The optometry business experienced steady growth from 2015-2020 due to the rise in aging population and increased awareness of eye health. However, similar to several other industries, the COVID-19 pandemic has had a negative impact on the optometry industry. Many older ODs are looking for an exit strategy more now than ever. Some might sell at a discount to be able to sell it faster. Loans have become lower but if you were out of work for 2-3 months than you might rethink getting a loan if a second wave could shut down a new practice again.
Several optometric practices have been forced to shut down as a significant number of people are now purchasing eyeglasses and contact lenses online.
If you’re considering buying or selling an optometry practice, here are some factors to consider before you take the plunge:
Purchasing an Optometry Practice
Before you purchase an optometry practice, you should have clear goals in mind. Think about your goals for buying an optometry business and how you can secure a perfect deal for yourself.
You can either make a complete purchase or a partial one. A complete purchase is when you buy the entire business at a certain price. You quote a rate and then negotiate with the seller to form a purchase agreement. Arrange funding to pay for the practice and your job is done. Purchasing a business provides you with complete control over it.
A partial purchase is not as expensive as a complete purchase, making it easier for you to get a loan for it. This involves negotiating with the current owner and buying a percentage of the business. The cost and cash flow will be based on the percentage you own. In case you plan to eventually own the entire practice, the agreement may initially include incremental purchases until you own it completely. Important criteria that you need to keep in mind when purchasing an optometric practice include:
Optometry practice owners typically run a business in the city they live in. While this is not necessary, practicing along with community involvement is usually a factor in growth.
Consider the presence of other optometrists in the vicinity when you decide to purchase a business. Check if the market is saturated or there is a need for more optometry practices.
Assess whether there is a growing demand for your products and services in the area you decide to buy a practice. Evaluate the demographics to ascertain the general age groups of people and whether the community is retiring, growing or stable. It is important to weigh in other factors, such as the lifestyles of people who have been affected in the area due to the pandemic.
Whether buying a corporate or private practice consider that many people have a shifted to not going to mall settings or areas where many people gather.
2. Practice Type
Spend time deciding the type of practice you want to buy. Do you want to buy a large, well-established practice or a reasonably priced smaller practice that you aim to transform into a full-time one? Several small optometry businesses are now up for sale as the baby boomer generation is retiring.
If you prefer to buy an already established business at a high price, you will not need to make additional investments. On the other hand, buying a smaller and older business may require you to invest in updated equipment or get the place remodeled.
It is important to carry out a financial assessment before buying a practice. Consider hiring an accountant to review all records. Make sure you have a good know-how of fee schedules, cash on hand, income sources, account receivables, accounts payable, overhead, the sales contract and the transaction itself.
It is relatively easy to get a bank loan for purchasing an optometry practice. Banks typically look for good credit history, small credit card debt, and personal tax returns that can prove a high level of income. If you are married and your spouse is working, that is also a plus point with banks that finance private businesses.
4. Hire a Broker
Perhaps, you are looking to buy an optometry practice but do not have time to search for one. Moreover, you may lack sound knowledge of the terms of sale. In such a scenario, your best bet is to hire a practice broker.
Brokers conduct extensive market research to help you decide which kind of business is most suitable for you to purchase. You can focus on working full time while your broker confidentially surveys the market for you. They will also be responsible for determining a fair market valuation and negotiate the terms of the transaction. Finally, your agent can help you receive funds for the purchase and guard you against common mistakes, such as overpaying for the new practice.
Selling an Optometry Practice
Ever since the pandemic hit, most businesses all over the world have experienced a financial setback. This has shrunk the buyer market, making it challenging for you to find a buyer for your optometry practice at the same time you wish to sell it. Therefore, you must ensure your business is not only good enough to be sold but also gets you the value it’s worth.
1. Exit Strategy
It is often difficult for optometrists to slow down as they grow older. Many are solo practitioners who do not have many alterative options to choose from. Some hire an associate as they lessen their working hours. Others choose to sell the entire business and either work part-time or retire completely.
Here are some key factors you need to consider when deciding your exit strategy from your optometry practice:
· Do you want to retire or work for the new owner?
· If yes, then will you work full-time or part-time? If you own the building where you practiced in, do you want to sell it or give it up for rent?
· Compare your income from the practice with the amount you need to sell it in to be able to afford to retire.
· Keep in mind that selling your optometry practice may take six months to a year. Smaller and rural practices usually take more time to sell than larger, urban practices.
· Plan your exit strategy in advance to increase the chance of its sale.
· Ideally, you should prepare for sale 2-3 years before you plan to retire.
Reputation matters a lot in the field of optometry. Clients are usually loyal to particular practices and often choose optometrists who belong to their friends or family circles.
Make sure your practice has attained sufficient goodwill before you decide to sell it. Create brand awareness in your community, retain your employees, offer efficient customer service and develop a strong marketing campaign.
The scope of digital marketing has grown in leaps and bounds, especially after the pandemic struck the world. Focus on maintaining a fully functional website and advertising customer reviews online. Satisfied clients are more likely to recommend your practice to their friends. A good reputation build over time will enhance the appeal and value of your optometry business with potential buyers.
3. Electronic Record System
Purchasing an electronic record system has the dual benefit of adding to your goodwill and managing your business before the sale. It enables you to run revenue reports, track your clients and help with scheduling visits.
An electronic system is a modern way of managing patient care while you can devote your time to attract more clients and organize your financials to make your practice ready for sale. Make sure you begin planning your sale strategy 2-3 years in advance and consider hiring an agent if you feel the need for assistance in the process.
4. Hire a Broker
Decide whether you have time to manage the sale process alone or require a broker who can help you. If you are considering selling your optometry practice, then it can be challenging to handle the sale transaction along with attending to your patients.
Services of an agent or broker include producing an in-depth prospectus of your business, checking out potential buyers, marketing the practice confidentially, determining the asking price, facilitating the buyer in obtaining funds, and working with an attorney to draft the sales agreement.
Hiring a broker has the advantage of reducing your stress and receiving a good value for your business in the current circumstances.
While many people now prefer to buy eyeglasses and contact lenses online to reduce physical contact, COVID-19 has not completely extinguished to physically visit optometrists. Diagnosing and treating eye diseases are still important jobs that need to be performed physically. Did you know that more than 6 out of 10 people wear eyeglasses or contact lenses? Whether you are preparing to sell or purchase an optometry practice, make sure you focus on strategies to increase sales through digital marketing.
Get your website optimized and use social media for advertisement. You can introduce special services, such as enabling customers to buy eyeglasses online if they are free of eye disease and have a prescription that does not date back beyond a certain time period, such as 24 months.
1. IBIS World, 2020 https://www.ibisworld.com/united-states/market-research-reports/optometrists-industry/
2. CBS, 2013 https://www.cbs.nl/en-gb/news/2013/38/more-than-6-in-10-people-wear-glasses-or-contact-lenses