Optometry is witnessing the largest transfer of practice ownership ever. And as demand for routine vision and medical eye care continues to grow, the current industry environment and future outlook present boundless opportunities for enterprising ODs!
Cold-Start or Purchase?
The two most common paths to practice ownership are cold-start and practice purchase. For the entrepreneurial OD ready to take the leap into practice ownership, deciding which path to take can be a cumbersome feat. This article explores 5 key factors and Rules of Thumb to consider in determining which path to practice ownership is right for you.
It all starts with vision (more like vision, mission & purpose!)! Although sometimes used synonymously, each refers to different statements that inform long-term strategy & short-term tactics, and shape culture. Simply stated:
- Vision is what the organization aspires to be.
- Mission is what the organization does and for whom.
- Purpose identifies the reason(s) the organization exists.
Together, Vision, Mission, & Purpose organize the foundational core values around which operational plans can be developed.
So, what does this mean for the budding entrepreneurial OD?
The first step in your journey to practice ownership is self-reflection on your professional vision, mission, & purpose. Identifying what you aspire to be, what you provide and for whom, and the reason you are pursuing practice ownership, will provide a values-based rubric as you weigh your ownership options to pursue cold-starting or purchasing a practice.
Scope of Care
Public health need for vision and medical eye care continues to grow. To meet this growing demand, R&D, educational institutions, and the regulatory environment are evolving rapidly, thus redefining “full scope” optometry and presenting new opportunities to serve patients and grow a thriving private practice.
Four simple exercises to frame scope of care for your private practice:
- Identify your current scope of care and areas where you seek to expand your scope.
- Conduct local market research across relevant patient populations in your area (datausa.io provides census-backed, demographic stats).
- Quantify the capital, personnel, & operational requirements to grow specialty care.
- Network with area ODs and physicians in complementary specialties. (Example: if VT & myopia is your specialty, connect with pediatricians in your community; position yourself as “the expert.”)
A clear understanding of your desired scope of care, both present and future, is an important consideration in determining if cold-start or purchase is right for you. Project the financial & operational requirements necessary to maximize each profit center across the full scope of your practice, comparing each as a cold-start vs purchase.
No matter your prior experience in leadership or management, private practice ownership demands leadership and management ability. The degree to which you prefer full creative capacity vs inheriting established systems, and autonomous vs collaborative decision-making, are two indicators if cold-starting or purchasing (or buying-in as a partner) is right for you. It’s one thing to seek outside guidance or support on practice management & business matters from a third party or colleague, where you ultimately decide what to do, as well as when and how to do it. It’s an entirely different circumstance when multiple, varied interests have a seat at the owner’s table, particularly when the parties may disagree on the path forward.
Reflect on each of these to gauge how much control you seek in practice ownership:
- Do you prefer “attention to details” or “the big picture”?
- Do you seek opinions presented in alternative viewpoints or rely solely on your own perspective?
- How comfortable are you delegating?
- How frequently do you seek input from others when making financial decisions?
How many readers would jump-in to practice ownership immediately if you were guaranteed to succeed? While there is no guarantee, optometry private practices are incredibly low-risk ventures (along with private practice across many healthcare specialties). How do we know? Look at available financing! Banks would not be lining-up to fund cold-starts or purchases if not for the strong track record ODs have in establishing viable businesses.
However, everyone does have their own unique risk tolerance. In the context of practice ownership, cold start bears greater risk than purchasing an established practice (of course the ROI is typically far greater than that of a purchase!).
For any entrepreneur, exit strategy is an integral component of your long-term professional plan, which ultimately impacts the attainability of your personal goals, financial and otherwise. Therefore, when considering the purchase of a practice, the exit strategy of the seller is critically important:
- If practice purchase is buy-in, how long will seller remain in ownership?
- If practice purchase is buy/sell, what is seller’s involvement in the practice post-sale?
Regarding your own future, it’s never too early to develop your exit strategy! So, what does it look like? Here are some items to get you thinking about your exit:
- How many years until your exit from practice ownership?
- What are your plans to add additional locations, associate providers, etc.?
- Do you seek additional partners over your practice lifecycle?
- What are your “post-exit” plans?
Rules of Thumb
Much of what we’ve explored here is values-based, all vitally important to the success of your practice, but lacking a clear financial comparison. Here are a few key Rules of Thumb to consider when evaluating the financial aspects of cold-start or purchase:
|Start-Up Costs||Typically Less||Typically More|
|Access to Financing||Financial forecast, business plan, and personal finances||Practice valuation, business plan and personal finances|
|Location||Geo-spatially optimized, negotiated lease terms||Inheritance of in-force lease (location and terms)|
|Design||Suited to scope of care and vision||Inherited as-is|
|Equipment||Aligned with scope of care, negotiated warranties and service||Existing warranties, service terms, functionality|
|Operations||Create, document, implement||Process change management|
|Staffing||Sole HR decision-maker||Inherit staff and HR functions|
|Marketing||Brand-building, new patient engagement||Re-branding, patient re-engagement|
|Return on Investment||Typically Higher||Typically Lower|
In conclusion, now is a wonderful time to take the leap into practice ownership. For the entrepreneurial OD evaluating which path is best suited to them, it is imperative to weigh many financial, administrative, & operational considerations into your plan. Above all, stay true to your core, and know that with proper planning and development, you too can launch a thriving career in practice ownership!