Preparing for the Sale of Your Practice

For many optometrists, their practice is their largest financial asset, the product of decades of hard work, and an important part of their identity. As a result, I have found that it’s essential to follow these steps to facilitate handing over those precious keys.

1. PREPARE THE PRACTICE’S
FINANCIAL HISTORY

A serious buyer will need reliable financial information. This is defined as at least 3 years of profit-and-loss statements, balance sheets, and tax returns, generally after a prospective buyer signs a nondisclosure agreement. Additionally, potential buyers want the operational story behind the numbers. This is so they can evaluate payer mix, patient demographics, staffing, equipment, electronic records, lease terms, service mix, office condition, and schedule demand, among other items.

• Pro Tip. Have clean, consistent records to make it easier for the buyer, lender, certified public accountant (CPA), and attorney to understand the practice’s true cash flow and keep the process moving forward without a hitch.

2. FOCUS ON THE WHOLE DEAL,
NOT JUST THE PRICE

When determining a price for the practice, owners should take into account their income, tax consequences, certainty of closing, post-sale employment requirements, outstanding debt, and the buyer’s ability to operate the practice successfully.

Private equity may offer more than an individual optometrist, but the seller may give up control, be forced to accept operational changes, or remain employed under specific expectations. For example, a private equity group may change the electronic health records system, remove and add certain frame lines, and make staffing adjustments, among other changes.

On the other hand, an associate or independent OD may offer better continuity for patients and staff but have less financing capacity.

Neither path is inherently good nor bad. The right one depends on the seller's financial needs, timeline, desired role after the sale, and legacy priorities.

• Pro Tip. Keep in mind that the highest headline price may reduce the buyer pool, give way to difficult negotiations, delay closing, or exceed what a bank will finance.

3. DETERMINE FINANCING AND TRANSACTION STRUCTURE

Traditional bank financing can provide a clean exit because the seller is generally paid at closing. However, the bank performs its own valuation and underwriting, so the buyer may need meaningful cash reserves. This can make things challenging for younger ODs looking to buy without much cash in the bank or for larger practices requiring more cash upfront.

Seller financing creates flexibility. The owner holds a note, earns interest, and may make ownership attainable for a qualified buyer who cannot satisfy every bank requirement. The tradeoff is added risk if the buyer defaults or backs out of the sale. Some transactions combine bank and seller financing to balance these concerns.

The transaction structure also matters. In an asset sale, the buyer purchases selected assets and generally limits exposure to prior liabilities. In a stock sale, the buyer purchases the entity itself, which may preserve contracts but also carries the entity’s liabilities.

• Pro Tip. Tax consequences can differ substantially for buyers and sellers alike, so structure and purchase-price allocation should be reviewed by experienced legal and tax professionals before the sale terms are finalized.

4. CHOOSE A RELIABLE TRANSITION TEAM

A transition team commonly includes an attorney, CPA, and, sometimes, a broker or consultant for better negotiation power.

The team’s value should extend beyond suggesting the highest price. Members should help expand outreach to prospective buyers, perform an accurate cash flow-based valuation, qualify buyers, coordinate the selling process, support good-faith negotiation, and keep financial, legal, and operational processes moving toward closing.

5. PLAN EARLIER THAN FEELS NECESSARY

This creates time to clarify an exit strategy, prepare financial records, strengthen the practice, and decide what type of buyer is the best fit. It also allows an associate OD who may want to buy the practice to learn the business and explore financing options.

• Pro Tip. In some situations, “soft language” can document that both parties intend to begin formal discussions within a defined period. This creates direction without forcing a deal before the relationship, valuation, financing, and future plans have been addressed. In the case of an associate who may be interested in purchasing the practice, it prevents them from spending years building a practice around an ownership opportunity that was never realistic.

HANDING OVER THE KEYS

The best transition rewards the seller’s years of work, positions the buyer to succeed, and supports staff and patients through the change. Additionally, it includes a plan for life after ownership, whether that includes continued clinical work, consulting, teaching, family time, travel, or other hobbies or interests.