Making Your Exit
So many ways to leave a practice, but which is best? Here are some options.
By Jerry Hayes, O.D.
Last month, we discussed the considerations to take into account before making the decision to sell your practice and retire. Those points, and the points I'll raise this month, apply to those of you who are ready to sell now as well as those who are just starting out and have a few decades of practicing ahead of you.
Ease out of it
Depending on the situation you're in when you leave practice, it might make sense to bring in a younger associate instead of selling your practice outright. But if you take this route, make sure you and your associate make an agreement that you'll sell to him at a predetermined price or formula as you get closer to retirement.
Assuming that you work the details out properly at the outset, this is a good arrangement because it provides an orderly transition for patient care and it protects you from the uncertainties of selling a solo practice in the open market. (You never know what the supply of qualified buyers will be at the exact moment you're ready to sell.)
A variation of the junior associate arrangement is to merge your practice with another practice and make a buyout at the predetermined formula part of the deal.
ILLUSTRATION BY LAEL
It's important to understand the potential downside of these two
arrangements. Whether bringing in an associate or merging your practice, after years in solo practice, you need to find someone whom you can get along with.
Equally important, the ultimate success of the deal for you depends on the performance of the new partner in terms of: a) his ability to make the practice flourish and b) his willingness and ability to honor his agreement to buy you out at your retirement.
This is less of a risk with a multi-doctor group, but there have been cases in which the new partner either refused to pay up or simply couldn't run the practice well enough to meet his loan obligations to the selling optometrist.
It happens more than you might think. The moral is to choose your new associate wisely and put an appropriate amount of time and energy into your contracts. Note: Any new partnership arrangement should include a buy-sell agreement funded with life insurance to protect each doctor's family in the event of unexpected death.
Love it and leave it
Another option, if the selling market isn't good or you didn't plan ahead, is to simply keep working until you're ready to close the doors. That's actually not a bad choice if your net is still pretty high. Instead of selling a $400,000 gross practice for $300,000, why not work 4 or 5 more years at $100,000 a year?
This scenario, of course, assumes you're in good health and want to continue practicing. Optometry is the type of profession you can enjoy as you get older -- hopefully because you want to and not because you have to.
At the very least, plan ahead
Poor planning (or no planning) can really throw a wrench into your retirement. Even if you're not planning to retire for a few decades, you'll want to develop a game plan at some point down the road. Remember to get an accurate valuation of your practice so you can decide whether you need to put more into the practice or if it's running smoothly as is.
Then, later down the line, decide what type of exit strategy suits you best. Good luck, however you choose to proceed.
A FREQUENT WRITER AND SPEAKER ON PRACTICE MANAGEMENT ISSUES, DR. HAYES IS THE FOUNDER AND DIRECTOR OF HAYES CONSULTING. YOU CAN REACH HIM AT (800) 588-9636 OR
Optometric Management, Issue: November 2001