Unfortunately a lot of todays optometrists a facing a daunting financial challenge. Many tend to enter this profession saddled with debt that can be well into six figures. And this not all, especially if you are someone who wants to purchase their own practice. In that case those optometrists can expect to double, if not triple their amount of debt. On top of all of that, it is common for optometrists to have little or no extra cash needed to purchase things like equipment or other upgrades, much less fund the down payment on a loan.
Now you might be thinking is there some good news coming? And yes, we have some good news when it comes to your dream of owning your own practice. Don’t worry this goal is still within reach. However when it comes to achieving this dream, it requires a more strategic approach than it was required in past generations. That strategy should include paying close attention to:
- Seller’s level of engagement. Sadly not all optometrists have the foresight to retire when their practice is at its peak. It sounds weird right, retire when the practice is at the peak? But that’s the best strategy. Many only sell after they have begun to lose patients to younger, more marketing savvy practitioners. Some delay retirement because of financial missteps made earlier in their careers. A plus side to this is that you might be able to negotiate a better price for these practices, but you might be at risk of purchasing “damaged” goods. So it is important to take in the overall “pulse” of the practice’s overall health. This includes talking to patients and staff and by reviewing financial records dating back five years or more so you can identify and assess trends.
- The practice’s cash flow. While it is tempting for new optometrists to only focus on the outward appearance of the practice they’d like to purchase there are others aspects that need to be seen and evaluated beyond just the condition of the equipment, furniture, computers and other assets. Even though these things are still important, the parts of a practice that deserve the most scrutiny aren’t always visible, like cash flow.
In order to fully understand this you’ll need to examine the practice’s financial records. This is where you’ll learn the most valuable information: when and how customers pay and which procedures generate the greatest revenue, for example, income, expenses, overhead, and collection rates. You will also need to look into any other data that show how money moves in and out of the practice because these are just as critical to understand. The reason for this is simple. Cash flow provides the funds needed to operate a practice and pay the debt associated with its purchase. The better you understand cash flow, the better you can plan for the peaks and valleys that virtually every practice experiences. As you can see all of this requires a bit of financial knowledge and if you don’t think of yourself as a financial person, make sure you have a trusted advisor who is.
- Your financial advisor’s understanding of practice finances. Typically, banks tend to be reluctant when it comes to extending 100% plus financing to professionals who are do not have business experience and long on financial needs. The good news is, banks that specialize in healthcare practice lending understand the obstacles younger optometrists face and offer invaluable solutions, such as lines of credit and flexible payment plans that provide the financial safety net many practices periodically need. That’s why you may want to think twice about working with lenders that assign you a toll-free phone number, rather than a knowledgeable, local banker, to handle your needs. Not only are local bankers able to tailor a financing program to fit your individual circumstances, they may offer ongoing financial advice, industry contacts and other benefits that save you time and money as well.
- The practice’s patient base. So let’s circle back to the previous practitioner. As we mentioned before, it is important to evaluate the previous seller’s practice. You need to consider all the inner workings of the practice before you make a decision. For example information like client demographics can help you get a better handle on how a move to a different location or a marketing program to reach a different customer base might impact business and cash flow. It might also provide insights on tenant improvements to consider, as well as the number of patients you might reasonably gain or lose as you project into the future.
- The practice’s procedures. Once again you are looking into the inner workings of the current practice. You will need to examine closely the procedures of the practice you are considering buying to make sure it is a good fit for you. As a buyer, you will want to know if you can at least match the revenue that the practice has recently generated. Requesting and reviewing The Procedure by Code Report should provide you a detailed understanding of the types of procedures performed.
As you can see there is a lot to consider when taking over a practice, especially and Optometry practice. When it comes to buying a practice is is a lot like to putting together a giant jigsaw puzzle. While it can seem overwhelming at first there is a light at the end of the tunnel. With some persistence, planning and an understanding of what the big picture should look like, you can put your purchase in focus.
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