“How many frames do I need?” “How many frames should I carry?” “How much stock should I have in inventory?” It doesn’t matter how you phrase it, at least 1/3 of my consultations start the same way. I’m going to make this all very, very easy for you. Consider it my holiday gift! To determine the number of frames you will want to carry in the practice to maximize the potential profitability of your cost of goods, take the number of frames you sold last year, divide that by 3, to a minimum of 500.
For larger practices: 2537 frames sold last year / 3 = 845
For smaller ones: 1150 / 3 = 500
Let’s break that down for a second and explain the why, because I always believe the why is very important. It’s not enough to have an understanding of policy and procedure. It is an understanding of the why that will keep us adhering to them.
The number of frames sold in one calendar year is unlikely to change drastically without expansion of the practice, acquisition, or renovation of the optical. Because of its relative stability, the number of frames sold annually will give us a good understanding of how quickly any frame we bring in is likely to sell. If we sold 1000 frames in a calendar year, and we carry 2000 frames, each frame has a very small likelihood to turn, or sell, and an even smaller likelihood that it will do so quickly. If we sold 1000 frames in a calendar year, and we carry 250 frames, each frame could sell, if we’ve chosen the right inventory, four times at least! If every frame has an equal opportunity to sell four times annually, it becomes really apparent, very quickly, whether any frame is right for the practice, based on how quickly it moves. If we are overstocked based on what we are likely to sell in one year, the determination of best-sellers is not only much more difficult, but largely arbitrary, making it, over time, harder and harder to manage our inventory.
If you are a new practice, less than 5 years old, your growth will be outsized to the average, and, in this case, you can always use the current year-to-date units sold, projected through the end of the year.
For example, a 3-year old practice sold 300 frames in 2016, and 600 frames in 2017 as of October 31st. If you use the 300 unit annual number to determine how many frames you should carry, you will get 500. If you project this year’s sales through December 31st, you get… 500…
Wait, why are the inventory suggestions the same? “We sold more than twice as many frames this year as we did last year!” They’re the same because increasing the number of frames you carry has no correlation to the number of frames you sell. Changing your assortment drives sales, and when you add frames you may have inadvertently added a line that the patients find more appealing. To assume that simply carrying more is what causes the increase in sales, is by all evidence, inaccurate. More is not better, more is just more. More time spent taking inventory, more money spent on cost of goods, more reps visiting the office, and more invoices, packing slips, boxes, and frames flying about the place!
So, number of frames sold in one calendar year, divided by 3, to a minimum of 500. That’s how many frames you need.
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