In the first part of this series, BOQ Specialist CEO, Dr Brett Robinson draws on the firm’s Guide to Practice Ownership to highlight the practical and financial implications when deciding whether to purchase an existing optometry practice or to set up a practice from scratch.
Purchasing a practice requires careful consideration and planning. It’s important that you gather information on both the financial and practical implications. To give you a hand with making the decision, here are some of the points to consider when deciding which way you might approach purchasing a practice.
When buying a practice outright, on face value, the cost of the practice may look more expensive. BOQ’s financial specialists across the country are seeing existing practices sell for over AU$200,000 more than the cost of setting up a practice from scratch.
However, your return on investment when purchasing an existing practice may be more predictable because the practice is fully operational before you even walk in the door.
Purchasing a practice requires careful consideration and planning
In the same way, reviewing profit and loss for an existing practice can also be easier, which makes applying for a loan simpler and takes up less of your valuable time. It also means you could start to think more strategically about investing in new equipment earlier, which in the long-run could further improve the bottom line of your practice.
There’s also the benefit of goodwill when purchasing an existing practice. It might come with staff who know how to run the day-to-day operations and who have good rapport with patients. On the flip-side, we notice that many medical specialists underestimate the time it takes to develop an excellent working relationship with existing staff. If you choose to hold on to pre-existing staff, you will need to work on navigating the change of ownership smoothly to ensure that loyalty from staff and ultimately, with patients, remains.
There is also the chance that the fixtures you inherit in an existing practice and the floor plan might not suit your aspirations for how you want the practice to run.
Make sure you take a thorough approach to due diligence – as this will help reduce your risk over the long term.
Starting from Scratch
Starting a practice from scratch, might be considered to be more exciting. It also comes with more freedom of choice – you can choose the location of your new practice, its size, fit it out exactly the way you want it and establish your ideal team from the get-go.
You also might find that starting from scratch presents you with more options on choice of premises. Commercial spaces can come up in a multitude of forms – whether that’s through a multi-occupancy office building, or a high street retail space or even an ex-residential property, there is certainly plenty of variety. Curb-appeal, foot traffic, and availability of parking are also important aspects to consider. With an increasing number of high-rise buildings appearing in the major cities across the country, medical specialists are finding new opportunities to access dense populations in attractive spaces.
With more flexibility on the size of your new practice and its location, you might also be able to consider partnering with ancillary service providers, creating a ‘one-stop’ solution for patients – all the treatment that they need in one visit.
Remember though, there may be planning permission constraints for consideration that you will need to work through.
You will certainly need to be prepared to start a practice and cover initial outgoings with few or no patients at the beginning. Careful planning and a realistic business and marketing plan can help, but you will need to be comfortable with a certain amount of risk that you will face before you reach break-even, as well as the time lag before you reach that point. You will also need to consider the added expense of hiring new staff, as well as training them.
Finding the Right Practice for You
Whether it’s purchasing an existing practice, or starting from scratch, you need to make sure you do what’s right for you. You may already know the owner or work in the practice that you ultimately want to own. If not, a good way to start looking for that opportunity is through your network – sales reps can be a good source of insider knowledge on commercial opportunities – or from a specialist practice sales professional who knows of owners looking to sell their practice. There are several things to consider but leveraging a number of specialists can help inform your decision and make it easier.
In the next part of the series, Dr. Brett Robinson will assess the pros and cons when deciding whether to rent or purchase a practice.
Dr. Brett Robinson is the CEO of BOQ Specialist.
The information contained in this article is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided. BOQ Specialist is not offering financial, tax or legal advice. We recommend that you obtain independent financial and tax advice before making any decisions.
Practice Ownership Guide
BOQ Specialist’s Practice Ownership Guide is available to help you navigate the process of owning a practice that’s right for your future plans and to help you understand the financial options available. Call 1300 131 141 to order a copy.