We have helped a number of optometrists either start their own practices or take over ownership of an existing practice. Both come with pros and cons. How do you decide what the best route is for you?
An existing practice is appealing because the patient base is already existing. Appointments are already booked and there is a patient base to re-call from to keep the schedule more or less full. If the owner has done their due diligence leading up to the sale of the practice, then other pieces will be in place. The practice will have kept up with the latest technology, both in diagnostic equipment and their EMR system.
To attract top dollar on the open market, the owner will also have invested in keeping the office renovated over the years. They will have implemented a marketing plan that is making sure the right people are aware of all the office has to offer. An up-to-date website, a social media strategy and AdWord campaigns that are driving in new patients at a consistent rate of 20 per cent is all part of this.
However, if the practice owner has failed to keep the practice up date, there is a price to pay: a lower market value. The reality is that an office that is not keeping current and up to date is creating a gap in the marketplace that a competitor can fill. That competitor could be a brand new player that opens in the area or it could be an associate who decides to invest their money in a new space instead of renovating an existing one.
There are many factors that impact this number, but a start-up or new build generally costs anywhere between $300k and $600k. On the lower end of the scale will be practices who have smaller spaces and number of lanes and use basic finishing materials and mainstream products. On the higher side, practices that have carved out a strategy based on investing in the latest technology, will open in a larger space with multiple lanes and use unique finishing materials and exclusive products.
On the other hand, if you purchase an existing practice, leasehold improvements on their own start around $125k and can go up from there. Now, the biggest thing is to figure out how much needs to be invested in and improved. If you are generally looking at having to improve everything — from introducing an EMR to revamping the frame strategy, the worth of the practice diminishes substantially. While a case could be made for good will— in this day and age of digital marketing and referrals, that good will is not worth what it once was.
It’s an exciting time when you are venturing into Practice Ownership. It is important to look at all the opportunities and weigh them carefully — both from a financial perspective and a quality of life perspective. Both purchasing a practice and building a brand new one are great options — take the time to figure out which option makes the most sense for you.
is the co-founder and managing partner of Simple Innovative Management Ideas (SIMI) Inc. and expert Practice Management contributor for Optik magazine. She can be reached at firstname.lastname@example.org