IDOC actively shares industry-focused articles, blog posts, podcasts, videos and other thought leadership with our members and other optometric practitioners. Below, you will find links to our growing library of educational materials and multi-media assets written and created by IDOC's team of seasoned industry experts.
Nathan Hayes | 5/10/2018

A practice owner with a cash crunch recently pushed back on the advice I was giving – to defer some compensation for a quarterly distribution – with this statement: “I thought I was supposed to pay myself first!”

And “pay yourself first” – which means putting money away into long term savings before spending it on your immediate needs – is really good advice.  But it also can get owners into trouble if they forget all the obligations a practice owner must honor before paying themselves.

Before anyone worries that I don’t want you to make any money, let me acknowledge this important fact about you as a practice owner:

You own your practice for two reasons: your desire to have control – over how you care for your patients and who you work with –  and the income premium you can receive by delivering better care and service to your patients than your competition.

And my job is to help optometric practice owners earn more income.  But it’s also to take the stress out of managing practice finances. Stressful things like:

  • Struggling to make payroll every two weeks
  • Falling behind on their bills with vendors
  • Not being able to catch up on credit cards
  • Getting walloped by an unexpectedly large tax bill

All of these will either cause or be caused by tight cash flow.  My best definition of tight cash flow is this:

Tight cash flow happens when there isn’t enough cash in the business to pay the owner what he or she wants AND pay all the bills.

In most cases, owners need to remember this about the net income on their P&Ls:

First, the government gets paid.

Second, creditors get paid.

Then, and only then, can the owner pay himself or herself.

Let’s consider how those factors affect when and how you pay yourselves.


We all know the saying ‘the only sure things in life are death and taxes’.  You are sure to owe taxes, so you need to plan for them.  Work with your CPA to plan for your quarterly estimated taxes. Have a separate account for taxes and contribute 25%-35% of your total income, less what you withheld on your regular paycheck.

Owners can choose to make capital equipment purchases, run more or fewer personal expenses through the practice, or take on more aggressive tax-preferred savings vehicles.  But if you’re making money, you’re going to owe taxes.

When you buy equipment remember, you only save the taxes – about a third of what you spend.  If you want to spend more to save on taxes, IDOC has a special dues program just for you!


Finally, pay all of your income and payroll taxes.  Having seen a few cases where practice owners have fallen behind with the IRS, let me assure you that you don’t want to be in that situation.

Debt Service

Secondly, you must repay your creditors – people who have lent you money.  Debt is not a bad thing.  With interest rates as low as they have been for almost a decade, using a bank’s money to fund your growth is be a great way to accelerate your growth.

But growth is key when taking on debt.  Avoid excess debt by making sure you have a clear path to growing your revenues and profits before taking out a loan.  Unlike taxes, you can control your debt load.

If you’re buying equipment, be sure that your patient volume and the fees the equipment generates will cover the note or lease from day one. New equipment doesn’t increase the value of your practice UNLESS it increases the revenues and profits.

And be careful with revolving loans (credit cards or lines of credit), don’t come with a baked-in plan to pay them off.   Credit card debt really ought to be paid off every month.  Lines of credit too, but occasionally be stretched to three months.

If you have credit card debt or a line of credit you can’t retire within two or three months, consider restructuring that debt as a fixed installment loan. 

Personal Income

Finally, once you’ve accounted for taxes and debt service, you can pay yourself.  And you should pay yourself as much as you can.  But there’s still a bit of a timing issue.

Let’s say you’re the solo OD-owner of a $900,000 practice which should net $300,000 (33% of Gross Revenues), which is your pre-tax income.  Since $300,000 ÷ 12 months = $25,000 per month, should that be your monthly income (accounting for taxes and debt service, of course)?

No, because your practice results vary month-to-month. You will be fine some months, but others you will be taking out more income than the practice will have profits and cash flow to pay you.  So, set your regular draw or salary comfortably below your total expected income.

Set a cash reserve target for the practice: the max you should need is one month’s expected expenses (everything except the owner(s)’ pay).  Monthly or quarterly, take out any cash above your targeted reserve amount.  If you’re below the target, wait a month or two for the cash to build back up.

So you can’t just take money out of your practice willy-nilly, but here’s the most important thing.  Once you’ve met all your obligations to the government, your creditors, and to prudent cash management in your practice, take every red cent out of the practice that you can.  Pay yourself first – build up your personal wealth and savings – and then enjoy the fruits of your labor!

Your practice is worth far more for the income it provides you than what you can sell it for. Extra cash left in the practice doesn’t do anything for the value of the practice and is likely to get spent on stuff you don’t need.  Reduce stress by taking care of your other commitments first, then maximize your income. That’s best for you today, and it has the effect of increasing the value of your practice.

Nathan Hayes
Practice Finance Consultant
Nathan Hayes joined IDOC with a solid background in the eye care industry and serves as IDOC&rsquo;s Practice Finance Consultant. Before Prima launched in 2011, he spent five years in business development for Red Tray and HMI Buying Group. Nathan graduated from Vanderbilt University in three years, with a degree in Spanish and a minor in mathematics. <br/><br/>After graduating, he spent a year working abroad. During that time, he worked for two firms in San Jose, Costa Rica. He interned with Grupo Juridico de San Jose, working in environmental policy to protect a threatened parcel of land, then he worked as a project manager for a US-owned precision machining shop. Nathan then spent 6 months working with street children and orphans in Mexico. <br/><br/>Before getting into the healthcare industry, he was an Assistant Store Manager and completed the Corporate Training Program with Haverty&rsquo;s Furniture Company in Atlanta, GA. Nathan and his wife Heather have a son, Daniel, and a daughter, Hannah. In his spare time, Nathan enjoys reading and outdoors activities - especially cycling and hiking.
Trending Blogs

11/19/2021 | Author: Geronda Wollack

I was on the couch with my wife during our daily “be present and reset” routine which includes reminiscing about our day, watching our favorite shows, and just being present with one another. Out of nowhere, she asked me a question that I wasn’t expecting- “Oh wait, what happened with the paid... Read more

10/26/2021 | Author: Steven Festa

Perhaps you're a recent graduate from Optometry School, or maybe you have spent time working in a corporate optometry practice, or even as an associate OD at an independent practice, and you have decided to go out on your own and open your own optometry... Read more

10/5/2021 | Author: Ximara Vega

How often do you think about your experiences as a consumer? What comes to mind when you reflect on positive interactions? How about negative? I don’t know about you, but for me the negative experiences are much more vivid. Many of those interactions occurred with someone who was well... Read more

9/30/2021 | Author: Amy Alvarez

When I was a retail manager, this would happen to me often. An employee would tell me they didn’t complete an important assigned task, or they would call out for their shift. And I could see it from both sides. They had a lot of conflicting responsibilities that day and yet, this task would... Read more

6/23/2021 | Author: Ximara Vega

School has ended and most of the world has opened back up. Many people I know have multiple weekend getaways, road trips and vacations scheduled because they are making up for lost time. You know what that means? We are surrounded by opportunities to sell sun!!!! The only problem is not... Read more

6/14/2021 | Author: Amy Alvarez

If you are recruiting staff for your practice, you are probably experiencing hiring woes. Some are new - it is a tight job market. Not everyone is able to go back to work depending on their individual circumstances and some employers need more employees than before to meet their current... Read more

5/5/2021 | Author: Nathan Hayes

With the spike in patient demand following the COVID-19 Pandemic, many owners are actively recruiting associate ODs to help carry their increased demand. And any owner looking to hire an associate right now knows that the market is tight.

My feeling is we have an outright shortage of... Read more

3/30/2021 | Author: Geronda Wollack

Managing your staff can be challenging! Am I right? Or am I right? Now, managing your staff and feeling confident with whether you are being compliant poses a different level of challenges. I will share a story to illustrate this challenge.

I had a consult with an Office Manager who... Read more

3/30/2021 | Author: Amy Alvarez

Signed into law on March 11th, 2021, The American Rescue Plan Act offers an extension to Families First Coronavirus Response Act. This provision added additional reasons the leave can be used as well as increasing the cap on eligible compensation for a tax credit.

FFCRA... Read more

3/12/2021 | Author: Ximara Vega

What should a practice do when they have lingering product? Well, 1st we have to identify what lingering product is. In my world, lingering product includes all frames that have been sitting on the shelf for a minimum of 6 months. I like to evaluate product every quarter to identify... Read more

© 2021 IDOC. All Rights Reserved