Buying a practice
Whether you dream of buying a practice quickly after optometry school or want to wait a few years, there are several things to consider before looking for a seller.
Here are four things to keep in mind about buying a practice:
1. Value of the practice
Buying options include purchasing a solo practice or buying into a group practice. Either way, you need to know the value of the practice to determine if you can pay the practice bills, the loan on the practice, your student loans and yourself. Ask first about the practice’s annual revenue. If a solo practice does not have gross collections of at least $650,000 a year, it can be difficult for a newer doctor to earn enough cash flow.
Value also includes the condition of the equipment and the building. Examine whether the practice is a medical practice with the latest optometric equipment, such as an optical coherence tomography instrument or thermal pulsation machine. This will increase value and reduce the amount of new equipment you need to invest in. Ask whether the practice has a fully integrated electronic medical records (EMR) system. Just because a practice has purchased an EMR system doesn’t mean the doctors have been using it yet, which could leave you dealing with the introduction and staff training.
Take a look around. Does the practice look modern? Will you have to invest in new carpeting, furniture, paint and signage? Those costs add up.
2. Type of practice
The type of practice goes beyond whether it is a medical practice or not. Does the style of the practice—especially if you’re buying in, not taking over—fit the style you want? For example, do you want a relaxed feel or a fast-paced environment? Do you want a partnership where you have equal decision-making?
Use some of your early career choices out of optometry school to best judge and experience firsthand and see what the different modalities of optometry are really like.
3. Paying for a practice
Because there is so much money available from large banks, it’s typically easy to get financing for a strong practice, Nolan says. Furthermore, many sellers are willing to finance the sale themselves, particularly for the tax advantages. (The installment sale provision of the IRS generally defers the large tax consequences over a period of time.)
But keep in mind that major banks generally will not finance loans for doctors of optometry until they are two to three years out of school, Nolan says. It’s also important that doctors have strong credit scores, about 725 or higher. You likely won’t need a cash down payment, but you will need a clean credit history to make the transaction easier. So it’s important to pay all your bills and loans on time in preparation for seeking a larger loan.
When you’re buying a practice, it doesn’t mean you also have to buy the building. That’s a bigger loan and more responsibility. Renting may be the safer option, especially if you haven’t worked in the building already and don’t know its quirks.
4. Building your practice
Before you buy a practice, start thinking about how you will retain and increase patients and market yourself to the community. Are you purchasing an existing practice with existing patients? If so this will help you out in the beginning as you will already have clients walking through your door.
Whether you are a new practice or taking over a practice you will still need to market your practice. You have to think about how you will reach potential clients. Is it through social media? Direct Mail? Word of Mouth? Sign Spinners? An ad in the local paper? Most of these options require money so you will have to consider a marketing budget.
With the right planning, buying a practice can be rewarding and profitable.
CONTACT PRACTICE ADVISORS
Now that you have read some basic tips and things to consider you are ready to start your practice. After you have found a place that meets your needs you will still need to make on offer, secure financing, sign the practice sale agreement and lease, and complete the purchase. As you can see a lot of important factors go into this decision. Make sure you are being properly advised. Practice Advisors 360 is the nation’s leading dental advisory company. Contact us today at (844) 360-8360 or visit us online at practiceadvisors360.com