As a business broker that has participated in well over 50 Optometry practice transitions in Minnesota, I have seen just about everything when it comes to buying or selling a practice. While every transition is unique in some way, each transition has some key similarities that can be planned for in advance. This article contains a recap of what I believe are the most important questions I have been asked by optometrists who want to buy a practice.
Q. What are my ownership options?
A. If you currently work at a practice, you may have the option of buying in as a partner or purchasing it outright. You can also consider a start-up or purchasing an existing practice. All options are viable ones. But each is very different in many ways from the others. So, you will want to carefully research the plusses and minus of each option before choosing your path forward.
Q. How does the income for practice owners compare to non-owners?
A. According to a 2018 survey published by the AOA, private practice Optometrist owner’s average income was $172,016 while non-owner Optometrist income averaged $121,609, a difference of over $50,000.
Q. How should owning a metro area versus an out-state location factor into my decision?
A. This is a tough one, as it is such a personal decision as to where someone should live and work. So, when asked this question, I focus on the economics involved. Besides the obvious advantage of a lower cost of living for the owner, out-state practices are typically more profitable than comparable sized metro area practices because their operating expenses and overhead is so much lower. Also, many out-state practices have little to no competition from corporate practices or big box retailers. When these factors are combined, it’s not uncommon for an out-state practice owner generate a couple of million dollars of additional income over the life of their ownership of the practice versus a similar sized metro area practice.
Q. How will I know when I can afford to purchase a practice?
A. I suggest prospective buyers contact a banker that specializes in practice financing to understand what qualification are necessary. An experienced and qualified banker can walk a buyer through their options as well as put a game plan together. In my experience, buyers are almost always surprised to discover that even if they are only a few years out of Optometry school and are saddled student loan debt, they often already qualify to purchase an Optometry practice for no money down. So, it’s never too soon to meet with a banker to understand what you borrowing options are.
Q. How else should I prepare for purchasing a practice?
A. If you plan to start up a practice, you will want to work with an attorney and an accountant to form the professional corporation. If you plan to buy-in to an existing practice or purchase one outright, you will want an attorney and an accountant to weigh in on whether you need to establish a new professional corporation or if you will purchase the stock of the current owner’s legal entity. These are complicated matters with potential ramifications that require professional advice.
Q. Once I find the right practice, how long will it take to complete the purchase process?
A. Once price and terms are agreed to, a typical transaction takes 60 to 90 days to complete (as long as insurance credentialing isn’t problematic).