IDOC actively shares industry-focused articles, blog posts, podcasts, videos and other thought leadership with our members and other optometric practitioners. Below, you will find links to our growing library of educational materials and multi-media assets written and created by IDOC's team of seasoned industry experts.
Nathan Hayes | 2/9/2018

Your optometry practice is incredibly valuable to you.  “Well, Nathan” – you may say – “of course it is!”  But have you ever thought of why it’s valuable?

You spend most days pouring your blood sweat and tears into it: hours and hours of patient care, planning, administration, dealing with staff, and worrying about industry trends and your competition.  You know your practice is valuable to because of what you put into it, the same way we know parents value their children because of the energy they expend raising them.

As a consultant, though, I have a different answer to this question.  To me, your practice is valuable for three reasons:

  • the INCOME it provides you over and above what you’d earn as an employee
  • the CONTROL you have as an owner: you get to say how things get done!
  • the EQUITY that you can sell when you’re ready to retire

For many owners, control is reason enough

And when it comes to balancing the value of the income versus the equity, I can also tell you that, your practice is almost certainly worth more as a source of income than for the value of the equity.  Most practices will sell for about 2 ½ to 3 ½ times the owner’s current income, once you take taxes into account.  Think of that as the price to earnings ratio.

Let’s consider two examples, a $700,000 single-OD practice and a $1,200,000 practice with a full-time associate, assuming the sale price for both is 2/3 of their revenue:

Own till you're 80.png

Let’s assume this seller can get a 5% long-term rate of return from investing the proceeds the sale.  For ease of use, let’s round up and say the sale nets $350,000 after taxes.  5% a year is only $17,500, nowhere close to the income stream the owner is receiving.

In a larger practice the spread is even more pronounced, even though the price to earnings ratio is better.  Remember that Practice Net is defined as all the pay and benefits to all the ODs in a practice, so we’ll deduct the associate OD’s comp first.

Nathan Hayes
Practice Finance Consultant
Nathan Hayes joined IDOC with a solid background in the eye care industry and serves as IDOC&rsquo;s Practice Finance Consultant. Before Prima launched in 2011, he spent five years in business development for Red Tray and HMI Buying Group. Nathan graduated from Vanderbilt University in three years, with a degree in Spanish and a minor in mathematics. <br/><br/>After graduating, he spent a year working abroad. During that time, he worked for two firms in San Jose, Costa Rica. He interned with Grupo Juridico de San Jose, working in environmental policy to protect a threatened parcel of land, then he worked as a project manager for a US-owned precision machining shop. Nathan then spent 6 months working with street children and orphans in Mexico. <br/><br/>Before getting into the healthcare industry, he was an Assistant Store Manager and completed the Corporate Training Program with Haverty&rsquo;s Furniture Company in Atlanta, GA. Nathan and his wife Heather have a son, Daniel, and a daughter, Hannah. In his spare time, Nathan enjoys reading and outdoors activities - especially cycling and hiking.
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