Failure to plan is planning to fail. This is especially true when transitioning out of your optometry practice.
It’s the goal of many professionals, ODs included, to make the most out of their practice when it’s time to call it a quit. Whether you want to retire or want to get into other things, proper planning and preparation are paramount.
Although many young professionals are looking for practice opportunities in the private sector, transitioning out of practice is still tough.
A survey done by the American Optometric Association in 2017 showed that about 58 percent of optometrists work in private practice, with more than 27 percent of them being in practice for over 30 years.
With this information at our disposal, the discussion around the transitioning out of practice is more relevant than ever. Luckily, this post will provide tips that will help you transition out of practice easily and profitably.
Timing is Key
Transitioning out of practice requires time. It’s not something you do without proper planning. Not at all. It will need proper planning in advance. Ideally, it can take up to five years to finalize this type of transaction.
Therefore, you need to start planning for your transition early enough. As earlier stated, while many optometry graduates seek to enter into private practice, there is a disconnect between the seller and buyers. Planning will help overcome these challenges.
Know Your Worth
Knowing the value of your practice before transitioning is key. This is probably the first question that potential buyers will ask when considering buying your practice.
Many factors will determine your practice’s value, including location, existing experts, facilities, and whether you will stay on the practice after the sale or not. Gross sales, net sales, staff, suppliers, existing contracts, etc., will also determine the value of your practice.
Getting an optometry practice appraisal and valuation can give you a much better understanding of overhead and profits for your company.
Maintain Your Revenue
While equipment upgrades and other factors will determine your practice’s value, potential buyers will be more interested in revenue. Don’t give in to the idea of relaxing and cutting back on your hours as you approach your retirement.
This can reduce your revenue, which can lead to a fall in your practice value. Appraisers will question why your practice has a downward trajectory in revenue. They will not see it as a choice.
Try and keep your revenue constant or grow it a little, if possible. This way, you can get a top-dollar when you finally transition out of practice.
Finding a Buyer
Job boards like AOA’s career center and optometry schools are some of the places you can post about your practice. You can also list your practice on for-profit job boards, states’, or schools’ newsletter associations.
You can also recruit a potential buyer from your school if you plan early enough.
Consulting is Key
Consultants can help both sellers and buyers in various ways. While consultants will charge you a fee for their services, their services can save you money and time. They will also prevent the frustration that would come during the transition process. For better results, choose consultants specializing in optometry.
As earlier stated, the value of a practice is based on both assets and earnings. Unlike tangible assets, it can be challenging to value intangible assets.
While the practice’s earnings may seem obvious, the amount of cash flow that a company will have after operational costs will also determine its value.
Your practice’s certified public accountant, your attorney, and consultants will play a vital role when transitioning out of practice. You may also want to involve experienced financial advisors in your transition process.
These experts will help you manage tax issues, help devise a retirement plan, create financial reports, assist in asset base determination, etc.
Work on Increasing the Value of Your Practice
Some optometrists work until they are about to retire before planning for the transition. Doing this will work against you as you will not have enough time to work on all value drivers before the transition.
Plan for you to exit early enough and aim to boost your practice’s value from the word go.
This will help boost your revenue and increase your chances of getting the top price for your business. After all, your business is worth what buyers are willing to pay. Instead of wondering what the worth of your practice is, find ways to increase your business value.