Are you interested in buying a practice but don’t know where to start? Mr. Peter Almonte is a lawyer and consultant for Practice Exchange with over 30 years of experience in coordinating optometric practice sales. His company appraises a doctor’s practice and coordinates terms between seller and buyer, aiding in the logistics for transition of ownership and helping with financing. Their group includes lawyers, accountants, tax attorneys, and marketing strategists to help match retiring doctors with younger doctors looking to buy a practice of their own.
Mr. Almonte fell into optometry by accident. Working as a lawyer in a group firm, he was asked to speak at a seminar about buying and selling a practice and he was approached by several ODs afterwards for help in their own office transitions. The experience was extremely rewarding and in just a few months he left his law firm and started his own consulting group.
Optometrists excel with their clinical skills, but they aren’t necessarily the best business people. Doctors that are most successful in the profession have a strong business sense to run an efficient practice. In addition to the challenges that all doctors face in having to learn business skills that optometry school didn’t necessarily prepare you for, Mr. Almonte notes that one of the big generational differences he sees with today’s younger buying doctors is that they are burdened with significant educational debt and are often fearful of practice ownership before they pay down their loans. Older doctors don’t always understand or appreciate the challenges that new graduate doctors face. The amount of loans and the need for immediate income is something older doctors didn’t have to face when they graduated.
A consultant has to work in the best interest of BOTH buying and selling doctor. They have to be a fair mediator to both. Older doctors deserve to sell their practice for fair market value; young buying doctors need a great opportunity for financial successful to make sure the purchase price isn’t a compounding debt burden. To have the purchase make sense, the buying doctor has to earn more money by purchasing the practice than they would have made working as an associate doctor. Both sides need to walk away from the closing feeling like they were treated fairly in the entire process.
A good consulting firm walks the transition through all 4 steps:
Step 1: Appraise the practice. A fair appraisal is mportant for buyer, seller, and the lender that will finance the sale. It must be impartial. Mr. Almonte also recommends working with a firm that will also do cash flow projections to help the potential buyer and lender understand how much the buyer can generate in income right away to reduce the risk of defaulting on loans.
Step 2: After the practice is appraised, the marketing department advertises the practice to potential buyers that would be interested in specific practice area. The Practice Exchange uses email and social media to target potential interested buyers.
Step 3: Help secure bank financing for the practice. The Practice Exchange is ypically looking for 100% bank financing so that the buyer isn’t financially overburdened right after the sale and the seller receives all of their money at the official closing date.
Step 4: Help transition the practice from selling doctor to buying doctor seamlessly for patient and staff retention.
How to Prepare for the Sale:
If it’s an older practice, Mr. Almonte advises the selling doctor to clean it up: paint the walls, replace carpeting. If you don’t have EHR, don’t implement it! The potential buyer can then choose their own preference. Just make a few cosmetic changes that are price effective.
Buying doctors should prepare for the sale by improving their credit score. To get the best financing, you need a score of 600 or higher. Mr. Almonte recommends new graduate doctors should get 2-3 years of experience to develop clinical skills and competence with staff management for best preparation for owning your own practice.
If someone is being hired as an associate doctor with a chance to buy in, he highly advises that you need a written employment agreement with a date set in the contract to buy in. If the owner doctor commits in writing, that’s a sign of good faith that they are actually prepared to sell the practice or add a partner.
The owner doctor should have their practice appraised BEFORE the associate enters the practice. Without knowing what the practice is worth beforehand, there is a greater risk that there will be disagreements about the buy in amount a few years down the road since the younger doctor can legitimately argue that they’ve grown the practice’s worth in that time.
When it’s time to buy in, have the practice appraised again and then whatever difference in growth between those dates should be split 50% between buyer and seller (if both worked full time). This arrangement works well to diffuse any disagreement between seller and buyer.
What about Private Equity?
In Mr. Almonte’s experience, private equity firms are looking for practices grossing $1 million or more yearly and selling doctors willing to stay on for 3-5 years. If a younger doctor is wanting to buy a practice, they’ll likely have to compete with private equity bids for practices of this size. Sometimes a retiring doctor still prefers to sell to a single owner doctor if they want to retire immediately instead of staying on for that additional 3-5 years that private equity companies demand.
If you are looking for doctors selling their practice, check out Practice Exchange for listings across the country. Be encouraged! The risk of default for a doctor on buying a practice is <1%; it’s as secure of a loan as most banks will ever make, so they are very willing to finance the purchase. In Mr. Almonte’s experience, if you buy a practice you will be successful and you will make much more money than you ever would have as an associate doctor.