In the Women In Optometry Pop-up Poll on counting down the years to retirement, one of the concerns expressed by more than 20 percent of the respondents who gave an answer focused on practice transitions or practice value. Many ODs don’t have a practice transition plan in place, and many delay doing the planning until it becomes more stressful than it needs to be, say consultants Gilan Cockrell, OD, FAAO, CEO of Williams Group and Robin Elliott, the group’s president of consulting.
First, the timeline sneaks up on many people, says Dr. Cockrell. “The myth of practice transition is that people think they can predict the desire to retire five to 10 years out. The reality is when most doctors are five to 10 years away from the time the true desire to retire occurs, they are still in the ‘I can do this forever’ stage. All of the sudden they wake up one morning and say, “I don’t think I can do this anymore,” he says. By then most of us have lost the desire and drive to make a lot of changes in our practice. That’s why it’s so important to start planning the transition early, he says. “Make sure that you have one or multiple associates who can create additional value now so that your practice is worth more in five years, along with making it more attractive to potential buyers, because the practice is not completely dependent on you being in place.” Just as importantly, your associates may make the remaining years in ownership more fun and the practice more vibrant and productive.
It’s also critical to understand why you want to retire, adds Elliott. There are a multitude of factors that can contribute to exasperation with ownership: the practice might be underperforming; the owner might be tired of dealing with HR processes and a revolving door of staff. “Constant hiring, onboarding and training can often lead to an ‘off culture.’” These are some of the most common complaints and/or reasons we hear as to why ODs want out. Often these concerns are repairable if the doctor is willing to focus on the changes that need to be made. Sometimes investing in your practice can pay off better than selling it.”
THE PRIVATE EQUITY TRAIN
Another undercurrent that runs strong now is the fear of missing out on the private equity train. That quick flip that could help an owner shed the responsibilities above and might seem attractive. In addition, shrinking insurance reimbursements and other financial headaches could potentially be resolved by selling to a willing private equity buyer, Elliott says.
Dr. Cockrell agrees, and says the news of lucrative offers has added a sense of urgency. “No one wants to miss out on the private equity train,” he says. And although it does seem likely the offers will recede from the high-water marks, he doesn’t think that will happen too quickly. “It makes more sense to build up the practice you have, making it more appealing to whatever buyers you ultimately attract,” he says.
WHAT TO DO NOW
Practice owners should know the value of their practice and they should understand whether it is performing well or underperforming. Looking at your practice – or hiring a consultant to help you through the process – can help position an owner for a strong, more profitable transition. That doesn’t mean working forever, but it could mean adding a year or so to your transition planning. In that time, here are some steps they suggest to take.
- Know how much money you need to retire, Elliott says.
- Know the true value of your practice from a performance perspective. An in-depth analysis can often identify some easy changes to make a practice more profitable.
- Look ahead so that the practice you sell (or keep) is well-positioned. For example, the graying of America allows for a highly successful medical model practice. Aesthetics or myopia management are other areas that have tremendous growth potential and fall outside of the purview of managed vision, she says.
- Keep the practice up to date. A practice in disrepair or furnished with old equipment and furniture is not going to be as attractive to a buyer. “Investments made now can improve the environment immediately and result in added value,” Dr. Cockrell says. “It’s a little like selling a house. You’re going to get less for it if it isn’t appealing to the buyer,” says Elliott.
- Review your staff compensation model. “It is important to create a culture where the employee feels they have a purpose, and they are remunerated appropriately,” he says.
- Know your numbers. “It’s important to have a good set of financial books and an information system in place so that you can access, update and provide statistical data to potential buyers. Maintain a checklist of all equipment with dates of purchase and current values,” Elliott says.
Selling a practice is rarely a cakewalk, they caution. But putting some energy and investment into having a modern, well-operated practice with potential, or actual partners who share the vision and the burden of management is not only energizing, it may help alleviate stress during your practice transition.