Jan. 13, 2016
Kenneth Daniels, OD, FAAO, Dipl. ABO, owner of See Life – Hopewell & Lambertville Eye Associates in Hopewell and Lambertville, N.J., advises practice owners to recognize the difference between borrowing wisely to add revenue-producing services vs. taking on bad debt that can derail your practice growth plan.
Acquire Good Debt. Good debt goes toward investments that will appreciate over time. For example, a mortgage is good debt, while a car loan is not. Debt acquired to purchase a practice with growth potential also is good debt. “As you purchase a practice and equipment, that should be good debt because you’re building on your own skills, your own capabilities as a clinician, and the good will of the practice you’ve purchased, or are building, that should grow over time,” says Dr. Daniels.
Show Your Practice’s Growth Potential. Be prepared to show your practice’s growth trajectory when you meet with a bank’s loan officer. “When you go to a bank to get a loan to purchase equipment, or to purchase the practice, you need to show that this practice has growth ability. If I’m looking at the practice of an older clinician who may not be doing the medical care that I’m doing,” says Dr. Daniels, “I can show the loan officer that I’m going to be adding medical care that wasn’t there before, which could be another 30 or 40 percent on top of present revenues.”
Plan for Office Enhancements. Investments that add value to your practice, such as instrumentation that enhances patient care, should be given priority over enhancements like new furnishings. “I tend shift more on acquiring proper clinical equipment, and I know I need new carpet and new paint. That can always get pushed off a little bit because I want to service the patient better, but at some point, you have to hire someone to come in and paint the walls and redo the carpeting,” says Dr. Daniels.
Budget Based on Past Revenues & Current Trends. For needed expenses, such as office renovations, estimate the cost against your expected revenues for the year. “If you have never done it, you have to sit down with an accountant and learn how to do proper budgeting by looking at previous revenues of the practice to potential future revenues and trends of the practice in terms of patient care and office visits, and each year is different,” says Dr. Daniels. He says that even when the economy was in a downturn, those practice owners who could show the growth of the medical eyecare they provided were in a good position to gain loans. “If you geared your practice toward medical, and you can show numbers that your medical billings are increasing over time, a financial institution will look very favorably upon that,” he says.
Kenneth Daniels, OD, FAAO, Dipl. ABO, is owner of See Life – Hopewell & Lambertville Eye Associates in Hopewell and Lambertville, N.J. To contact him: kennethdaniels@att.net
