Finances

Purchase An Established Practice–and Grow It

By Dave Anderson, OD

April 22, 2015

SYNOPSIS

Purchasing a long-established practice offers local name recognition and a ready-made patient base. Leverage these pluses in your growth plan.

ACTION POINTS

OPTIMIZE LONG-TERM STAFF. Learn about patients and the needs of the practice from staff who have been there for years or even decades.

INTRODUCE YOURSELF. Volunteer services to community groups, from church groups to organizations like the local Lion’s Club. Residents know the practice, but not you yet.

MANAGE TRANSFER OF CARE. Put a clause in the contract regarding care for long-term patients. Have out-going doctor introduce to you to patients with chronic conditions.

My wife and I both are optometrists, and when we decided to purchase a practice of our own, welooked at more than 25 practices. We decided on a 60-year-old practice because it provided us with an existing patient base we could grow in an area where my wife and I both wanted to live. In addition to these advantages, we put strategies in motion to have a smooth ownership transition. In addition, weput a growth plan in motion.

We have experienced 85 percent growth since the practice was purchased.

Whenwe purchased the practice, the yearly revenue was just under $1 million with two ODs, and now that is the revenue produced by each of the two full-time doctors in the practice. My wife, our other partner, practices on a part-time basis. We have grown from an office of 1,800 sq. ft. to 7,400 sq. ft., and we now have 15 full-time and two part-time staff, doubling the former owner’s staff level. The former owner worked for us as an employed OD for three years before retiring.

Miamisburg Vision Care
Miamisburg, Ohio

Locations: 1

Doctors: 3

Support Staff: 16

Annual Exams: 6,000

Annual Revenues: $2.2 million

Isolate Where You Want to Practice

The first part of the process was deciding where our family wanted to live. My wife and I knew our home towns were both too small for two new eye doctors to move in and practice. We wanted a smallcommunity, but wanted some of the benefits of living in a large town. Miamisburg, Ohio, where we ultimately settled, was just that, as were about 10 of the other practices that we considered.

Wehad a 10-question list, including: how many staff members dowe want? What is the percentage of new patients to established patients? And net revenue as a percent of gross revenue? The clincher for the practice we chose, Miamisburg Vision Care, was the first visit to the office. After walking around, seeing the interaction with the doctors, staff and patients, it was clear this practice had a lot it was doing right. I did not want to start from scratch, and I certainly did not want to purchase a practice that was on the way down.

The biggest advantage of buying an old practice was the staff. Several staff members had been at thepractice for over 10 years, and now, some have been with our practice for over 30 years. This provides incredible benefits, the primary one being theability to maintain patient loyalty. The patients were veryloyal to agreat doctor who was in practice for over 40 of the 60 years the practice has been around. They would wait for months to see him, and they raved at how well he took care of them. With a staff that understood the patients’ issues and history,we feltwe could provide the continuity of care our long-term patients valued.

Manage Expense of Buying Into Practice

The biggest risk, or downside, of buying an established, successful practice, is the expense. At the beginning, we were spending over 60 percent of our overall earnings to pay off the loanwe took out to make the purchase.We would never have been able to do this if my wife were not also earning income for our family. There is certain risk, and frankly, we had many financial sacrifices in the early years. When so many of my friends were buying HD TV’s, I was still investing in my practice. I am still driving the same truck I drove the year I moved to Miamisburg, and we saved money in any other area that we could, too.

If I didn’t have patience, it would have been really tough to maintain a strict budget for as long as we did. The advantages of buying an established practice are many. During the financial crisis of 2008, our office was able to weather the storm. We never saw a dip in our revenue, patient flow or overall growth. Because I did not have to fight to get patients in the door of our long-established practice, my only focus was addressing our patients’ needs and maintaining their loyalty.

Introduce Yourself to Community

When you buy an older practice, people in the community often are familiar with the practice, but they don’t know you.

I addressed the challenge of introducing myself to the community by volunteering to help in any way I could. I joined as many community groups as possible, from groups at my church, to the Lion’s Club and our downtown Merchants Association. I wanted everyone in the community to know I was a new doctor in town, and that I was here to stay. I offered to take as many emergency patients as possible, including on weekends. I never sat in my office on my computer, and was always visible and present in the office when I was not with patients. Any time I could introduce myself to long-time patients, I took the opportunity to say hi, or offered to adjust their glasses, or even just helped open the door for them.

Manage Transfer of Care for Long-Term Patients

As part of the initial contract with the doctorwe bought the practice from, we included a transfer-of-care clause related to chronic conditions, such as glaucoma or macular degeneration. The doctorwe purchased from would introduce me, having me come into the room to meet a patient nearly every day as he would transfer to me a complex contact lens fit, a glaucoma patient who was not well controlled, or someone who was clearly in need of long-term follow up.

Add Partners, Add New Advantages to Long-Time Patients

When we added my wife as a partner, we increased over 20 percent in patient volume and revenue in her first year with the practice. Many patients were excited to see a female doctor on our staff.

It was also great adding my wife to the practice because she has a different emphasis than my other partner and I. She loves seeing patients who have low vision and other vision rehabilitation needs. She has grown that aspect of our practice far beyond what we hoped. She sees as much as two to three new patients a month who are referred to us from either occupational therapists or retinal specialists.

At the time she joined, my other partner and I were so busy that we were both booked for nearly a month in advance, so seeing her would allow someone to have a new prescription for contacts before they ran out, or a quick new prescription to replace broken glasses.

It was nearly four years after we purchased the practice that she joined, and when she did, the opportunity to help those who had an immediate need allowed her to grow our patient base quickly. In fact, she sees the highest percentage of new patients–over 30 percent–and this has allowed us to add more hours to her schedule every year since she joined.

Note Patient Demographic Shifts & Changing Needs

The demographics have changed since I purchased the practice, with a big increase in the 30-50 age group. The practice was comprised mostly of patients in the 50-80 and 10-30 age ranges when I joined. Over the last few years, the 30-50-year-old group has increased tremendously. I’m sure some of it has to do with my age, but it also has to do with me knowing people in the community who refer their friends. Our growth also can be attributed to our reputation as good doctors for contact lens patients. We are proactive in fitting patients with contacts, offering the newest contact lenses on the market each year, participating in contact lens studies, and willing to fit any type of contact lens that is needed, from multifocal to scleral lenses.

Dave Anderson, OD, is a partner withMiamisburg Vision Care in Miamisburg, Ohio. To contact: doca@burgvision.com

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