Many optometrists who are at the midpoint in their career or later are worried about their exit strategy. Who will buy their practice? Should they get another OD in place now who might be able to buy the practice? In some cases, the practice owning OD is working too many hours and suffers from some degree of career burnout.
I think financial planning for retirement and estate planning is a smart idea. It is certainly never too early to have an attorney draw up a will or a living trust. You should have some retirement investment accounts. But selling your practice or even selling part of it just so you have a buyer lined up can be a mistake. You could give up a large portion of your income stream to a partner, you could give up some degree of control over the practice that you built and you could settle on a sale price that has not reached its maximum level.
An alternate exit strategy
Instead of selling your practice or taking in a partner to reduce your patient load and your stress level, what if you hired an associate OD to see a large percentage of your patients? You could reduce your days per week spent on patient care, gradually or quickly. Over time, you could see patients very little or not at all, but still own and operate the practice. I call this the CEO practice model.
When this model is implemented effectively, your timeline for complete retirement from the practice usually changes dramatically. If you did not have to see the patients, would you still be in a hurry to sell and retire? Many optometrists are happy to transition to more emphasis on practice management and ownership and less on clinical optometry. They still enjoy a nice income stream that is semi-passive along with a very flexible schedule. The practice really can function just fine without you and it can even produce revenue without you.
Many ODs find that the new horizon for retirement under these circumstances is 10 or more years further out than what they were thinking. And they can still sell the practice eventually, probably for more than it is worth now. The income stream you can derive from owning the practice for many more years is more valuable to you than the one-time asset sale.
Is your highest and best use seeing patients?
Most optometrists think of their practice as an extension of themselves, but it really could be managed as a separate business. Many ODs feel that their best purpose in the practice is to examine eyes, but I actually believe that a practice that has grown to a successful level needs the OD/owner to work on the business.
Some good things happen when you hire an associate and you don’t have to see all the patients:
You can spend more time on the business side of your practice, working with your office manager. Ironically, this attention to the business by someone at your high level almost always causes the practice to grow. The business operation improves and patient demand increases.
The associate OD and some additional staff members can allow the office to be open more convenient hours, such as a couple of evenings until 7pm and Saturdays 9am to 1pm. This is convenient for patients and good for the practice.
More revenue is produced because the new optometrist is allowing the practice to see more patients.
Why not a partner?
I know some excellent partnerships in optometry that work out very well. Partners can also apply the CEO model as described above. Just because the practice has some partners now does not mean all future ODs must be partners.
Here is why I think employed doctors work better in most cases:
Partners get to share in the business profit, in addition to the normal compensation one would receive as an optometrist. I would rather have you keep all that business profit.
You will have to share all your practice decisions with a partner and you won’t agree on everything.
Items charged to the practice as business expenses can be scrutinized and argued.
Ending the business relationship can be sticky with a partner; it’s easy with an employee.
Here is a good analogy about your exit strategy for your practice. Someday, you will want to sell your house. That really does not worry you right now and you really don’t know who will actually buy the house. When the time comes, you will put the house on the market and there will be a buyer. I think it is the same for your practice.
Best wishes for continued success,
Neil B. Gailmard, OD, MBA, FAAO
Editor, Optometric Management Tip of the Week
Dr. Gailmard's new book, Practice Management in Optometry: A Blueprint for Success Based on the Optometric Management Tip of the Week, is now available on Amazon.