less expensive frames and lenses with no AR or transitions. But at the same time I will have to really increase my volume. Additionally, we also know who else sells cheap frames and lenses - EVERYONE.

    So we have differentiated ourselves and push better product (notice I did not say more expensive, I will only sell it if the price = the value).

  5. #5
    Bad address email on file Whit's Avatar
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    I would have to agree with HarryChiling... Give the cheap frames away as a second pair with lens purchase. Our office uses a set formula for marking up frames. It's a tiered pricing structure. We are in an area that supports only mid to high end stuff, so we don't really carry any "cheap" stuff. Frame retail starts around 130.00. Truthfully, we probably don't mark ours up enough, but the Dr. wants to be fair and competitive with other local places. We try to make up the smaller mark up selling AR and Transitions as much as possible.

  6. #6
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    Harry brings up some excellent points. Without seeing your frames, its hard to really say what kind of mess you got there. But, turn it into a positive. One nice thing about lower priced frames--you can get VERY CREATIVE in how you sell them. "Three for Free Thursdays" with the purchase of lenses in each is a start. "Free Pair Fridays", buy a regular pair at regular retail and give away the second for paid in full at time of ordering sunglasses.

    I also believe that you can mark up your frames so, that for most frames sold, your actual dollar "earned" is about the same. That means that you don't make the same percentage on each frame. These costs are fictional and should not be tried at home!
    Examples may be:
    Frame#1=$200 your cost, you sell for $300
    Frame#2=$435 your cost, you sell for $535
    You get the drift. Just don't be so quick to dismiss the possible jewels that you have, they may be your ticket to profitability!

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    Spexvet, you've gotten me thinking...The understanding here at the office (where no one has paid attention to the optical really) is that with medicare, post-cataract, you get any frame priced at 125 or less for "free" and then medicare pays us the 50.28 or whatever it is. This seems weird to me, as it would mean having "middle" tier frames would bankrupt you.
    I know no one here can give legal advice, but is your understanding of medicare different from ours? The office is in PA if that makes a difference.
    Thanks.

  8. #8
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    You must keep an eye on these "slave labor" products. Just look at the other industries that are laying off Americans by the hundreds. Compete or die.

  9. #9
    Cape Codger OptiBoard Gold Supporter hcjilson's Avatar
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    Members are cautioned .....

    Members are cautioned about the posting of wholesale prices. I have edited one post and left another untouched as it was unrealistic to begin with. Any further use of numbers, real or imaginary will result in the thread's closing./

    Regarding Medicare.... the simple solution is not to accept assignment. Have the customer/patient pay the marked prices and submit the claim without accepting assignment. Medicare will reimburse the patient its allowable fees without you having to take the hit.
    "Always laugh when you can. It is a cheap medicine"
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