By Miki Lyn D’Angelo, OD
Oct. 19, 2016
Two young ODs looked at a start-up in a saturated market and chose a new practice model: VT-based, no optical. They kept costs low while developing local connections to gradually build up referrals.
OFFER A UNIQUE PROPOSITION. If your market is crowded with ODs and optical shops, don’t join the fray. Forego an optical and offer a unique service, like vision therapy.
RAMP-UP GRADUALLY. Start slowly, with two partners taking turns working in the new practice. Continue working part-time elsewhere to financially support the new practice.
NETWORK. Meet local health care providers and promote your skills and specialties. Since you have no optical, you’re not a threat, you’re a resource.
Opening a practice cold represents a tremendous opportunity to build, with the potential for great profitability and growth. But to be successful you need the right strategic plan in place. When my partner, Jessica Fulmer, OD, and I opened our two-doctor independent specialty practice in Riverhead, N.Y., in August 2015, we knew we could do it–provided we implemented each step of our plan carefully.
Dr. Fulmer and I, in starting our practice, wanted to specialize in vision therapy, vision rehabilitation and low vision services. As we build our practice, we both continue to work in other practices part-time and take turns working in the new practice. This allows us to financially support the new practice–and ourselves–as we grow our patient base.
Dr. Fulmer and I are challenging the old school thought process that an optometrist must have an optical. As a start-up, you have to look at the costs involved in housing an optical (space, inventory, optician, equipment, lens stock, staff, returns, etc.). Compare this with the lesser costs of setting up a specialty care practice that offers a unique niche in the community.
Our profits are made through annual comprehensive exams, medical optometry, contact lens fitting and dispensing and providing vision therapy and rehabilitation to our community, and we keep our expenses relatively low. The specialty care services we provide far outweigh our exams and contact lens dispensing as profit centers because we are the only people in our community providing a much needed service.
Twin Forks Optometry is located in a medical building near a hospital in Riverhead, N.Y. The practice created a niche by specializing in services, such as vision therapy, rehabilitative vision and low vision, that other nearby eyecare providers do not.
Determine if a New Practice is Right for You
Dr. Fulmer and I had worked together previously at separate locations of the same practice. We both did not agree with that practice’s business model, and simultaneously decided to leave around the same time. We both were just working at opticals when we got together and decided to go for it.
From the time we had that first conversation to when the business opened was only five months. We were on the same page about how we thought a business should be run, and we wanted to create a niche practice in our community. In a five-mile radius from our current location we have a Wal-Mart, VisionWorks, Pearl Vision, Cohens Optical, BJs, two mom-and-pop opticals, one OD practice and three OMD practices, none of which offer vision therapy, vision rehabilitation or low vision services.
We knew that we had to stand out and offer something that these professionals weren’t offering, and felt the best way to do that was to create something from the ground up, running the new practice according to our shared vision.
So far we have been doing well. We have created a great relationship with those local opticals and OMDs practices, in which they refer to us for our vision therapy and low vision services, and we send patients back for glasses or medical care.
Opening cold is the harder route in terms of getting a patient base through the doors, but we strongly believe that if you are offering a service that not just any practice can give, and offer excellent patient care with a personal touch, you can build your patient base.
Assess Needed Finances
My partner and I didn’t have a particular amount of money saved before we decided to open cold. We both had our own savings, but wanted to focus on getting a small business loan to fund most of the practice. This proved to be harder than both of us thought (few banks want to lend to start-ups). However, we did have success with one bank: Bank of America. They have a program called Practice Solutions, which is specifically designed for physicians who are opening practices (studies show physicians opening a business are less likely to fail than retailers or restaurants).
The exam room at Twin Forks Optometry. Dr. D’Angelo says not having an optical, and just providing specialty services and dispensing contact lenses, increases referrals from local optical shops.
We were approved for $250,00 and took out about $210,000 at 5.99 percent to be paid over 135 months. Additionally, we received a $50,000 line of credit at Prime Rate +2.75 percent to help offset any cash-flow problems once we opened. The payments are tiered at a lower rate for the first 15 months and then jump up after that.
It took six weeks from our first inquiry to get approval, and any monies my partner and I put forward to get the business started were re-paid. The bank also has us do a monthly “Practice Heartbeat,” in which we track our profits, new patients, accounts receivable and other metrics, to make sure we are growing at an appropriate rate.
The bank didn’t lay out a specific growth rate, but they want to make sure we are heading in an upward direction. They have an industry expert who reviews our numbers, and if we aren’t meeting their growth ideals, they will contact us to help us get back on track.
I would recommend tracking your metrics diligently, including chair costs, new patients, profit pillars and other profitability markers. For us, those are the most important right now; because we don’t have an optical, we don’t need to keep track of capture rates, second-pair sales, up-sells and other optical numbers.
We are looking at which of our profit centers (vision therapy, contact lenses, medical optometry and routine eyecare) is bringing in the most revenue and how to continue increasing our business. For example, if we see that vision therapy is down in referrals, we’ll do an in-service presentation, or reach back out to our referral sources to regain communication. We also diligently look at our expenses and review these periodically to see if we can reduce costs.
Pump Up Patient Flow By Networking
Patient flow was the biggest challenge in the beginning. We saw 15 patients our first month open, and we were related to 13 of them.
Instead of shying away, we hit the pavement. We went to every OD, OMD, PCP, and every other professional who would let us into their office to talk to them. We gave them pamphlets and talked with them about how we were different and what services we provided. We also offered an in-service targeted at local occupational therapists and physical therapists to educate them on vision therapy. Additionally, we linked up with a local hospital that deals heavily with concussion patients, which has allowed us to be affiliates. We have become their go-to doctors for patients with persistent visual issues following a traumatic brain injury.
The takeaway lesson: When you decide to take the plunge and open cold, you must be willing to dedicate the time and effort to be successful. You are only going to get what you put into it.
Get a Loan to Start Your New Practice
We took the following steps in securing a loan for our new practice. Pictured on the right is the room in our office where we conduct vision therapy, one our specialties.
• Took out life and disability insurance, naming Bank of America NA as the collateral assignee.
• Provided proof of all licenses (state/professional).
• Participated in financial interview and then statement certificate.
• Obtained a landlord subordination and consent (waiver) that allows BAC access to the borrower’s leased premises (if applicable).
• Obtained a Certificate of Insurance to be maintained for the term of the loan for Business Personal Property naming Bank of America, N.A., as Loss Payee when exposure exceeds $50,000.
• Purchased flood insurance for building (always required) and contents (if applicable) if property is deemed in a flood zone. —Miki Lyn D’Angelo, OD
Get Legal Help
The first thing we did was contact a business-focused lawyer. He was well versed in registering/naming a business, negotiating lease terms with our landlord, as well as creating an operations agreement between my partner and I. In the beginning, he was by far the most important person in the process.
Registering/naming the business was a process, and took about eight weeks; we had a little hiccup due to an issue with our original name (Twin Forks Eye Associates) because NYS felt it was too vague and “misleading on what type of eye professionals we were,” so we ended up with Twin Forks Optometry. Once we had a registered Tax ID number, we were able to then move forward with our loan and getting on insurance panels.
Find Office Space
As we were waiting for our Tax ID, we were looking for a location for our business. We knew that we did not want an optical (we are focused more on specialty care optometry rather than retail), so we were looking for a free-standing building that read more like a medical building than a retail center. Once we found our location, we had our lawyer negotiate our lease terms (rent increases, responsibilities and property maintenance) with the realtor/land owner.
We got lucky in finding a building with a limited build-out cost (we only spent about $10,000 on cabinet/small changes). Some of the other locations we looked at had build-out costs of between $20,000-$90,000.
Additionally, we began making a “need” and “want” list for the equipment and setup we needed to function. It is always nice to have all the newest and fanciest equipment, but realistically we got down to the bare bones and really asked ourselves what we needed to open and practice effectively. Once we knew exactly what we wanted we were able to reach out to vendors to give us price quotes. We found that working with the equipment retailer Lombart was the most cost effective because they gave us a great deal for purchasing everything from them.
We also found an IT guy to help set up the office (server, computers, phones, printers, cameras). He was a crucial piece to our success in the beginning because he helped set up all of our equipment, linked it to our EHR, talked to reps about integration, and basically took care of everything IT-related.
Key Advantages of Opening Cold
FRESH START. You have the opportunity to create the practice of your dreams. You don’t have to worry about transitioning or transforming an existing practice.
SHAPE EXPECTATIONS. Opening cold, our patients didn’t have a preconceived notion of how the business should run. Taking over another doctor’s practice, you occasionally will run into issues that need to be fixed, such as co-pays not being routinely collected, or contact lens exams not being charged, which makes it very hard to change the patient’s mindset when the new doctor comes in.
CREATE A NICHE. We created something that is unique, and offer a service that is much needed in the area with our vision therapy/rehab/low vision specialty. I tried to start a VT clinic in an already existing practice prior to opening cold and there were so many roadblocks (no support from senior doctors, scheduling issues and insurance problems, among other challenges), that opening my own office seemed like my only option if I wanted to pursue my passion.
—Miki Lyn D’Angelo, OD
*Shown in photo: Dr. D’Angelo on right and her partner, Dr. Jessica Fulmer, on left.
Lean on Mentors for Guidance
We did not have a formal consultant, but both of my residency directors helped tremendously in this process. My residency was completed at a private practice (in business for 25 years) that focused on vision therapy and rehabilitation, but also how to run a private practice. My mentors worked with consultants from the EMyth and with Gary Gerber, OD, of The Power Practice, so learnings from those two consultancies were drilled into me throughout the residency. Any questions or concerns I had, they guided my partner and I through the process.
Also, the optometric community is very open and we would discuss challenges with colleagues who have been in practice for many years. Our local optometric chapter, Suffolk County Optometric Association, was a great resource through which we would get together with all the local optometrists on a monthly basis for continuing education, but also to have the opportunity to discuss business concerns.
Market Your New Practice
The first thing we did was contact our town hall and had them come do a ribbon cutting ceremony, which the local paper did a story on. We also had the local paper do a more specific article on what we were bringing to the community, which was well received and brought in many patients.
Other marketing investments we made:
Web Site: By far the most important; we hired a web designer to create a professional looking web site because that is where most people will go first before contacting or visiting a doctor’s office.
Social Media: Facebook has been a great resource to keep our patients/parents/community aware of success stories and events. You can use the paid ads service (it allows you to have a certain budget, select your target demographic and geographic target), which has been wonderful for us! It is not that expensive and reaches a lot of people (highly recommend).
Google: Verify your business and they send you monthly statistics of how many people searched for you, called your business and asked for directions.
Print Ads: Print ads are expensive, and we have not had a great ROI with them. I would not recommend spending a ton of money on these. We do not have an optical, so perhaps if we were selling goods, we could have used a coupon-type print ad to drive people in. I would say this was by the far the biggest waste of money for us.
Radio: We advertised with a local radio station, which reached the older population. It wasn’t expensive, but we only got two patients from it after running for six months. We discontinued this service.
Web Ad: We have a local web-based newspaper that we advertised with on their web site; we got a few clicks, but the ad is usually buried within many others. Not recommended.