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Starting a Private Optometry Practice
The idea of starting a private optometry practice fascinates many Optometrists and Optometry students. But the cost of starting a business worries many. Starting a business and sustaining it can be difficult, according to entrepreneurs. So we have interviewed Jessica, who has 12 years of experience owning her practice and let us learn from her what it takes to start a private optometric practice.
Purchasing a pre-owned business or Starting Cold
The main question in people’s minds is whether to start cold or purchase a pre-owned business from someone who has been practicing previously. The popular opinion is that the more reliable option is to buy someone else’s business if the previous business was earning a decent amount of revenue compared to its size. According to Jessica, she paid a total of about $350,000 for the building and all the equipment for her practice back in 2007.
It is tough to determine the exact value of starting a practice, and it is generally costly. But there are ways to determine the approximate value. According to the claim of the American Optometric Association, the worth of a practice is close to 55 or 60 percent of the average gross collected in the last three years.
Starting cold is more complicated and complex since the banks are reluctant to give loans to new practices with a bad history of regular income. Building an office space from scratch, including all the furnishings, and the building can alone cost about $100,000 to $350,000, depending on the scale of the practice. On the positive side, you have complete control over your design and choose your ideal location for your practice. This can help you secure your customer base and provide the best possible outcome for growing your practice. It’s a high-risk, high-reward situation.
Another less risky choice is renting, which is also very popular. If you want to start your practice cold, then this will reduce the starting investment significantly. Remember that you have to deal with the landlord who rents the building to you, and your experience might vary. The rent might increase annually, or you might have to pay for annual maintenance. So make sure to reach an agreement with your landlord before renting the property.
The next step of growing your practice is to get equipment for the purpose after you have decided how you want to start. If you have purchased a pre-owned practice, then you will get all the pieces of equipment you need. Although in some cases, the equipment might be old and need to be replaced, as was in the case of Jessica. She said that it was an unexpected expenditure for her as she had expected to use the equipment of the last owner. Hence, it is also necessary to check the equipment before buying a practice to calculate the extra cost of repairing or replacing the old ones.
If you are making a fresh start, you need to spend on buying your equipment. First, you need to evaluate the overall cost of purchasing equipment and research extensively for the price of each for your practice. You can avail of discounts from online retailers or trusted sellers. For reducing the cost, you can rent equipment or purchase from old practices. For starting a small practice buying new equipment can cost you over $100,000.
Every successful business model contains optimal plans for advertising. In the modern era, advertising on a website has become a necessity. Other great ways of advertisement to increase awareness about your practice include printing on newspapers, pamphlets, road signs, etc. As for Jessica, her practice was already well established, so she didn’t face any difficulty generating revenue. However, this may not always be the case for people starting cold.
Jessica’s practice currently spends just $5000 annually on advertising, but in the case of a new practice, the amount maybe 3 to 4 times more in order to be recognized and develop the ideal customer base. Once that target is achieved, the advertisement costs can be reduced.
Hiring a good lawyer is crucial for your business since handling legal matters should be done in the best possible way. Jessica spends nearly $4000 on legal fees, which is acceptable for a purchased practice. Expert legal guidance is required to negotiate the terms of sale and the practice value, which takes some time and is a complicated process.
However, in the case of starting a practice from scratch, the cost of legal advice is expected to be a bit lower at around $1000 to $1500. This is because the legal help for negotiations or licensing of the terms of agreement for renting from a property owner is less tedious as compared to the negotiation of the price of a pre-owned practice. So, legal assistance plays an important role, and its cost should be taken into consideration.
Insurance and other Overheads
For Jessica, the insurance of her practice costs $1000 every six months, so it wasn’t a big concern, and the insurance cost was lumped up with other overheads like electricity, water, etc. Overheads depend on the size of your business, and an amount ranging between $10000 to $15000 should be kept aside safely in the first year for that purpose. Licensing fees that usually don’t cost a very high amount can also vary with your practice location.
If there is a record of the business’s gross for purchase practices in the last few years, financing becomes more effortless. A great source of financing is the credit unions due to their lower fees than banks and faster loan approval at lower interest rates. However, a detailed business plan and cash flow forecast are required before taking a loan from banks and credit unions.
In some cases, even a good business plan is not enough since most financial institutions want to check good credit history. Jessica used a credit union to finance her practice. Thanks to a well-outlined business plan, a very good personal credit score, and a good business credit history with old practices, she had no difficulty getting the capital she needed.
The Overall Idea
Beginning a private practice is an appealing thought, and for Optometrists like Jessica, it worked out amazingly well. In any case, it’s critical to think about all parts of the expense to do so before deciding the start of your practice. Jessica clarified that a substantial strategy and involvement with the business were vital to her prosperity and that she has no regrets about her decision.