Optometry Practice Sales and Appraisal
When it comes to negotiating the sale of an optometric practice, price and terms are only a portion of the overall consideration. Deal terms are an expression of the financial understanding between the two parties, but terms are driven by a combination of business and personal motivations as well as market conditions. Having a clear understanding of your goals and objectives regardless of where you are sitting at the table can help facilitate a better and more equitable transaction.
Optometry practice owners should be aware of how practices are valued in today's market and what the steps involved in the sale of optometry practices even if they aren't ready to sell for a number of years. Knowing what to expect down the road will help owners to develop a better pre-sale roadmap.
Younger vision care providers seeking information on how to buy an optometry practice should know what motivates them to buy, as well as what to look for in a potential deal. Whether you are buying or selling a practice, having a better knowledge of the issues allows you to make confident and well-informed decisions.
Buying an Optometry Practice
What do you look for in a practice? Analyzing an optometric practice requires a prioritization of a number of factors. Here are major criteria prospective buyers should consider:
- Market Conditions - What is the current state of the optometry market?
- Profitability – After all, a practice acquisition is a business investment. Does the practice generate sufficient earnings to cover the fair market value of your labor, service debt on a practice loan, and leave you a return on investment? If not, does it have the potential to do so?
- Practice size – Is it an established practice or a start-up? What is its growth potential?
- Location – Do you have preferences for the geographical location, building type, or community?
- Service Mix - Is this a medically oriented optometry practice? High volume? Dispensing or professional service oriented? These are critical questions when determining if the practice is the right fit.
- Red Flags - Conduct your due diligence to find any potential problems. Know how to find red flags in the buying process.
- Miscellaneous. Other factors, such as work-life balance or payor mix, can affect the way you practice optometry. What are your motivations in owning and managing an optometry practice?
This list is by no means exhaustive, but these considerations are critical in buying an optometry practice. It is important to realize that each practice opportunity is different and should be evaluated accordingly. Buyers who rely exclusively on anecdotal information, appraisal rules of thumb, colleague recommendations, and other subjective measures can find it difficult to prioritize their acquisition criteria.
How to Value an Optometry Practice
Business appraisers value optometry practices using three major approaches: income, asset and market. The income approach examines the practice’s historical earnings and financial data to determine its future profitability. The asset approach takes into consideration the fixtures, ophthalmic equipment, frame inventory, exam lanes, and other tangible assets of the practice. The market approach compares the practice’s characteristics with past transactions of similar optometry practices. Appraisers select the methods under each approach which are most appropriate for each situation. Because the vision care industry differs from other businesses, make sure your appraiser specializes in healthcare. General business appraisers may not understand insurance payments and other nuances specific to the operation of an optometry practice.
Selling an Optometry Practice
The decision to sell an optometry practice is only the beginning of a lengthy and often arduous process follows. Fortunately, our experts are equipped to guide you step-by-step from start to finish. We perform the behind-the-scene duties so you can continue operating your practice at its optimal performance. Transition Consultants is your advocate in evaluating, marketing, structuring and negotiating optometry practice sales. Have you decided to sell your practice? Do you plan to retire in the next few years? It is better to start presale planning early, since the process is long and time-sensitive. Contact us at 800-416-2055 for a complimentary consultation.