By Mark Wright, OD, FCOVD,
and Bob Schultz, president & CEO, Vision One Credit Union
Sept. 13, 2017
It’s unfortunate, but optometrists often make mistakes in selling their practices. Mistakes that did not need to happen. Let’s consider a mistake that we see doctors making today, and understand how to avoid this mistake.
Does everyone see the irony in this situation?: You’ve spent your entire career fighting retail optometry and your last move in the profession is to sell your practice to retail optometry. Understand that’s the end goal of private equity groups (PE). The private equity model is clear – buy a group of practices, work to create efficiency by decreasing expenses and using economies of scale, and if it follows the standard pattern of PE, then sell the group of practices to a larger group of investors who then have a “ready-to-go” retail chain.
There are two primary reasons we’ve heard as to why optometrists are selling their practices to PE groups: a larger price for their practice and ease of sale. Let’s look closer at both of these reasons to see if they are accurate and then consider two keys to avoiding this mistake.
We’ve done the math, and in most cases, you will make more money on the sale of your practice if you sell to an independent practitioner than if you sell your practice to a PE group. As in any deal, you also have to look not only at the price, but also at the terms. You’ve heard it said that “the devil is in the details.” Well, that is exactly true in the PE deals we’ve seen.
What about ease of sale? Ease is in the mind of the beholder. If you sell to a PE group, they may tie your practice sale to a five-year employee agreement with a productivity clause. You may not get the entire sale price upfront with the ability to walk away. You may have to work for them for five years as an employee of the practice. And, if you are not as productive as the contract stipulates, then you may get paid less for your practice.
Let’s drill down a little deeper on that idea because it is so important. First off, you may not be paid the full value promised upfront. You may be paid over time – we’ve seen five years – and the amount paid may not be the full amount because you didn’t hit the productivity requirements in the contract. None of that sounds easy, does it?
Then, there is the issue of dealing with staff. When you owned the practice, you could tell staff what to do and when to do it to make sure the practice was functioning efficiently and effectively. As doctors have told us, If you sell to a PE group, you let the PE group know what is going on and hope they will get staff to do what you need. Is this really the way you want to practice? Is this really the vision you have for your career in optometry? We’ve talked to doctors who’ve regretted this mistake.
There are two keys to avoiding this mistake in selling your practice:
Key 1: Have professional consulting help you through the process
The key to a successful practice transition is to have professional consulting helping you at each step. Companies like the Practice Management Center (PMC) can help you. They help you get a fair price for your practice, they use a SMART MATCH system to help you find a buyer when needed, and they have a complete system from start to finish. You can take the first step by registering with the PMC HERE to get free practice valuation and initial consultation.
Key 2: Work with the right banker
Not all bankers have your best interests in mind, or even have specific experience with optometric transitions. You need a banker who cares more about you than just getting a loan approved.
At Vision One Credit Union (VOCU), we work to make the practice transition in the best way for you. We do that by helping you personally through the banking process step-by-step. Take the first step by calling us at 916-363-4293.
At the end of the day, you want to feel good about the sale of your practice. Follow these two keys to make sure you don’t make an unnecessary mistake that you regret.