Article Date: 9/1/2008

Step 2 in Starting a Practice from the Ground Up

Step 2 in Starting a Practice from the Ground Up

This optometrist started her own practice — cold — shortly after optometry school. Learn about the next steps she took to make it happen.

By Gina Wesley, O.D., M.S., F.A.A.O., Medina, Minn.

This article is the second in a series about what it takes for a new O.D. to start a private practice. Gina Wesley, O.D., M.S., F.A.A.O., a 2006 graduate of The Ohio State University School of Optometry, will discuss how to negotiate the terms of a lease, develop a timeline, design an office, choose equipment, im plement office systems, find the right staff and prepare for opening day. Sounds like a huge undertaking, but if you go through the process one step at a time, Dr. Wesley says you'll succeed.

In part one of this series, I discussed how to search for office space, research demographic data, develop a budget and secure financing to start your own practice. I also explained how to apply for medical insurance credentials and how to network to find colleagues and qualified professionals to help you with legal and financial issues during the planning stages of opening your practice.

Once you've found an ideal location, established a need for a new optometry office and found lenders that are amenable to your business plan, you're ready to lease the space and move forward with office planning. Your attention to detail is crucial at this stage. Not only are you laying the foundation for much of your monetary spending and investing, you're creating a professional environment and workspace you'll call your own. I found this part of the planning process enjoyable. Using the space I leased to create my own office design was empowering to me.

In this article, I'll discuss how to negotiate the terms of a lease, develop a timeline and design your office space. You'll be able to set clear goals and finalize plans that will help you reach your final goal: opening your own practice.

Lease Negotiation

Negotiating a lease for office space is the first — and most crucial — step in the second phase of planning to open your own practice. If you don't secure the space for your office, you can't move forward. So it's important for you and your landlord to reach an agreement about various aspects of the lease so you can make additional plans toward opening your practice. Here's what you'll need to consider when entering a lease agreement:

1. Rental and build-out costs. You'll need to determine how much you can afford to rent and build-out your office space, even if you're basing your figures on financial projections. (The term "build-out" means to remodel or construct office space.) I discussed my financial status with my landlord as a stepping-stone for lease negotiations. Initially, my landlord suggested I pay a certain dollar amount in square footage without offering to help cover construction costs. At this point, my office space was an empty shell with concrete floors, and I wanted to reduce my initial expenses as much as possible.

After speaking with my lawyer, consultant and financial associate, I determined that I'd be better off financially if I asked my landlord to help pay for the build-out, even if that meant paying a higher dollar amount in square footage for the length of the lease. I told my landlord that once I established a steady patient flow, I'd be able to cover the extra costs in square footage easily in the years ahead. Paying extra money up front would've put a financial strain on my new practice in its early stages of development. Of course, my landlord counter-offered by asking for a higher dollar amount in square footage, in addition to paying for a portion of the construction costs.

If your landlord doesn't agree to the amount of money you'd like for him to pay for a build-out, perhaps he will offer to pay for certain items during construction. My landlord paid for ceiling work, lighting, common hallways and door construction. Having your landlord pay for specific items during construction may be a better deal for you financially than receiving extra money for the build-out. A financial planner or accountant can help you decide which is best for you.

2. Term of the lease. The length of the lease is another factor that may determine the cost of square footage. Typically, the longer the term of the lease, the less you'll pay per square foot. I chose a 5-year lease. After 5 years, I have the option to renew the lease for another 5 years at a slightly higher rate. I could've agreed to a longer lease, but I wanted the freedom to expand my practice in the future or own my own building if the opportunity presents itself. When you negotiate a lease, consider if it's important to you to have this flexibility.

3. Maintenance, taxes and other details. You'll need to pay for common area maintenance (CAM), such as trash and snow removal, and the upkeep of the parking lot and surrounding area. Make sure you discuss the costs of CAM with your landlord, because it can add to your yearly expenses significantly. My landlord provides CAM at a very low cost to me. He works on the second floor of the building I lease and doesn't think the expense of maintenance is a big deal. This incentive may not be the norm, but it's something to consider during negotiations. If your landlord decides to pay a portion or a large sum of CAM, this can add considerable savings to your bottom line.

Property taxes are usually passed on to the person who's leasing the property. They're often estimated for the calendar year in proportion to the size of the space. For instance, I estimated the property taxes I will owe for fiscal year 2008, and I pay an estimated share of that total each month. Adjustments are made as my landlord receives the actual real estate tax statements. Like CAM, don't forget to count property taxes as part of your expenses.

You'll also need to consider purchasing property and liability insurance and other miscellaneous expenses of a lease, such as city water and janitorial services and heating/ventilation/air conditioning (HVAC) maintenance. Ask who will be responsible for the cost of servicing or replacing these units if they break down. And make sure you specify where you want to place signage, even if you don't do it immediately.

I also added a stipulation to my lease, preventing the landlord from renting additional space to other optometrists, optical shops, or the like, for the duration of my lease.

Lease negotiations involve many other details, although I believe I've discussed several of the most important aspects. My best advice is for you to seek legal counsel familiar with optometric practices to ensure you receive the best terms.

Develop a Timeline

Once you've ironed out the details of a lease, you're ready to create a timeline to prioritize everything you need to accomplish so your practice will be up and running on opening day. This seems daunting, but it's an excellent way to ensure you complete your tasks in the right sequence. For instance, if you don't know your office space limitations, it doesn't make sense to decide what optometric equipment you're going to purchase.

I suggest creating your timeline in stages:

Stage 1: Find an attorney and an accountant; negotiate a lease; work with an architect to finalize a floor plan; develop a name for your practice and determine your corporate status. Depending on the state in which you practice, you'll need to determine if you're going to be a Limited Liability Company, an S-corp or Partnership.

Stage 2: With the help of a friend or a design firm, create a logo and slogan; begin the application process for insurance credentials; develop a Web site; and choose interior finishes.

Stage 3: Develop an inventory for frames and contact lenses; secure a phone number; ensure your landlord fulfills the lease agreement; purchase equipment; and order diagnostics.

Each stage will continue like this until everything is categorized sequentially. This way, you won't be held to any particular date to accomplish the tasks, but you'll have to complete a stage before moving on to the next.

There are other details that can, and should, be added to the various stages. You'll need to do some research to determine exactly what you need to do to open your practice. When I was developing my timeline, I received help from my consultant who made sure I remembered every detail during the planning stages.

Designing Your Office

My favorite part of the planning stage was designing my office space. My landlord gave me a layout of the space so I could begin thinking about what I wanted to do. I wanted the flow of the office to be functional for my patients and staff. I didn't have to worry about creating space to store charts for patients, because I'd planned to use electronic medical records. I showcased the optical cabinetry and reception area on the south and west sides of the office where natural light beams from the windows. I wanted to create a modern, yet warm, ambiance in the office, so I used my optical cabinetry as the source of inspiration for the office's interior design. To that end, I selected a local cabinetry company to create the look I wanted.

Before you begin designing your office, ask yourself what's important to you. As an intern, I had the opportunity to work in several optometric practice settings, so I knew what office designs I liked and disliked. For instance, I created a left-handed exam room and a right-handed exam room to prevent repetitive stressrelated injuries from working with patients in one position and in one direction. As you design your office, leave extra space for equipment that you may add to your exam rooms in the future.

The design you create is called your "concept design." It shows where the rooms and open areas are located. Once you've completed this phase, it's time to talk to an architect. I explained my vision for the design of my office to an architect so he could draft the final layout. I paid an additional fee to have him create plans that showed where electrical outlets, plumbing and lighting would be installed. I specified where I wanted certain types of lights and outlets. Because of this upfront planning, I avoided incurring additional costs during construction, because I didn't have to make any changes to the architect's plans.

Stay Optimistic

While you need to make many decisions during this second phase of starting a new practice, don't get discouraged if you encounter a few bumps in the road, or if you don't understand what each task entails. If you have an attorney, a consultant and an accountant, they'll be able to guide you every step of the way to ensure you make wise decisions. In the end, your meticulous planning will pay off when your vision becomes a reality. In the next issue of new O.D., I'll discuss how to obtain contractors' bids, choose equipment and implement office systems. nOD

Dr. Wesley practices at Complete Eye Care of Medina and Crystal Vision Clinic in Minnesota. You can reach her at drwesley@cecofmedina.com.


Optometric Management, Issue: September 2008