An OD who has transitioned from owner to employee
By Dan Runyan, OD
New Image Eye Centerp
Springfield, Ohio
Having an exit strategy is important, as Dan Runyan tells ROB. He and his partner went to optometry school together and were in practice together for 40 years. But, Dr. Runyan wanted to retire sooner than his partner. So, they partnered with two younger optometrists to merge practices and create a new practice called the New Image Eye Center. Today, Runyan works for the practice one day a week and one Saturday a month as an employee doctor, while his former partner is still part of the practice.
Seize the Opportunity
My partner and I talked about our exit strategy for about five or six years prior to partnering with the two younger ODs. When the opportunity arose to merge the two practices, we made the decision to do it in 2008. In 2010, I sold my shares of the practice to my partners. It takes time—often years—to go from idea to plan to reality. Many doctors make the mistake of thinking they can complete the entire process in only one or two years.
Work Out the Details
In terms of my own exit from the practice, I wound up loaning money to the younger doctors, and I am being paid over time. The formula for the price was determined before we did the merger, which removed a huge hurdle. Most optometrists today come out of school with a lot of student-loan debt, so buying into a practice is often difficult. In my case, I am getting three kinds of income now–practice purchase, interest on the debt repayment, and income as an employee of the practice.
Recognize When the Time is Right
A lot of doctors my age do not have an exit strategy. Every doctor should have a written exit strategy. Thinking down the road to what you will do in 25 to 30 years is it essential in today’s practice life. You can’t just hope that someone will buy you out when you think it is time to exit.
Know Your Value, Adjust Expectations
Unless you are really progressive, a lot of things tend to slide. Doctors often think their practice is a lot more valuable than it is. They try to sell the practice for what it could be rather than what it currently is. They are trying to sell an imaginary practice–one that does not exist–rather than the real practice that does exist.Doctors often must adjust expectations when it comes to how much the practice is actually worth to prospective buyers. The bottom line is always what the buyer will pay and the seller will accept.
Combine Forces, Create Opportunity
Partnering as we did, we could now invest in equipment we couldn’t have justified before. The new high-tech equipment is attractive for the younger new doctors. Older doctors are often comfortable with the equipment they have used for years. Older, and sometimes inadequate, equipment may be a practice sale liability. A younger doctor may not want to practice there. A practice with older equipment is a less valuable practice. Combining forces created a larger practice that is more attractive than either of the two smaller practices.
Bringing in an Expert
It helps to take the emotion out of it when it comes to finding your practice’s value. You need to be creative and open, and sometimes that’s where a negotiator can help put the valuation into a reasonable and proper perspective.
Price Is Not Everything
Price is important but so are the terms. For some doctors, getting paid completely upfront makes sense. For others, an accountant might advise spreading payments out over time to minimize tax consequences. If a younger doctor cannot support the sale of a practice with cash flow, then your prctice is less viable, no matter how well it’s worked for you over the years. Having a good lawyer to make sure all your bases are covered in the sale agreement is also important.
Pros and Cons
The good news is that I don’t have to make all the decisions. The con here is that I don’t get to make all of the decisions. My responsibilities are different now. Letting go–not having my finger on the pulse of what’s happening day to day–is a big part of the transition for me.
When you have long-time patients, you have a commitment and an obligation to them. You want to assure them that they will continue to receive good care and transfer that confidence over to their new doctors.
The people who really want to see me can, if they wish to wait. The staff can transition them over easily to the other doctors if they need more care than my schedule allows.
The good feeling I have is knowing that my staff and my patients will be cared for by quality doctors in an excellent practice, and the fact that I can continue to deliver care on a schedule that is comfortable for me has made this into a win-win scenario for everyone.
Dr. Runyan can be reached at drunyan@woh.rr.com.
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