23 data to include in the business plan of your optical store

This article was written by our expert who is surveying the industry and constantly updating the business plan for an optical store.

Our business plan for an optical store will help you build a profitable project

Ever wondered what the ideal inventory turnover ratio should be to ensure your optical store remains profitable?

Or how many eye exams need to be conducted each week to meet your revenue goals?

And do you know the perfect cost of goods sold percentage for a successful optical retail business?

These aren’t just nice-to-know numbers; they’re the metrics that can make or break your business.

If you’re putting together a business plan, investors and banks will scrutinize these figures to gauge your strategic approach and potential for success.

In this article, we’ll cover 23 essential data points every optical store business plan needs to demonstrate you're prepared and ready to thrive.

Optical stores should aim to keep cost of goods sold (COGS) below 50% of revenue to maintain healthy margins

Optical stores should aim to keep their cost of goods sold (COGS) below 50% of revenue to ensure they maintain healthy profit margins.

By keeping COGS under this threshold, stores can allocate more resources to other essential areas like marketing and customer service, which are crucial for growth. Additionally, lower COGS allows for more flexibility in pricing strategies, enabling stores to offer competitive prices or promotions without sacrificing profitability.

However, this target can vary depending on factors such as store location and the specific product mix offered.

For instance, stores in high-rent areas might need to adjust their COGS target to account for higher operating expenses. Similarly, stores that focus on premium eyewear might have a higher COGS but can offset this with higher price points and luxury branding.

Labor costs should ideally range between 15-25% of total sales to ensure profitability

In an optical store, maintaining labor costs between 15-25% of total sales is crucial for ensuring profitability.

Labor costs include salaries, benefits, and other expenses related to employees, which are significant but need to be balanced with other operational costs. Keeping these costs within this range helps the store to allocate sufficient resources to other areas like inventory, marketing, and technology, which are essential for business growth.

However, this percentage can vary depending on the store's location, size, and customer base.

For instance, a store in a high-rent area might need to adjust its labor cost percentage to accommodate higher overheads, while a smaller store with fewer employees might naturally have a lower percentage. Additionally, during peak seasons or when launching new services, labor costs might temporarily exceed this range to meet increased demand or to invest in staff training and development.

The average turnover rate for optical store staff is around 30%, so budget for moderate recruiting and training costs

The average turnover rate for optical store staff is around 30%, which means you should budget for moderate recruiting and training costs.

This turnover rate can be attributed to factors such as the need for specialized skills and the competitive nature of the retail industry. Employees often leave for better opportunities or due to dissatisfaction with their current roles, which is common in retail settings.

Additionally, the optical industry requires staff to have a mix of technical and customer service skills, making it challenging to find the right candidates quickly.

Turnover rates can vary depending on the store's location and management practices. Stores in high-traffic areas or with strong leadership might experience lower turnover, while those in less desirable locations or with poor management could see higher rates.

60% of new optical stores fail within the first three years, often due to cash flow issues

Many new optical stores struggle to survive beyond their first three years, with about 60% failing, primarily due to cash flow issues.

One major reason is the high initial investment required for inventory, equipment, and store setup, which can strain financial resources. Additionally, optical stores often face delayed payments from insurance companies, which can further exacerbate cash flow problems.

Moreover, competition from established brands and online retailers can make it difficult for new stores to attract and retain customers, impacting their revenue streams.

However, the success rate can vary depending on factors such as location and target market. Stores in high-traffic areas or those that cater to a niche market may have a better chance of overcoming these challenges and achieving financial stability.

Optical stores should aim for a break-even point within 12 months to be considered viable

Optical stores should aim for a break-even point within 12 months to be considered viable because this timeframe aligns with typical business expectations for achieving financial stability.

Reaching the break-even point within a year helps ensure that the store can cover its initial investment and operational costs, which is crucial for long-term sustainability. Additionally, it demonstrates that the store has successfully attracted a steady customer base and can maintain consistent sales.

However, this timeframe can vary depending on factors such as location, competition, and the store's unique business model.

For instance, a store in a high-traffic area might reach break-even faster due to increased footfall, while a store in a less populated area might take longer. Similarly, stores offering specialized services or products may have different timelines based on their target market and pricing strategy.

Contact lenses typically have a profit margin of 40-50%, higher than frames, making them crucial for profitability

Contact lenses often boast a profit margin of 40-50%, which is generally higher than that of frames, making them a key component for an optical store's profitability.

One reason for this is that contact lenses are typically purchased more frequently than frames, as they need to be replaced regularly, leading to consistent sales. Additionally, the production costs for contact lenses can be lower, allowing stores to maintain a higher markup on these products.

However, the profit margin can vary depending on factors such as brand exclusivity and the store's negotiated supplier agreements.

For instance, stores that have exclusive rights to sell certain brands may enjoy higher margins due to reduced competition. On the other hand, stores in highly competitive markets might have to offer discounts or promotions to attract customers, which can lower their profit margins.

Prime cost (COGS and labor) should stay below 70% of revenue for financial health

Keeping the prime cost, which includes COGS and labor, below 70% of revenue is crucial for the financial health of an optical store because it ensures that there is enough margin left to cover other expenses and generate profit.

In an optical store, the cost of goods sold includes the cost of frames, lenses, and other optical products, while labor costs cover the salaries of opticians and sales staff. If these costs exceed 70% of revenue, the store might struggle to cover other operational expenses like rent, utilities, and marketing, which are essential for maintaining and growing the business.

By keeping prime costs under control, the store can ensure it has a healthy profit margin to reinvest in the business or save for future needs.

However, this percentage can vary depending on specific circumstances, such as the store's location, the level of competition, and the target market. For instance, a store in a high-rent area might need to keep prime costs even lower to maintain profitability, while a store with a niche market might afford slightly higher costs due to premium pricing strategies.

Optical stores should ideally reserve 1-2% of revenue for equipment maintenance and replacement annually

Optical stores should ideally reserve 1-2% of revenue for equipment maintenance and replacement annually because this ensures that their tools and machines are always in optimal working condition.

Regular maintenance helps prevent unexpected breakdowns, which can disrupt service and lead to lost revenue. Additionally, setting aside funds for replacement allows stores to upgrade to new technology when necessary, keeping them competitive in the market.

However, the exact percentage can vary depending on the size and specific needs of the store.

For instance, a larger store with more equipment might need to allocate a higher percentage to cover the costs of maintaining a larger inventory. Conversely, a smaller store with fewer machines might find that 1% is sufficient to meet their needs.

A successful optical store should aim for an average transaction value increase of 5-10% year-over-year

A successful optical store should aim for an average transaction value increase of 5-10% year-over-year because it reflects healthy business growth and adaptation to market trends.

By targeting this increase, the store can ensure it is keeping pace with inflation and rising costs, which helps maintain profitability. Additionally, it allows the store to invest in new technologies and products, enhancing the customer experience and staying competitive.

However, this target can vary depending on factors such as the store's location, customer demographics, and the range of products offered.

For instance, a store in a high-income area might aim for a higher increase due to a clientele willing to spend more on premium products. Conversely, a store in a more price-sensitive market might focus on volume sales rather than increasing transaction value, emphasizing affordable options and promotional offers to attract customers.

Inventory turnover should happen every 3-4 months to avoid obsolescence and ensure freshness

Inventory turnover in an optical store should occur every 3-4 months to prevent product obsolescence and maintain product freshness.

Optical products, like frames and lenses, are subject to fashion trends and technological advancements, which can quickly render them outdated. Regular turnover ensures that the store offers the latest styles and innovations, keeping customers interested and satisfied.

Additionally, some optical products, such as contact lenses, have expiration dates that necessitate timely sales to avoid waste.

However, the frequency of inventory turnover can vary based on factors like store location and target market. For instance, a store in a fashion-forward city might need more frequent updates compared to one in a rural area, where trends change more slowly.

It's common for optical stores to lose 2-4% of revenue due to theft or inventory shrinkage

Optical stores often experience a 2-4% revenue loss due to theft or inventory shrinkage because they deal with high-value, small-sized items that are easy to steal.

These stores typically carry a wide range of expensive eyewear and accessories, making them attractive targets for theft. Additionally, the small size of these items makes them easy to conceal, increasing the risk of shoplifting.

Inventory shrinkage can also occur due to employee errors or mismanagement, which can lead to discrepancies in stock levels.

The extent of revenue loss can vary depending on factors such as the store's location and security measures. Stores in high-traffic areas or those with inadequate security systems may experience higher rates of shrinkage compared to those with robust loss prevention strategies.

Rent should not exceed 8-12% of total revenue to avoid financial strain

In an optical store, keeping rent between 8-12% of total revenue is crucial to maintain financial health.

When rent exceeds this percentage, it can lead to financial strain, making it difficult to cover other essential expenses like salaries, inventory, and utilities. This is because a higher rent percentage reduces the available cash flow for these necessary operational costs.

However, this percentage can vary depending on factors such as location and store size.

For instance, a store in a high-traffic area might justify a slightly higher rent percentage due to increased sales potential. Conversely, a store in a less busy area should aim for the lower end of the spectrum to ensure sustainable profitability.

Upselling premium lens coatings can increase average ticket size by 15-25%

Upselling premium lens coatings in an optical store can significantly boost the average ticket size by 15-25% because these coatings add substantial value to the basic lens purchase.

Customers often seek enhancements like anti-reflective coatings or blue light filters, which not only improve visual comfort but also protect their eyes from harmful elements. These additional features are perceived as essential by many, making them more willing to invest in higher-quality options.

However, the impact on ticket size can vary depending on the customer's specific needs and budget.

For instance, a customer who spends a lot of time on digital devices might prioritize blue light protection, while someone who drives frequently at night might opt for anti-glare coatings. By understanding these individual preferences, optical stores can tailor their upselling strategies to maximize both customer satisfaction and revenue.

The average profit margin for an optical store is 5-10%, with higher margins for independent stores and lower for chains

The average profit margin for an optical store typically ranges from 5-10%, with independent stores often enjoying higher margins compared to chain stores.

This difference is largely due to the fact that independent stores have more flexibility in pricing and can offer personalized services that attract loyal customers willing to pay a premium. On the other hand, chain stores often operate on a volume-based model, focusing on selling a large number of products at lower prices, which can squeeze their profit margins.

Additionally, independent stores may have lower overhead costs, as they often operate in smaller spaces and have fewer employees.

However, profit margins can vary significantly depending on factors such as location, the range of products offered, and the store's ability to negotiate with suppliers. Stores in high-rent areas or those that stock a wide variety of high-end brands may face higher costs, which can impact their margins.

Average check amount should grow by at least 3-5% year-over-year to offset rising costs

In an optical store, the average check amount should grow by at least 3-5% year-over-year to effectively offset rising costs.

These rising costs can include factors like increased supplier prices for lenses and frames, as well as higher operational expenses such as rent and utilities. If the average check amount doesn't increase, the store might struggle to maintain its profit margins and could face financial difficulties.

However, the required growth rate can vary depending on specific circumstances, such as the store's location and customer base.

For instance, a store in a high-income area might be able to increase prices more easily, while a store in a more price-sensitive market might need to focus on increasing sales volume instead. Additionally, if a store has invested in advanced technology or offers specialized services, it might justify a higher increase in the average check amount to cover these additional costs.

Ideally, an optical store should maintain a current ratio (assets to liabilities) of 1.5:1

Ideally, an optical store should maintain a current ratio of 1.5:1 because it indicates a healthy balance between its current assets and current liabilities.

This ratio suggests that the store has enough resources to cover its short-term obligations, which is crucial for maintaining financial stability. A ratio of 1.5:1 provides a buffer against unexpected expenses or fluctuations in sales.

However, this ideal ratio can vary depending on the specific circumstances of the store.

For instance, a store with a high turnover rate of inventory might operate efficiently with a lower ratio. Conversely, a store facing seasonal demand might need a higher ratio to ensure it can meet its obligations during slower periods.

Effective merchandising can boost revenue by 10-15% by highlighting high-margin products

Effective merchandising in an optical store can significantly boost revenue by 10-15% by strategically highlighting high-margin products.

When customers walk into an optical store, their attention is often drawn to displays that are visually appealing and well-organized. By placing high-margin eyewear in prominent positions, such as eye-level shelves or near the checkout counter, stores can increase the likelihood of these items being noticed and purchased.

This approach not only encourages impulse buying but also helps in upselling, as customers may be more inclined to choose a premium product when it's presented as a featured item.

However, the effectiveness of merchandising can vary depending on factors like store location, customer demographics, and the overall shopping experience. For instance, a store in a high-traffic urban area might see a greater impact from merchandising strategies compared to a store in a rural setting, where customer preferences might differ. By tailoring merchandising efforts to the specific needs and behaviors of their target audience, optical stores can maximize their revenue potential.

An optical store should have 0.5-0.75 square meters of retail space per customer to ensure comfort and efficiency

An optical store should have 0.5-0.75 square meters of retail space per customer to ensure comfort and efficiency because it balances the need for personal space with the store's operational requirements.

Having this amount of space allows customers to browse and try on eyewear without feeling cramped, which enhances their shopping experience. Additionally, it provides enough room for staff to assist customers effectively, ensuring that service remains prompt and attentive.

However, the ideal space allocation can vary depending on factors such as the store's location and the type of products offered.

For instance, a store in a high-traffic urban area might need to optimize space differently compared to a suburban store with more room. Similarly, stores offering a wide range of products, including high-end designer frames or specialized optical equipment, might require more space to display their inventory attractively and securely.

Customer satisfaction scores can directly impact repeat business and should stay above 85%

Customer satisfaction scores are crucial for an optical store because they directly influence the likelihood of repeat business.

When customers are satisfied, they are more likely to return for future purchases, such as new glasses or contact lenses. Additionally, satisfied customers are more inclined to recommend the store to others, which can lead to increased foot traffic and sales.

Maintaining a satisfaction score above 85% is essential because it indicates a high level of customer approval and trust.

However, the impact of satisfaction scores can vary depending on specific cases, such as the complexity of a customer's prescription or the availability of desired eyewear brands. In situations where a customer has a unique need, personalized service can significantly enhance their experience, making them more likely to return even if the overall score is slightly lower.

Stores in high-density areas often allocate 2-4% of revenue for online sales platforms and fees

Stores in high-density areas often allocate 2-4% of revenue for online sales platforms and fees because they need to maintain a strong digital presence to compete effectively.

In bustling urban environments, the competition is fierce, and having a robust online platform helps optical stores reach a broader audience. This allocation covers costs like website maintenance, transaction fees, and digital marketing efforts to attract and retain customers.

However, the percentage of revenue allocated can vary depending on the store's specific circumstances.

For instance, a store with a well-established brand might spend less on digital marketing, while a newer store might need to invest more to build its online presence. Additionally, stores that offer unique or high-end products might allocate a higher percentage to ensure their online platforms effectively showcase their offerings and reach the right audience.

Digital marketing should take up about 4-6% of revenue, especially for new or growing stores

Digital marketing should take up about 4-6% of revenue for optical stores, especially those that are new or growing, because it helps establish a strong online presence and attract customers.

For new optical stores, investing in digital marketing is crucial to build brand awareness and reach potential customers who are searching for eyewear online. Growing stores can use this budget to expand their reach and compete with established brands by leveraging targeted ads and social media campaigns.

However, the percentage of revenue allocated to digital marketing can vary based on factors like store location, target audience, and competition.

For instance, stores in highly competitive urban areas might need to spend more to stand out, while those in less competitive regions might get by with a smaller budget. Additionally, if a store has a unique selling proposition, such as eco-friendly eyewear, it might require a different strategy and budget allocation to effectively communicate this to its audience.

Seasonal promotions can increase sales by up to 20% by attracting repeat customers

Seasonal promotions can boost sales by up to 20% in an optical store by enticing repeat customers to return for more purchases.

These promotions often create a sense of urgency and excitement, encouraging customers to take advantage of limited-time offers. Additionally, they can help build customer loyalty by providing exclusive deals to those who have previously shopped at the store.

For instance, offering discounts on prescription glasses during back-to-school season can attract parents looking to update their children's eyewear.

However, the effectiveness of these promotions can vary depending on factors such as location and target audience. In areas with a high concentration of students, back-to-school promotions might be more successful, while in regions with an older demographic, promotions on reading glasses during the holiday season could yield better results.

Establishing a COGS variance below 3% month-to-month is a sign of strong management and control.

Establishing a COGS variance below 3% month-to-month in an optical store is a sign of strong management and control because it indicates consistent and efficient handling of inventory and costs.

In an optical store, the cost of goods sold includes expenses related to lenses, frames, and other optical products, which can fluctuate due to supplier pricing or demand changes. By maintaining a low variance, the store demonstrates its ability to predict and manage these fluctuations effectively.

This level of control suggests that the store has implemented robust inventory management practices, ensuring that stock levels are optimized and waste is minimized.

However, the acceptable variance can vary depending on specific cases, such as seasonal demand changes or new product launches, which might temporarily increase COGS variance. In such scenarios, a slightly higher variance might be acceptable, provided it is part of a strategic plan to capitalize on market opportunities.