Selling a small practice is nevery easy.
However, not everything went according to plan. He soon became overextended in terms of time, cash, and resources. To make matters worse, the second practice turned out to be a big disappointment. Located in a strip mall, the high rent ate up much of the gross profit, which turned out to be less than the revenues claimed on the profit and loss statement by the previous owner. Last year, the office also was flooded on four different occasions.
Straddled with bills and headaches, the optometrist decided to cut his losses. He moved his first office to a better location, remodeled it, and invested in technology. He put the second practice up for sale.
Selling a small practice is never easy, mainly because it doesn't generate enough income to support a full-time optometrist. While there are common approaches sellers can use to attract buyers, such as lowering the sales price, remodeling, or upgrading technology, those are not always options for cash-strapped sellers.
The key to building equity or maximizing the worth of any small practice typically relies on one key activity: developing a solid business plan at least 5 years in advance of the sale, which will help the practice's value go nowhere but up.
Some practice owners, or would-be practice owners, blame the light cash flow. Others point to difficulty in obtaining business loans, the impact of evolving technology, or buyers' debt obligations. Regardless of the challenges affiliated with selling small practices, they have drawn industry attention over recent years, said Scott Daniels, a practice broker and industry consultant in Costa Mesa, CA. Daniels co-owns Practice Concepts with his wife, Alissa Wald, OD, a practicing optometrist.
But sellers who own practices grossing under $300,000 per year don't have to wave the white flag or suffer business losses. Instead, they need to be proactive with their planning and strategies.
Among Daniels' suggestions is to hire an associate. Pay the optometrist a salary, then help the doctor grow the practice and buy in over time. For example, the first year, the associate can buy 10% or 20% of the practice. Not only does this help build the practice's value, but it also enables optometrists who are approaching retirement the opportunity to cut back their work schedule to part-time.
Likewise, you can find another optometrist in your location who is facing a similar challenge, Daniels said. Create a short-term partnership and merge both practices under one roof. That will cut rent, labor costs, and other expenses in half. Now you have a practice grossing $500,000 to $600,000 instead of $300,000, which can sustain a full-time optometrist. In the end, the practice will be easier to sell and provide a larger chunk of profit for both optometrists in the interim.