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"Hear's" to Life!

News, Information and Ideas on how to deal with hearing loss in a hearing world. Plus a few other topics!

Hypothetical Hearing Aid Dispenser Business Plan

Thanks to Ed Belcher for sharing this with me.  He has given me permission to publish his business plan which could, in fact, be the starting point for reducing the cost of hearing aids!  If you have any questions or comments for him, his email is on the plan. 

For the 1st part of this article, please go to this link:

Here's the 2nd part with the actual Business Plan.  I've sent it to the National HLAA office for their consideration.  It will be interesting to see if something is done with it. 

Description of NEWCO, a Hearing Aid Dispenser

Ed Belcher (


Can a hearing aid dispenser provide excellent service and quality aids for 25% of prices currently charged hearing-impaired customers?  This paper hypothesizes such a distributor. The answer is “can be yes” with a win for well-paid company personnel, manufacturers with an increasing volume of sales, and customers obtaining excellent aids and service at a fraction of the current cost.  The General Description gives a brief explanation of the company, with financial details given in Corporate Analysis and the Financial Spreadsheet.

I. General Description

NEWCO distributes hearing aids through 600 franchises spread over the 50
states.  Each franchise has a lead audiologist, two hearing-technicians, a
receptionist, and a part-time bookkeeper. The franchises have the expertise
found in a typical Audiology practice and a large selection of high-end hearing


Assume NEWCO’s corporate facility negotiates directly with manufacturers and
purchases per year at least 560,000 hearing aids, the same number purchased
by the VA. The VA contracted with 5-6 manufacturers and obtained rights to
purchase quality aids averaging $340/aid over the 2010-2014 timeframe.
NEWCO obtains similar prices from the best manufacturers averaging $350/aid.
The VA currently purchases 20% of the hearing aids purchased in the USA.
NEWCO commands 25% of the non-VA market of hearing aid purchasers.
Considering the statistic that only 25% of those needing hearing aids currently
purchase them, NEWCO’s 560,000 aids represent only 1/16th or 6.25% of the
potential non-VA hearing aid market.

In addition to having low hearing aid acquisition costs, the franchises reduce

expenses by sharing advertising expenses with Corporate and sharing net-based
customer relationship software, bookkeeping software, and business
management practices/software. The franchises participate in initial and on-going
training for employees in regional workshops held in mutually convenient


A multi-outlet dispenser is not a new concept. HearUSA, Miracle-Ear, Costco,
and Walmart are just four examples of multi-outlet businesses today. NEWCO
differs from the above four companies in that each service and product is
separately priced and the total price of services and products are 25% of its


This section follows the order of the Business Finances Spreadsheet at the end
of the paper and explains the numbers and the organization behind the numbers.

II. A Corporate Analysis

Corporate negotiates an average price of $350 per hearing aid. Similar to the

price negotiated by the VA for a similar volume of 560,000 aids fitted in one year.

Corporate marks up the aids not by a percentage but flat rate or $35 per aid. The sale price to the franchises is an average of $385 per aid.
The net revenue is $35 times the number of aids sold.


Administrative and Executive Branch

There are 35 members of the administrative staff ranging from assistants to

President.  The average salary is $140,000 ranging from $40,000 for assistants
to hundreds of thousands of dollars for top management.  Corporate does the

1. Negotiates prices and services with manufacturers.

2. Handles national advertising/branding campaigns for all of the franchises.

3. Provides at cost all franchises with bookkeeping software, customer-relations
software, and franchise-management software.  These packages are all internet-
based with data stored redundantly at two separate off-site locations for safety.

4. Trains and monitors franchises in business management, operation of

software packages, and customer services. If a customer moves, s/he knows that records, warrantees, and the same expert treatment are available in any other NEWCO franchise.


Administrative space will be 10,000 square feet at $20 per square foot per year. The facility is situated in a location requiring modest rent and centrally located for travel considerations.


Corporate spends $9.65 on advertising for each hearing aid purchased or 27.6%
of markup.  The resulting $5 Million will be used annually for national campaigns
that brand the franchises, their services, and features of the aids currently sold.
NEWCO expects word-of-mouth from satisfied customers to be their best

FICA and Benefits

Social Security and Medicare insurance born by the employer and employee will be 15.3% of wages. Benefits including healthcare insurance and 401(k)
contributions will be 12% of wages.


Unallocated Expenses

Rather than try to make this budget delineate every tax, fee and expense at this stage, a large category of Unallocated Expenses covers those expenses.  Part of this amount may be corporate distributions to shareholders and bonuses.


The markup of $35 on each of the 561,508 aids sold in one year provides $19,652,780 for the corporate facility and its staff.


II.B Franchise Assumptions

Each franchise obtains a license to operate as a franchise of NEWCO and has the following benefits and obligations:


1. Top-of-the-line hearing aids cost an average of $385 each.

2. Training for staff will be available periodically each year at various locations convenient to groups of franchises featuring manufacturers under contract, and experts in business management and the field of Audiology.

3. Advertising/branding the franchise, its services and products

3. Quality software for bookkeeping, customer relations, and management.



1. Pricing for services and products is standardized

2. Quality of service and equipment exceeds standards

3. Quality of the facility exceeds standards

3. Salaries have local control with ranges related to job function.

4. The more aids and services sold, the more profit for the franchise. Profits are dispersed within the franchise for facility and equipment upgrades along with bonuses, and increased salaries.

5.  Each franchise will spend approximately 2% of its revenues to augment corporate advertising.


An audiologist leads the staff. Two hearing-technicians help in areas such as
tests, fittings, adjustments, and ordering aids products.  The receptionist greets
the customers, notifies the technical staff of arrivals, maintains the appointment
calendar and updates the customer relations software. A bookkeeper (or
bookkeeping firm) works approximately 16 hours/week and handles Payables,
Receivables, Payroll, Tax computations, and maintaining on-line bookkeeping


In this hypothetical company, the minimum desired salaries for the staff are:

Audiologist              $120,000

Lead Tech              $50,000

Tech              $42,000

Receptionist              $38,000

40%-time Bookkeeper              $20,000

With the assumed cost/revenue structure, the franchise numbers are: Number of Aids sold per year:  916

For corporate to sell over 560,000 aids/year it needs 613 franchises

The franchise buys aids from Corporate for an average of $385/aid

The franchise sells the aids to customers for an average price of $565 each To sell 916 aids the franchise needs 458 paying customers
To get this final result the following are performed:
641 hearing tests

609 fittings

1827 adjustments

305 additional 30 minute visits
25 2-hour support groups


NEWCO is a fee-for-service organization.  For most hearing aid sales, the following services will be needed:


1 hearing test

1 fitting

3 adjustments


1 Year Support Group Membership
required part of the purchase package)


$100 (1 hour)

$150 (2 hours)

$50 each (1/2 hour each)

$50 (optional - a suggested but not a

For the activities listed above, the actual salaries are:

Audiologist              $120,202

Lead Tech              50,088

Tech              42,074

Receptionist              38,067

Part-time Bookkeeper              20,235

Increased salaries or bonuses can be obtained with an increase in activity.



Rent: Assume a 2000 square-foot office at $20/square-foot-year


Equipment: Cost of Maintenance, Repair, and Replacement


Advertising:               2% of total revenue for local campaigns.  Corporate supplements
advertising with a $5,400,000 national campaign to brand the business, its
service, its products and costs.


Unallocated Expenses: Expenses not covered in the allocations above, profit for shareholders and/or extra bonuses


FICA (Federal Insurance Contributions Act)

15.3% Social Security and Medicare Insurance Payments



12% 401(k) retirement account and health insurance

Work Hours (Possible and Actual)

Assume practice hours consist of five 7-hr days per week for 48 weeks per year. That would be 1680 hours/year per person.  The billable hours are performed by three staff members to provide a possible total per year of 5,040 billable hours. The calculated workload (including two staff members at 25 support group
meetings) to achieve the franchise activities in the spreadsheet is 3025 hours.  A 3-person staff would average 4.2 hours each per day.  This leaves nearly 3 hours per day for seeing customers for other issues related to hearing and balance,
studying the current literature, and going to workshops and other outside tasks while not infringing on the 4 weeks of vacation leave.


III. Summary

Three major differences between NEWCO and its competition are:

1) The total package for a pair of hearing aids will average $1,530 approximately 25% of obtaining similar hearing aids from the competition.


2) Services rendered are charged whether aids are purchased or not.  Assume a
customer had her hearing tested, hearing aids fitted, and three adjustments with
the purchased aids. If the customer decides not to keep the aids, she will get all
her money back except for services rendered. In the above case the services
were: test ($100), fitting ($150), and three adjustments ($ 50 each) for a total of
$400.  If fewer services were rendered before the aids were returned, the cost to
the customer would be less.  Charging fees for services rendered is expected in
laws affecting hearing aid distribution.  It is VERY IMPORTANT that the customer
is told and agrees that charges for services rendered will be withheld from money
refunded if hearing aids are returned during the trial period.


3) A support group is available.  It is two hours long and held 25 times a year.

Each meeting will be facilitated by two members of the staff (audiologist and one
of the two hearing-technicians) It is open to anyone who has paid a $50 annual
fee.  This includes prospective customers and purchasers of hearing aids from
other dispensers.  The two hours will have guest speakers discussing equipment
and programs available to the hearing impaired. There will be time for general
discussion of member experiences and ways to cope.  Also there will be time at
each meeting where one can talk one-on-one to a staff member about a

particular issue.  If more time is needed, an office visit can be scheduled.


NEWCO Business Finances Draft Rev: 17 June 2012              Ed Belcher

Corporate Facility

Manufacturer Price              350

Number Aids Purchased              561508

Markup ($)              35

Sell Price              385

Net Revenue Central Facility              19,652,780.00



Administration              4,900,000.00              35              140000              Ave Salary              See Com. 1

Rent              200,000.00              $20/sqft/year              10000              sqft

Advertising              5,418,552.20              $9.65 * number aids sold

FICA and Benefits              1,337,700.00

UnAllocated Expenses              7,796,527.80              Com. 1              Executive, contracts with manufactures,

Total              19,652,780.00              Advertising Liason, Central support, Franchise suport



Number of Franchises              613

HA purchase price              385

Markup              180

Sell Price              565

Number aids sold              916

Cost Hearing Exam              100

Number hearing exams              641              1              hour

Cost Fitting              150

Number of Fittings              609              2              hours

Cost Adjustment              50

Number of adjustments              1827              0.5              Assume 3 adjustments/fitting

Cost Additional Visits              50

Number of Additional Visits              305              0.5              Assume 1 visit

Cost Support Group Entry              50

Support Group Members              485              1 2-hour sessions 25 weeks/year)


Revenue/Franchise              451,180.00

Personnel/Franchise              $Gross Labor              $Salary              $ Desired              Desired              Benefits

Audiologist1              165,353              120,212              120000              0.44              14425.43

Audiologist2              0              0              0              0.00              0

Tech1              68,897              50,088              50000              0.19              6010.597

Tech2              57,874              42,074              42000              0.16              5048.901

Receptionist              52,362              38,067              38000              0.14              4568.054

Bookkeeper 40%              27,559              20,035              20000              0.07              2404.239

Total $              372,045              270,477              270000              1.00



Rent              40,000.00              2000              sqft              Occ Tax              0.153

Equipment              15,000.00              Benefits              0.120

Advertising              9,023.60              Total              0.273

UnAllocated Expenses              15,111.20

FICA and Benefits              101,568.34

Total Expenses              180,703.14


Total Salaries & Expenses              451,180.00              (Equals Revenue/Franchise)


Work Hours (Possible/Year)              5040              hours (3 people)              5 7-hr days/week  48 weeks/year              4 weeks vacation

Actual Contact Hours              3025              hours              60.0              % of a 7-hour day    or              4.2              contact hours/day

Final Price to Customer              1530              % of 6300 =              24.3

2 aids, test, fitting, and 3 adjustments

If a one-year membership in the support group is desired, add $50 to the above price.


Table 1. Financial Spreadsheet of a hypothetical, multi-outlet dispenser of
hearing aids.  See Section II. for detailed explanation of  data entries.

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