Selling your optometry practice is a big decision. It can be one of the most challenging decisions you have to make in your professional career. You should take the time to think through not only whether you want to make this next step but also how you should do it.
Selling a practice that you took years to create is not as simple as putting it up for sale and signing some paperwork. Instead, there is a specific process that you should use to not only successfully market your practice but also get the most you possibly can out of the sale. If done correctly, the process will take years, and planning ahead will give you the best chance of a successful transition. You can use these tips and information to get this process started.
Before you start with the logistics of the sale, you need to set up some personal goals for this transition. For example, if the sale of your practice is going to fund your retirement, is there a certain amount you have to get out of the sale to live comfortably in retirement? The answer to this question may dictate whether you will need to continue to work for the new owner for some time before you can make a complete transition out of the practice.
The timeline and timing of the transition will also be important. Lining up when this transition should take place will also depend on your personal goals for the sale.
If you have a solo optometry practice, you may need to take some additional steps to plan an effective transition. For example, hiring an associate or two might help you have a more marketable practice for someone who wants to immediately step into your shoes. The associate might also be a good option for a buyer in some cases as well.
You need to have a good idea of what your practice is worth long before you start the sale process. Unfortunately, many optometry practice owners make the mistake of overvaluing their practice simply because they put a tremendous amount of time and effort into developing it. However, if you make the mistake of overvaluing it, you are going to have a tough time selling it, especially in the timeline that you have developed for yourself.
Start with a valuation.
You can do an elementary valuation calculation yourself. Start by simply adding up the value of all of the assets in your practice and subtracting your liabilities. This will get you a good starting point.
However, you should also consider that an optometry practice’s most valuable asset is often its goodwill and client base, which can be very difficult to value. We highly recommend hiring someone to do a strong valuation that can be relied upon by you and the buyer.
Consider how real estate plays into the valuation.
Real estate may also be involved in the sale. Some optometry practice owners choose to sell the real estate at the same time, while others may want to hold on to the real estate with the understanding that the new owner will rent the space from them for at least some amount of time. Sellers who sell their practice and the real estate typically have stronger buyers and more buyers to choose from.
Bring in a professional to help with the valuation process.
Instead of relying on your own valuation, it is a good idea to get a third-party in to help you value your practice using a few valuation methods. Any buyer who is serious about making the investment to purchase your practice will likely get their own valuation as well. You need to be prepared by having a valuation ahead of time—this will also help you avoid any sticker shock when parties want to negotiate the price.
Planning your exit strategy as early as possible will help you set yourself up for success. In general, planning for a period of four to five years is a good idea.
The timeline for selling an optometry practice is longer compared to selling other types of businesses. Financials play a unique role in selling this practice, so planning a few years in advance will help you get the best price you can.
This timeline is ideal, but there are a wide variety of factors that can affect it. For example, the buyer you find may need to become licensed in a new state, which can delay the transition period. If you are in a specialized or niche practice area or market, it may take longer to find a willing and able buyer.
Market changes will often affect this timeline. The COVID-19 pandemic, for example, forced many people to put potential sales on pause while everyone considered how the pandemic was going to affect them personally and financially.
The three years before a sale are critical for an optometry practice. As you move toward a sale, you need to maintain value during these crucial years.
Avoid scaling back or slowing down.
As you move toward retirement, it is entirely normal to want to scale back and work fewer hours. However, working fewer hours also means that you generally have less revenue. Less revenue can look like your practice is in decline, which can decrease your overall valuation at the time of your sale.
Instead of scaling back, you often need to plan to continue “full steam ahead” until the point of the sale. Buyers are more likely to want to see growth rather than declining revenues when they are considering purchasing a practice.
If you are close to the point of burnout, and that is why you are considering retirement, make every effort to continue until you have a willing, ready, and able buyer.
Take a hard look at the valuation of your practice.
In general, practices that gross less than $400,000 per year are harder to sell. If you are under that line, you may want to take steps to make improvements. Involving a third-party consulting group might not be a bad idea.
Keep in mind that the last three years of your practice are the most crucial from a buyer's standpoint. Maintaining or increasing your receipts during this period can help you get a fair price for your practice.
Update your office and keep up with technology.
You might also want to consider updating your office as you prepare for a sale. Making the office more appealing for patients will also make it more appealing for buyers. Keeping current on technological advances will also be a great selling point for buyers, and it is a huge benefit for current patients.
However, keep in mind that an office update might send signals to your staff that a change is coming. Doing this update far in advance of any sale can help deal with staff concerns. Making changes slowly and over time will also make the change less dramatic (and therefore less concerning).
As part of years one through three, you should start gathering information to market your practice. If you are maintaining strong hours and receipts, your financial information will show well to a potential buyer. Regardless, you still need to present it in a way that is appealing and makes sense for a new buyer. Thinking like a buyer will help you present your practice in the best light possible.
If you have more than one practice area, it is a good idea to further break out your financial information by practice area. A potential buyer will then be able to evaluate this information to determine whether they want to continue in these multiple practice areas moving forward.
A broker and an attorney can be great assets in these types of sales. They will be able to help you find the right professionals for valuation, and he or she can help you create a detailed prospectus of the practice. When you have the right advisors, who have experience selling optometry practices, they will also be able to tell you which aspects of your practice are great selling points and where you might need work to market effectively.
A broker can also help you by:
An attorney can assist you with the:
Your broker will often also work directly with your attorney, so you have a team of knowledgeable individuals drafting legal documents for you. The legal documents you need often include more than just one sale document. You may need non-disclosure agreements, non-compete agreements, plus all of the documents that go along with the sale itself.
At Dental & Medical Counsel, we help professionals like you successfully sell their practice. Our team specializes in helping medical and dental professionals avoid legal pitfalls, sell their practices, merge practices, and more. We have the experience you need to successfully sell your practice. Learn more about our team and how we can assist you by scheduling a complimentary consultation with attorney Ali Oromchian.
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