The "Busy Fool" Problem: Why Your 3x Markup is Failing

For decades, the standard optical pricing model was simple: take the wholesale cost and multiply it by three. This formula was effective before managed vision care became the primary driver of sales. Today, that same formula can be a financial disaster.

When you're bound by plan allowances and reimbursement rules, a simple markup doesn't account for your true costs. The cost of turning on the lights, paying skilled staff, managing inventory, and renting your space is the same whether you're selling a $30 frame or an $80 frame. If your pricing doesn't reflect this, you are effectively subsidizing the managed care plans and losing money on every dispense.

The Solution: The Minimum List Price (MLP)

The key to profitability is to shift your mindset from a markup to a Minimum List Price (MLP).

An MLP is a strategic retail price floor—generally between $159 and $219, depending on your market—that accounts for all your overhead. Even if a frame's wholesale cost is only $30, it should be priced at your MLP. This philosophy recognizes that you are selling not just a product, but your expertise, your service, and your business's overhead.

Managed care plans don't dictate your retail prices; you do. Adopting an MLP strategy allows you to navigate their complex rules to your advantage.

Plan-Specific Strategies for Profitability

Let's break down how an MLP philosophy dramatically outperforms old models when applied to the "big three" plans.

1. EyeMed: Maximizing the "Percent of Charge"

Many EyeMed plans use a "60% of charge" formula. Let's compare:

• Old 3x Markup:
  • $45 Wholesale Frame x 3 = $135 Retail
  • $135 - 40% = $81 (EyeMed's price)
  • $81 - $38.25 (Net COGS) = $42.75 Profit
• MLP Strategy:
  • $169 MLP (Your new retail price)
  • $169 - 40% = $101.40 (EyeMed's price)
  • $101.40 - $38.25 (Net COGS) = $63.15 Profit

By simply establishing a retail price that reflects your costs, you generate a 47.5% increase in profit on the exact same frame.

2. Davis Vision: The "Whichever is Greater" Advantage

Davis plans can be tricky, often offering what seems like a low dollar-value allowance (e.g., $25). This can discourage patients from purchasing.

Instead of just applying the allowance, implement an in-store promotion: "All Davis Vision patients receive 20% off their eyewear, or their plan allowance—whichever is greater!"

• Old Allowance-Only Model:
  • Patient chooses a $300 frame.
  • They see their $25 allowance and say "no, that's too expensive." You lose the sale.
• New Promotion Model:
  • Patient chooses a $300 frame.
  • Your optician informs them of the 20% discount ($60 off).
  • Since $60 is greater than $25, the patient pays $240.
  • The patient is motivated to buy, and your practice captures a high-value sale that would have otherwise been lost. This empowers your staff to stop restricting patients to "the frames on the rack" and start finding frames they love.

3. VSP: Navigating the WFA vs. Retail Allowance

The VSP formula is the most critical to understand. It has two distinct paths, and your profit depends entirely on which path you're on.

• Path 1 (Wholesale Formula): If a frame's wholesale cost is at or below the Wholesale Frame Allowance (WFA)—e.g., WFA is $45 and your frame cost is $45—the patient pays $0. Your retail price is irrelevant.
  • VSP Pays: $45
  • Patient Pays: $0
  • Net COGS: $38.25
  • Profit: $6.75 (plus dispensing fee)
• Path 2 (Retail Formula): If a frame's wholesale cost is even one dollar above the WFA (e.g., $46), you switch to the retail allowance formula (Retail Price - Retail Allowance - 20% of Overage). This is where you make your money.

Let's compare results for a $46 wholesale frame (WFA $45, Retail Allowance $120):

• 2.5x Markup ($115 Retail): Your retail is less than the allowance.
  • Patient Pays: $0
  • VSP Pays: $45
  • Net COGS: $39.10
  • Profit: $5.90 (plus dispensing fee). You are officially losing money.
• 3x Markup ($138 Retail):
  • Patient Pays: ($138 - $120) - 20% = $14.40
  • VSP Pays: $45
  • Total Revenue: $59.40
  • Net COGS: $39.10
  • Profit: $20.30 (plus dispensing fee).
• MLP Strategy ($169 Retail):
  • Patient Pays: ($169 - $120) - 20% = $39.20
  • VSP Pays: $45
  • Total Revenue: $84.20
  • Net COGS: $39.10
  • Profit: $45.10 (plus dispensing fee).

By strategically pricing your frames with an MLP, you ensure you are on the profitable "Retail Formula" path and increase your profit by 84% over the standard 3x markup.

The Final Takeaway

The single most important lesson is this: If you can't mark up your products profitably, don't sell them.

Stop being afraid to charge appropriately for your frames. Your business's survival depends on it. A chaotic, "whatever you feel like" pricing scheme is a recipe for failure. By implementing a consistent, cost-based Minimum List Price (MLP), you can finally stop losing money and start profiting from your frame sales in today's managed care environment.

‍