When an optometry practice changes hands, attention often settles on the purchase price. But beneath that number is a more practical question: what exactly is being transferred to the buyer, and what remains with the seller?
A “debt free, cash free” deal is one way this is addressed, particularly when equipment financing, leases, inventory, and working capital are involved. The phrase sounds simple, but the details can materially affect what the buyer receives and what the seller keeps.
What does “debt free, cash free” mean?
At its core, this structure separates the operating value of the practice from its financing history. The buyer acquires the clinic, patient base, goodwill, systems, and operating assets, but not the seller’s excess cash or debt obligations.
For optometry practices, this distinction matters because equipment loans and leases are often tied directly to the assets needed to run the clinic. Exam lanes, imaging systems, diagnostic technology, and optical equipment may all carry financing that must be dealt with before closing.
Equipment loans and the reality of settlement
Equipment loans are often paid out before closing so the buyer receives the equipment free and clear. That keeps the transaction clean, but it also affects the seller’s net proceeds.
A practice may have a strong headline value, yet the owner’s actual outcome can be reduced if recent technology purchases still carry significant debt. This is one reason sellers need to look beyond the sale price and understand how financing will be settled.
When are leases transferable?
Leases introduce a more nuanced layer. Unlike term loans, some equipment leases can be assigned to a buyer, subject to lender approval. When this happens, the obligation may travel with the asset rather than being paid out beforehand.
In practice, there are three common ways to address leases:
- Assigned to the buyer: the buyer assumes the remaining payments, usually with lender approval and a purchase price adjustment.
- Paid out by the seller: the seller clears the lease before closing so the asset transfers free and clear.
- Handled through a negotiated adjustment: the economics of the lease are reflected in the deal rather than strictly assigned or paid out.
The important detail is that “transferable” does not mean “automatic.” Lease terms, lender policies, and buyer qualifications all matter. This should be clarified early in the transaction process to avoid last-minute disruption.
Working capital and inventory
Even in a debt free, cash free deal, the buyer expects to receive a clinic that can operate on day one. That usually means a normal level of working capital, including receivables, payables, prepaid expenses, and inventory.
Most transactions establish a working capital target that reflects what is typical for that practice. If the seller runs inventory unusually low before closing, or builds it up beyond normal levels, the purchase price may be adjusted back to the agreed baseline.
Inventory deserves particular attention in an optometry practice because frames, lenses, and contact lenses support both patient care and revenue generation. It is usually included as part of working capital delivered at closing, but it is not always valued at retail.
- Inventory is typically measured at cost rather than retail value.
- Slow-moving frames, outdated styles, or discontinued product lines may be discounted or excluded.
- Unusual changes before closing are often adjusted back to a normal operating level.
For sellers, this can highlight capital tied up in product. For buyers, it helps ensure the clinic remains ready to operate immediately after closing.
The definitions drive the outcome
The phrase “debt free, cash free” provides structure, but the definitions drive the outcome. Which debts must be cleared? Which leases can be assigned? What level of working capital is normal? How will inventory be valued?
These details directly influence both the buyer’s experience and the seller’s net result. In optometry, where equipment investment and inventory management are part of daily practice life, clarity on these points can prevent surprises and create cleaner expectations on both sides.
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Roxanne Arnal is a Certified Financial Planner®, Chartered Life Underwriter®, Certified Health Insurance Specialist, former optometrist, Professional Corporation President, and practice owner. She is dedicated to empowering individuals and their wealth by helping them make smart financial decisions that bring more joy to their lives.
This article is for information purposes only and is not a replacement for personalized financial planning. Errors and omissions excepted.
ROXANNE ARNAL,
Optometrist and Certified Financial Planner
Roxanne Arnal graduated from UW School of Optometry in 1995 and is a past-president of the Alberta Association of Optometrists (AAO) and the Canadian Association of Optometry Students (CAOS). She subsequently built a thriving optometric practice in rural Alberta.
Roxanne took the decision in 2012 to leave optometry and become a financial planning professional. She now focuses on providing services to Optometrists with a plan to parlay her unique expertise to help optometric practices and their families across the country meet their goals through astute financial planning and decision making.
