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Thread: Buying a practice-helppppp

  1. #1
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    Confused Buying a practice-helppppp

    Happy 2020 everyone!

    I am in desperate need of your help. I am interested in buying a practice and I don’t know where to start. I am an Optician-considering the possibility of partnering with an O.D.

    I have signed a non disclosure and got some basic financials.

    now what?
    Who can I go to come up with a fair price!? Are there specific attorneys and accountants? Will a General business suffice?

    Any help or guidance would be greatly appreciated.
    i have done research online and shows there are different valuation processes-how do I choose the correct one?

    Thanks so much in advance!

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    Basically you will want to calculate EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization). This is can be thought of similar to an annual profit. Ask if you can speak directly to their accountant who should be able to give you a figure. Then determine a multiplier of that number to get to a fair price. In the current state of the industry 4-5x would probably be a good place to start. it really depends on how successful and stable the practice is.

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    ePii! Thanks for your help!
    I am looking into it as I write this! There are also diff practice valuation methods-and I’m getting completely diff price ranges!
    Thanks again!

  4. #4
    Master OptiBoarder optical24/7's Avatar
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    For what it's worth, I'll throw in my 2 cents... There are a ton of variables, but I know I personally wouldn't pay 5x net for an optical shop. Hypothetically, if this practice netted 100k per year you'd be looking at half a mil to purchase. Do you know how nice of an optical and how great a location you can get for that kind of money? 5 years to break even IF you continued to profit just as much as the previous owner?

    As far as variables, just a few to consider...
    Frame inventory; Is it new, returnable, warranted still by the manufacture? What is the actual cost of this inventory if purchased directly from the manufacturer? Value of the frame inventory plummets if it's not all 3.

    Location; Does it have a ton of foot traffic or is it on some drive by only back road? Optician owned locations that don't have a ton of foot traffic usually struggle. Even with an OD, without foot traffic, you have to take insurance to drive patients to a back road location.

    Does this place have a finish lab? What condition? What would it cost to purchase the same from a private seller? Lens inventory; Is it in materials and coatings you plan to sell in popular power ranges, or is it all old yellow cr39 in high cyl powers?

    Does the current owner have referring OMD's? Do you KNOW you can also build a relationship with these doc's cold out of the box?

    This next one is a big question to answer; Was the reason for the success of this location due to the Optician that owned it prior? Are the current clients loyal to him, or the location? Do you have your own patient base that will follow you to your new place? ( same basic neighborhood, folks don't usually travel far for glasses) I was at my last location for around 15 years. When the owning OD sold to another OD, I left also..The new doc folded in about 2 years. Our patient base was loyal to us, not the location. ( Oh, some of our former patients still went there, but the volume dropped quickly...)

    Unfortunately, few Optician owned (and even OD owned) businesses are worth much more than the inventory and equipment. They fold daily and their inventory is worth pennies on the dollar...

    If you feel the current owner is asking too much, consider buying out one of these shops that folds and open cold at a new location. Make sure you have at least 2-3 years of capitol to live off of and pay your basic business expenses. There of course is more to consider, but this is a pretty basic list to start with. Good Luck!

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