If you're a trained and qualified optician you might decide to go into business on your own. You'll find all you need to start up and run your own optician business in our practical guide.
- Research your target market
- Decide what services to offer
- Estimating income
- NHS work
- Pricing policy
- Buy an existing business
Research your target market
When you plan your opticians business it's very important to find out as much as possible about your potential customers - and establish how much competition there is out there already. Doing some market research will help you with this.
Finding out about your clients
To help you plan the range of spectacles and other products that you will offer, and to set your prices appropriately, you should find out a bit about the local population. In particular:
- are there enough people in the area to support your business
- are local people affluent
- what is the local demographic distribution - are there many elderly people, for example
Your local NHS England Regional Team or equivalent body in Scotland, Wales or Northern Ireland will have statistical information about the number of sight tests and vouchers reimbursed per 10,000 people in your region, the number of ophthalmic practitioners operating and so on. You might try approaching your commissioning body direct for this information. Alternatively, the government collates and publishes these statistics in a range of bulletins which are available free of charge online. General Ophthalmic Services Activity Statistics England, for example, is an annual publication which, among other things, enables comparison of the number of NHS funded sight tests and dispensings per 10,000 people on a regional basis. It is available to download from the NHS Digital website.
Contact your local commissioning body (and any others that you expect to be dealing with) to discuss becoming a listed ophthalmic 'performer' - this is necessary if you intend to carry out NHS funded sight tests and dispensings.
Consider whether there are any potential business clients that are worth targeting. For example, call-centres (in which staff often spend long periods looking at computer monitors) and other employers commonly send their employees for sight tests on a regular basis. You may be able to sign up local employers for a package of corporate eye care services to cover their employees.
Finding out about your competitors
How well are your potential customers already served by existing businesses? Your most important competitors are other opticians' outlets within, say, ten miles of your own. Look out for branches of large chains, such as SpecSavers, Boots Opticians and Vision Express. Some Asda and Tesco outlets include an optician service too. Don't forget that many other businesses sell accessories like reading glasses and contact lens fluids.
Try to identify five or so outlets that you think will be your most important competitors. Visit them and make a note of the following:
- are they dispensing-only outlets or do they test sight as well
- are they part of a large national chain or franchise (including Boots)
- are they smart and attractive or shabby and run down
- what are their prices and fees like
- are there any special offers currently available (for example two pairs for the price of one)
- what types of product do they focus on (for example designer frames, budget lines and so on)
- where are they located (shopping precinct, residential area, close to town centre)
Bear in mind that competition won't just come from businesses in your area. You'll face strong and growing competition from mail order and internet retailers like Glasses Direct, some of which are based overseas and offer bargain prices. You'll want to try and make sure that people understand the benefits of a face-to-face spectacle fitting.
Research current trends, plus legal and tax issues
Decide what services to offer
Depending on your qualifications - or those of your staff - you may well decide to offer sight testing in addition to spectacle dispensing. Alternatively, if neither you nor any of your staff are qualified to test sight, you could consider engaging a freelance optometrist to work within your outlet. In this situation, it would be normal to enter into an agreement whereby the freelancer pays you an agreed amount of rent in return for the use of your premises and facilities. Make sure that you get the appropriate legal and professional advice when setting up an agreement of this nature.
There is a range of different sight testing and eye treatment services that you could offer, as follows:
- standard sight tests for both private and NHS clients (NHS sight tests are done under the General Ophthalmic Service or GOS contract)
- 'community' eye care services undertaken for NHS clients (these non-GOS services are done under the NHS standard contract)
- enhanced sight tests for private clients who opt for a premium service
- home visits for clients who are unable to visit your premises (note that the NHS will reimburse you for visits made to eligible clients on a separate (higher) fee scale)
- examination and treatment of individuals with visual impairment and eye problems (you might employ a specialist orthoptist to do this type of work)
- specialised occupational eye examinations, for example for individuals whose work requires special visual abilities or may potentially pose risks to eyesight
- examination and assessment prior to referring patients for laser surgery
- other specialist examinations, sight training and treatment; you might, for example, decide to target sportsmen and women, who often have special visual needs
In some parts of the UK, you may be able to carry out certain specific additional and enhanced services for NHS-funded clients - for example, services like the Eye Health Examination Wales (EHEW) provided under the Wales Eye Care Service (WECS).
You could also decide to offer a range of other services from your outlet. You may be able to carry out some of these in-house, using your own staff and equipment, while others may have to be outsourced to a specialist. Examples of some of the services that you might offer include:
- contact lens fitting (special additional training is needed for this)
- spectacle repairs
Depending on your facilities, you might carry out lens cutting in your own workshop. Alternatively, you may decide to outsource this to a prescription house. Most prescription houses offer a fast, efficient service.
As a specialist in vision and eye-wear you may find that you regularly receive enquiries about items such as protective appliances, specialist optical equipment and so on. You might decide to make the most of your specialist status by stocking items such as:
- off-the-shelf reading glasses
- sunglasses and ski goggles
- binoculars, telescopes, magnifiers and so on
- cosmetic and fashion eye-wear
Estimating income
To make an estimate of how much income your business will earn, you could work through the following steps:
- Decide exactly what type of business you will be running. For example, will it be a dispensing-only outlet or a sight-testing (ophthalmic) and dispensing outlet? Perhaps you are a qualified dispensing optician but intend to employ an optometrist. Or maybe you are going to work as a freelance optometrist in someone else's outlet
- If your business is going to carry out sight tests, make an estimate of how many tests you will carry out each month, and at what charge
- Estimate how many pairs of spectacles and other optical devices (such as contact lenses) you expect to dispense each month, and at what price
- Make an estimate of how many other accessories you expect to sell each month, and at what price
- Multiply your estimates of how many items you expect to sell each month, and how many sight tests you expect to carry out by the appropriate prices, and add these sub-totals together to reach a grand total. Add to this total any other income that you anticipate your business will earn to arrive at your estimate of total income
Sight tests
If your business is going to offer sight testing you might, as a very rough guide, expect to do somewhere in the region of 1,000 tests a year, depending on both the level of demand and your working hours (or those of your qualified optometrist). A very busy optician might manage as many as double this, but there are many reasons why your total might be considerably lower. If, however, you think that demand for sight tests will exceed this, then you will probably need to take on additional qualified optometrists.
Some people receive free eye-tests that are paid for by the NHS, while others have to pay for their own treatment. NHS Digital and equivalent bodies in Scotland, Wales and Northern Ireland will pay you a fixed fee for each NHS funded sight test that you do. Find out what the current rate is and decide whether or not your fee for private consultations will be the same. If you intend to charge a different rate for private consultations, you will need to estimate what proportion of tests that you carry out will be NHS funded, and what proportion will be private. On average, over half of all sight tests are NHS funded, although local factors may affect this significantly. Think too about what proportion - if any - of your private sight tests will include additional elements and be charged for at a premium rate.
If you're paid for NHS work through an LOC company (a non-profit intermediary set up by a group of opticians to contract with the NHS) then a small amount of each transaction will be retained towards the company's running costs.
Spectacles and contact lenses
If your business is going to carry out sight tests, roughly two thirds of the tests that you carry out should typically result in a new or altered prescription for spectacles, contact lenses or, occasionally, something else such as surgery. Remember though that not everyone will decide to buy their prescription in your shop, and some may choose not to take up their prescription at all.
If you do not intend to carry out sight tests, think about how you will attract customers to your shop. You might, for example, arrange to receive referrals from an optometrist. Make an estimate of how many pairs you will sell each month, possibly based on the number of referrals you hope to receive.
Some of your clients will pay for part or all of the cost of their subscription using NHS vouchers. Expect around a quarter of all your clients to use vouchers, although once again local economic factors can cause this proportion to vary significantly. Note that, while some clients will 'top up' their vouchers with their own money, many will not want to pay any extra and will choose spectacles or contact lenses that are priced within a particular bracket. As a general rule, the 'average spend' by self-funding clients will be higher than the average for those using vouchers.
Accessories and other items
You may decide to stock other items and accessories, for example, sunglasses, contact lens solutions and so on. In some cases, you may hope that a client will purchase certain complementary items, such as cleaning materials, with a prescription. Make an estimate of what percentage of clients will also purchase additional accessories. (Note, however, that sales of accessories are unlikely to account for a substantial percentage of your income.)
Sources of useful information
The NHS publishes a large amount of information about current voucher values and usage, sight test fees, number of sight tests and so on on the NHS Digital website. The Federation of Ophthalmic and Dispensing Opticians (FODO) collates and analyses many useful statistics, including details of the NHS sight test fees, on their website.
NHS work
Optical prescribing and dispensing in the UK involves the National Health Service (NHS) working side by side with private practices to deliver a range of services. As a dispensing or ophthalmic optician you will work within the framework of the NHS regulatory system and your clients/patients will fall into one of three main categories:
- private self-funding clients
- NHS funded clients
- clients whose treatment and prescription are funded partly by the NHS and partly from their own resources
Clients can receive NHS funded care in two main ways - eligibility for a free eye test, and eligibility for vouchers towards the cost of a prescription (spectacles or contact lenses). Vouchers come in a range of different values and are dispensed according to the needs of the recipient. The values of these vouchers are reviewed annually, while the NHS sight test fee is also reviewed on a regular basis - although not necessarily increased after every review.
In some parts of the UK, certain additional and enhanced eye care services are available to NHS-funded patients - for example, specialist low vision assessments in Wales.
Groups of people who are normally eligible for NHS funded treatment include benefit claimants and people on low incomes, children and full-time students aged under 19 years, registered blind people and sufferers of certain other conditions, such as diabetes. All people aged 60 years or over are automatically entitled to free sight tests. In Scotland, everyone is entitled to a free annual sight test.
NHS funded treatment is administered by NHS England and by equivalent bodies in Scotland, Wales and Northern Ireland. When you carry out NHS work you may become a contractor to one or more of these bodies, from whom you will receive payment for the work that you do and for the vouchers that you accept. As an alternative to contracting directly with commissioning bodies, you might contract collectively with other optical practices through an intermediary company known as an LOC company. You'll need to be on each commissioning body's ophthalmic performers list.
You will probably do some basic NHS work under the General Ophthalmic Service (GOS) contract and some non-GOS work under the NHS standard contract.
To receive payment for NHS work, you will submit a claim to the appropriate body each month. You will normally receive one monthly payment for NHS funded sight tests that you have carried out and a separate monthly payment reimbursing you for vouchers that you have accepted. Note that vouchers are reimbursed at their full face value. Also note that payments from commissioning bodies are made in arrears, usually between two and eight weeks after you actually do the work.
NHS primary care commissioning bodies with whom you contract will normally require you to meet certain minimum quality and governance standards.
Pricing policy
Depending on the range of goods and services that you offer, your pricing structure may have two main elements:
- fees charged for sight testing, eye treatment and other services
- retail prices charged for spectacles, contact lenses, accessories and other items that you sell
Furthermore, some of your retail prices may contain both a fee element and a charge for the actual items purchased by the client.
In some cases, your fees will be set by the NHS, which reviews (but doesn't always increase) its standard fee payments on a regular basis (usually annually). Examples include fees for NHS funded sight tests and domiciliary visits. In other cases, you are free to decide your own prices.
It is important to set your retail prices and your sight test fees at an appropriate level. Make sure that you are aware of the current NHS voucher values and consider offering some spectacles within these price brackets. For the majority of practices, NHS sight tests account for over 50% of tests and the failure to increase the fee for inflation over the years has meant that in real terms its value is less than it was in 1948.
Be aware that many opticians consider the NHS sight test fee to be so low that NHS sight testing is essentially a loss-making exercise when taken on its own. This may apply to other NHS services you offer, and possibly even to private sight testing.
In March 2014 the average fee for a private sight test was £26. This is less than half the actual cost and shows the way in which sales of spectacles and other items subsidise eye tests. When setting your fee you will want to take into consideration the prices charged by your competitors but you are unlikely to be able to match the special offers that some of the multiples advertise from time to time.
Think about whether you'll offer enhanced sight test options to private clients at a premium price. You might, for example, decide to offer retinal photography to monitor the health of the back of the eye.
You can get details of the current spectacle voucher values on the NHS website.
Some suppliers may suggest retail prices for the goods that they supply. You might decide to stick to these, to use them as a rough guide only or to ignore them altogether. In other cases, you will have to decide on your own retail prices. Depending on the amount of competition that exists, you may decide to offer a range of discounted lines and regular special offers.
Calculating spectacle prices
Your spectacle prices should be set at a rate which reflects the specialist consulting, dispensing and fitting work that you carry out and leaves you with an acceptable profit after the actual cost of the frames and lenses has been covered. You may decide to itemise your charges for dispensing services, or you might choose to include these in the retail price.
A common way of setting spectacle prices is to use a 'multiplier'. The multiplier is the number of times that the cost price (the price charged to your business by your suppliers) is multiplied to arrive at the retail selling price. For example, you might decide to use a multiplier of 2.5 on many of the items that you sell - this means that an item you buy in for £20 will be sold at £50 (figures used for illustrative purposes only). You may want to use a different multiplier for different types of goods and even for different ranges of spectacles. As a rough guide, expect to use a multiplier of between 1.5 and 3 on many of the items that you sell.
When you display your prices, you might show a single inclusive price for a frame and a particular type of lens, or you may prefer to display a frame price only and calculate the total cost of each complete pair of spectacles individually. Do mark your prices clearly and try to adopt a pricing structure that is simple for your clients to understand.
It is realistic to expect that many clients who pay for spectacles using vouchers will not want to spend any of their own money on topping-up the voucher value. You might decide to adopt a 'fluid' pricing structure in such cases and allow clients to use their voucher to pay in full for spectacles that would normally cost slightly more than the voucher's face value.
Buy an existing business
You might decide to buy an existing optician business rather than start your own venture from scratch. Buying a going concern can mean that the products, customers, regular sales, staff, premises and equipment are already in place.
Buying a going concern normally means that:
- contracts may be in place with Regional Teams of NHS England (the NHS commissioning body in England) and equivalent organisations elsewhere in the UK
- the business may be a member of a non-profit LOC company (an NHS contracting intermediary set up by a group of opticians)
Other matters to consider include:
- the condition of any stock of frames and eyecare accessories - bear in mind that frames have become fashion items and that once they have gone out of fashion it may be very difficult to sell them. The same applies to sunglasses if they are stocked
But buying a business can be a hazardous, expensive process unless you have the right skills and experience on your team, including legal and financial know-how. Establish the genuine trading and financial position, so that the price you pay for the business is not too high.
Franchises and joint venture opportunities
Franchising can be a good 'halfway house' between starting out from scratch and buying an existing business. If you purchase a franchise you'll still be setting up your own business, but you could benefit from the experience, resources and brand name of an optician business that is already successful.
The SpecSavers business model is similar to franchising and involves a joint venture partnership between an optician and the parent company.
There are several franchises available in the optical sector. Although different franchises vary in detail, most feature the following key points:
- as a franchise holder, you will remain self-employed but will use the identity (corporate colours, logos, trade name and so on) of the franchisor
- in return, you will pay the franchisor a fee - this might be a one-off investment, a monthly charge, or a combination of both
- both you and your franchisor will have to fulfil certain obligations and maintain certain minimum standards
Some franchisors will provide you with some business training, help with advertising and marketing, and advice and support on a range of business and technical matters.
Details of the above points are set out in the franchise agreement or contract, which both you and your franchisor will sign. The agreement will also deal with other matters, for example, any territorial exclusivity due to you and the minimum period for which the franchise will run.
Before entering into a franchise agreement, it is advisable to compare the terms of different franchisors to be sure that you are getting a good deal. Go through the contract with your solicitor before signing anything. More information about franchising is available on the Franchise Info website. Information is also available from the British Franchise Association (BFA).
