The Art of Buying into Your Own Practice

Optometry is a unique profession that enables you to combine your expertise in health with fashion, retailing, business and human resource management. For some this is an exciting prospect, for others it’s daunting. Fortunately, there are many well established business models for practice ownership that can provide you with options for support to help you maximise all of these opportunities.

At one end of the spectrum is total independence. Free from the shackles of any business partner, marketing or administrative body, you can open and close your doors when you like, choose the stock you want to offer, the equipment you wish to use and there’s no obligation to pay ongoing service fees or buy into an established group. You will however, be completely on your own when it comes to devising your own business development strategies, managing your administration and planning, executing and funding your own marketing and more.

before you embark on practice ownership… acquire sound professional experience, business acumen, and organisational competence

At the other end of the spectrum, there is the opportunity to partner with a corporate within a franchise model. In doing so, you’ll gain your desired business ownership along with comprehensive administrative and marketing support. However you may not enjoy your desired freedom to practice as you wish.

And then there are the options in between – memberships and alternative franchise models that provide more or less influence and support, according to your needs.

Whichever path you choose to take, Philip Fent from Optometry Business Brokers advises that, before you embark on practice ownership, you acquire sound professional experience, business acumen, and organisational competence – not to mention a passion and drive for success.

And perhaps most important of all, Steven Johnston, CEO of ProVision says, you need to be open to taking advice. “Novices in any business model need assistance because no matter how good we might think we are, nobody is blessed with all of the requisite skills required to run a successful business.”

EVALUATING OPTIONS

Partnership or Sole Ownership 

Whether you enter a partnership or go it alone will depend on your personality and your long term ambitions. While a partnership will undoubtedly provide you with someone to share the risks, bounce ideas off, and manage the workload, it will also increase your operational costs and necessitate compromises – good or bad.

“Everyone is different. If you are looking into a partnership and it’s your first practice, maybe look for a partner who can mentor you,” advises Mr Fent.

“Partnerships can provide mutual support and, in the ideal case, will complement each other. Imagine the success that comes from a great, experienced mentor partnered with a young enthusiastic novice – the dream team.

“On the other hand, partnerships can be challenging and can fail for many reasons. Before entering into a partnership make sure you are transparent and honest with each other about your business objectives, spend time setting joint goals, and ensure you understand each other’s strengths and weaknesses.”

For those who like to be in full control, Mr Fent recommends going it alone – in which case getting a good team of business advisors and experts around you is essential.

This is where the optical groups come into their own. ProVision is the country’s largest. Established over 30 years ago by Optometry Australia, today it has 465 practices across the country and, with a good handle on what does and doesn’t work, Mr Johnston says the group is well placed to advise its members so they can take informed risks.

“We are there to provide counsel to those members wise enough to solicit an external view from our subject matter experts,” Mr Johnston said.

Starting a practice from scratch is challenging, mainly because every patient is a new patient…

EyeCare Plus is another Australian optical group. With 151 members, it’s best known for its clinical focus and for being awarded the Canstar Blue’s most satisfied customers – optical stores award, for two consecutive years.

And then there is EyeQ Optometrists, with 26 stores, 16 of which are corporate owned and 10 owned by Franchise Associates. Lily Wegrzynowski, EyeQ’s Chief Business Development Officer, said the organisation’s growth strategy is through this franchise model. “The reason for this is that the original owners had independent practices and, while they want to ensure the next generation of optometrists has the same opportunity, they recognised the challenges in doing so and looked for ways to assist future generations achieve this goal.”

Additionally, there’s Specsavers, which has 398 practices, 342 inAustralia and 55 in New Zealand, co-owned by Specsavers and its franchise partners. Practices are supported by a massive team of more than 550 people whose collective role is to provide partners and their teams with assistance to help make them successful.

Greenfields or Existing 

Whether you are considering an existing practice or buying afresh, evaluating the prospecive site is complex and mulifactorial. Location, financial performance, details of the lease, direct competition, and future risks/opportunities should all be taken into consideration.

If you’re buying an existing practice you’ll need a comprehensive review and valuation, which is best completed by a business broker or optometry expert.

As part of this, medical specialist financier Craig Spiegel from Credabl recommends you analyse the financials of the business and the mix of services provided.

“Do you possess the same skill set as the departing optometrist? Or perhaps you have a complementary skill set or another competitive advantage you can introduce into the clinic. What obligations will you become responsible for such as staff entitlements… and will the vendor stay on for a period of time?”

If you’re looking at establishing an entirely new practice, Mr Fent says location is one of the most important aspects that will determine your business success.

“Most new or greenfields locations are high risk propositions, especially in metro locations, so if this is what you’re considering, it is critical to ask as many questions as possible and understand the area as best you can,” he said.

Considerations should include:

• What do the local population anddemographics look like?
• What other optical outlets are nearbynow and are there any expected to open?
• Where will the customers come from?
• Is the practice easy to find?
• What is the past and potential financialperformance?
• Will you have passing traffic to helpwith awareness?

HOW LONG BEFORE YOU TURN A PROFIT

According to Mr Fent this will depend on your business plan and a number of internal and external factors, but traditionally, it can take up to four or five years for a greenfields site to turn a profit in a metro location.

“Starting a practice from scratch is challenging, mainly because every patient is a new patient until they return for their next visit, which in most cases is about two years. This means for the first two years you have no patient database to build on. It is when they return for their second visit, that you should find yourself with more existing patients than new patients, and that’s when the practice should begin to show a profit,” he said.

By giving you all the essential information and services to help you work smarter, you have the opportunity to really work on building your relationship with patients

With this in mind, Ms Wegrzynowski, said when establishing a new practice it’s important to carefully invest in areas that will bring the most return in the initial months and years.

“As optometrists, we all want to invest in the latest equipment from the get go but sometimes that’s not what you need to attract patients, especially in the early days. One of our franchise associates, Bayd Rosenbaum who opened an EyeQ practice at Merimbula, is the perfect example. When he opened his practice, he became very busy with appointments, despite being absolutely new to the area and not the only optometrist in town. At his opening celebration, when he spoke to members of the community, they told him they’d booked appointments because they had observed how much he had invested into his practice and, as an extension of that, their community. He could have scrimped on cheap fittings but instead he invested in creating a beautiful environment that communicated his long term commitment and his respect for the community.”

The value of making decisions like this can easily be overlooked when you’re a start-up.

“No one is an expert in every field, which is why EyeQ Optometrists has experts on hand to offer this professional level of advice across all areas of practice management and operations,” said Ms Wegrzynowski. “If you’re not into frame buying, our product team can help, if human resources management is a weakness, we can provide guidance. Some optometrists are unfamiliar with financial reports so again we can explain them and help them gain an understanding of how to read them going forward. We also provide benchmarking so practices see accurately how they compare and where they can focus attention. It’s a matter of leveraging the knowledge and skills we make available to fill your own skills gap or lack of knowledge”.

MANAGING THE BACK OFFICE

While optometry schools are increasingly integrating elements of practice management into their teaching, in the end nothing can really prepare you for being at the coalface of a start-up business.

The optical groups all offer comprehensive support services which can provide a distinct advantage to new, existing and exiting practice owners. “

At EyeQ we’ve really dialled up the services to a greater level than offered through membership groups to provide that next level of service in areas that normally may need to be out sourced or done by the optometrist who may not necessarily have all the knowledge,” says Ms Wegrzynowski. “So we can take care of invoice reconciliation, financial reporting, benchmarking, and stock control if that’s what a franchise associate wants us to do.

“By giving you all the essential information and services to help you work smarter, you have the opportunity to really work on building your relationship with patients knowing that practice management is all taken care of.”

ProVision also offers its members access to buying, centralised billing, an automated supply chain, generic and bespoke marketing materials, human resources support, leasing advice, business systems, learning and development programs, and more.

“Unlike franchise models, ProVision does not have a ‘compliance mindset’, our model is to provide members with the flexibility to run their practice as a true independent and leverage the collective experience of our 32 subject matter experts and the power of our 465 practices,” said Mr Johnston. “New members can take advantage of the whole package or pick and choose where they think they need help. In ProVision you remain truly independent to practice the way that you want.”

Similarly, Eyecare Plus members who can participate as a branded, unbranded or co-branded practice, have access to services including buying power, clinical leadership, marketing campaigns, human resources support, training, benchmarking, and business coaching and incentives. Simon Lewis says territory protection is a key differentiator for his group, which means members and their staff can attend meetings, workshops and conferences to discuss their business, share ideas and learn from each other, without concern that competing practice owners or staff are in the room.

As competition increases to attract members, the optical groups are continuously expanding their member services. ProVision has invested in ProLearnMAX, a learning management platform for practice staff and leaders and a new ProAccounts program with the aim of moving towards a paperless environment. Eyecare Plus recently introduced Supply Plus, an online portal to streamline ordering and product sourcing.

Whereas EyeCare Plus, ProVision and EyeQ Optometrists all emphasise optometrists’ rights to pick and choose services and operate independently, Specsavers works to a more controlled model.

“From management of landlord relationships to professional recruitment, training and development, to piloting and development of in-practice equipment, to really clear monthly and annual financial statements, Specsavers offers an end-to-end business support package,” says Charles Hornor, Director of Communications at Specsavers. “We also help practices scale to grow, manage relocations, shopfits, and more so that the partners can continue to focus their energies on two main things – looking after their customers and developing their teams.”

However, he says the “unsung hero” of the organisation is its back-office service. “It covers everything from managing each practice’s administration, from accounts payable and payroll to tax payments, monthly financial statements and beyond.”

POWER OF COLLECTIVE MARKETING

Establishing your brand and reputation can be a challenge for new practice owners, especially those who set up in a greenfields site. Eye catching window displays, mail drops, social media campaigns, sponsoring local groups, and networking at community events and allied health events are all viable ways to become known over time.

Faster still is to leverage off the brand of an established optical group, which will provide immediate credibility.

Thanks to a budget which simply cannot be matched by the competition (Specsavers has a marketing fund of more than $65 million this year), consumer recognition of the Specsavers brand provides a powerful public-facing advantage.

While optical groups do not have the same level of clout as Specsavers, they can be highly resourceful when it comes to pooling their efforts and those that choose to brand or co-brand with their optical group will reap the rewards.

Eyecare Plus branding, for instance, enables clusters of practices to band together and share marketing costs – especially television and radio, which may be too expensive for a single independent practice to afford. The National office is also focussed on expanding its reach through digital marketing and SEO. Having won the 2019 Canstar Blue Most Satisfied Customers award, there’s no doubt that practices that have branded or co-branded with Eyecare Plus are benefiting from the association.

WHAT ABOUT THE MONEY?

While there’s a cost involved in joining an optical group or buying into a franchise, according to the experts, if you run with the advice and support on offer, you will enjoy a return on your investment.

Mr Lewis says Eyecare Plus’ marketing efforts, combined with its business management and development services, have resulted in numerous examples of members who have grown their business substantially, some upwards of 50% over a three year period.

Similarly, Mr Johnston says ProVision has helped members grow on a like for like basis in each of the last six years despite significant competition from the corporate players.

“There is no secret sauce behind these great results, it is the result of a joint approach between members and ProVision to deliver a differentiated offer in each and every practice, supported by a clear market position and relevant communications, leveraging the best people and products in the market,” he said.

And at Specsavers, Charles Hornor reports the average store is recording annual sales of more than $3 million. “In the past 12 months, locally we have opened around 20 new practices. Reviewing the figures shows that every single one of those stores has averaged over $20,000 per week since opening with some returning $30k and $40k averages. Across the network of stores we have seen strong like-for-like growth and different stores at different levels of maturity continue to move forwards. For example, we now have some stores, that started life ten years ago, that continue to grow and now have annual sales of over $7 million.”

SOURCING FINANCE

With all of this in mind, we asked Craig Spiegel, from medical finance specialist Credabl, how much money you’ll need to raise to start up a practice – and how to go about it. As you’d expect, the answer is never simple and it depends on what you’re buying, where you’re buying it and how your practice ownership will be structured.

“If you’re establishing a new practice, you need to consider the size of the space and quality of fit out/finish you are after. In say 100m2 you would want to budget at minimum $100,000. Then you need equipment, computers, furniture etc, so say another $50,000. On top of this you might need funding for stock/frames, the bank guarantee for the premises lease, and then an overdraft to help run the business. I would say overall, an amount of $250,000 should be in mind,” said Mr Spiegel.

“If, on the other hand, you’re considering an existing practice, the first step would be to obtain all the information on the practice, such as the practice financials for the last few years. Thereafter, seeking support/input from your accountant and or financial adviser. This is also a great time to engage an experienced financier that you can bring on the journey with you.”

Before putting in your application for finance, you’ll need up to date financials and or pay slips to show the lender you can, and have, been earning an income.

Mr Spiegel said you should also work through the ‘intangible’ elements of practice ownership and be prepared to articulate them well. For example, why do you want to own your own practice? Why is the location you choose the best to support your success?

While finance can be approved within a couple of days, Mr Spiegel recommends engaging with a financier from the get go.

“In my experience, this often leads to a better outcome and practice set up or acquisition over time. When you establish a great working relationship, you can explore your options, in terms of finance, at the very early stages and be guided on how t o improve your situation if necessary.

“But it’s not just about the transaction. An experienced lender will do more than just ‘get you the money’. We can connect you to the right people in the industry such as lawyers, accountants, and insurance providers should you need them. We will also work with you to protect your interests which sometimes might mean walking away from a deal which presents serious risks.”

NO TIME LIKE THE PRESENT

With so many options for practice ownership, and a plethora of experts available to help get you started, why not make 2020 the year that you commence your journey towards owning your own business?