Cold Start Practice

Are the Challenges of Private Practice Ownership Worth It?

By Alan P. Levitt, OD

Feb. 22, 2023

In my last article, I discussed how to begin building your dream practice, despite the burden of student loans, by purchasing an existing practice with 100 percent bank financing. Another pathway into private practice is to finance a cold-start.

Let’s consider both the quality of life and financial benefits of solo or group private practice versus being an employed associate or practicing in a commercial location.

Quality of Life
Gain greater personal satisfaction by taking control of your career
Sometimes the intangible things in life are worth as much, or more, than tangibles. Strongly consider private practice if you have a firm vision for your ideal practice, wish to earn more than an associate’s salary and want to control your long-term financial future. You decide where to locate your practice, which services and specialty areas you offer, how you manage patients and staff and when to schedule patients/time off.

When you are self-employed and own your practice, you decide how much time you spend in the office on a daily, weekly, monthly, seasonal and annual basis and can schedule accordingly. You can make time for personal non-optometric experiences, including family, volunteering, travel, lecturing, research or managing outside investments, such as real estate, without being controlled by employment agreements or commercial leaseholds.

Private Practice Ownership Comes with Challenges, However
You don’t have to go it alone. Consider partnering with one or more trusted colleagues to share management and finances.

As CEO of your private practice, you will wear many hats:

  • Chief operating officer
  • Chief information officer
  • Chief compliance officer
  • Chief planning officer
  • Chief finance officer
  • Medical director
  • Chief marketing officer
  • Chief technology officer
  • Head of human resources
  • Head of purchasing
  • Head of facilities and maintenance

Most of the daily details related to managing these critical areas should be assigned to individual staff; ultimately the practice owner or owners bear responsibility for setting goals, budgets and making final decisions. If you enter private practice with one or more partners, share these responsibilities among the partners, then consider periodically rotating responsibility for all areas of practice management so each partner becomes fully acquainted with every aspect of their business.

If two or more doctors enter practice together, in the beginning each partner may need to work part-time in the practice and part-time as associates elsewhere to pay personal bills. As the private practice grows, increase your in-office hours until you are both full-time.

Travel More Thanks to Your Practice

Let Your Practice Pay for Travel Expenses by Strategically Using Rewards Credit Cards  

Private practices typically run about 30 percent cost of goods sold. If you pay your monthly bills (frames, lenses, contacts, equipment and general office supplies) with a rewards credit card, you will easily generate hundreds of thousands of points every year for domestic or international travel including airfare and hotels at no additional cost to you or your practice. In the early years of practice ownership, when money is tight, a cash back rewards card may be the better choice. As your practice and income grow, then consider switching to travel rewards cards. Do not overlook this amazing no-cost benefit of practice ownership.

To build up points as rapidly as possible, one option is to use two distinct rewards cards from the same company. Use one for office expenses and the other for personal expenses, then link both cards to the same rewards account.

Be creative with your strategy. You may decide to use an airline rewards card for office expenses and a separate hotel rewards card for personal expenses. Choose your rewards cards based on sign-up bonuses, annual costs, specific benefits, redemption flexibility and which airlines service nearby airports. For your office card, be sure to choose one that allows you to earn unlimited annual points. Partners can alternate paying monthly bills or split monthly payments, so each principal accrues equal rewards benefits.

For many years, credit card rewards (primarily from my solo private practice) allowed me and my wife to take one or two annual round-trip business class flights to Europe or Asia just using our rewards points. In our case, the most effective dollar value for our airline points was to reserve them for international business class flights and pay out of pocket for domestic flights. This strategy allowed us to travel more frequently, in greater comfort on long-haul flights, with much less out-of-pocket cost.–Alan P. Levitt, OD

Financial Benefits of Private Practice Ownership – present and future
Generate a higher net income over your career as an owner vs. an employee/associate
Annual income surveys historically indicate that optometrists with the highest net income are self-employed in group private practice, followed by solo private practitioners, and lastly, employed associates. Annual net income for group practice partners is often twice that of employed optometrists.

Hire associates to increase your income and build practice equity
As an associate, when you leave a practice, you rarely take more than your diplomas with you. In contrast, practice owners retain a large successful ongoing business that generates significant net annual income in the present and will eventually provide a large profit when sold.

As your practice grows, hire part-time or full-time associates to increase office productivity and net income, while covering office overhead when you are out of the office. A practice with two or more doctors is much more valuable than a single-doctor practice because it has significantly higher gross and net income. It can more easily afford technology upgrades, increase patient retention by providing additional in-house specialty areas of practice and services and share after-hours emergency coverage.

A practice may grow organically by adding associate/partners or by acquiring or merging with nearby solo or group practices. In planning an exit strategy, a multi-doctor office will command a much higher final sale price than a solo practice. If the practice is structured as a partnership, incorporate buy-out terms and key-person insurance to address disability, death, or retirement in the partnership agreement.

Rebates and other financial incentives
Major optical suppliers and labs are always looking to build long-term relationships with growing practices that consistently pay their bills and successfully dispense high-margin products. Don’t be afraid to ask vendors what type of rebate or incentive programs they currently offer to retain and grow your business. These incentives are often used to reward employee performance, purchase new equipment, pay bills and increase your net income. Programs change throughout the year, so check with your key vendors every six months.

Tax advantages
Ask your accountant about the significant potential tax benefits of owning a business versus being an employee. Common strategies include writing off car expenses, employing family members, assigning certain personal expenses to the office and paying yourself or a family member (instead of a bank or leasing company) a market rate interest-bearing loan to fund practice growth, new equipment and other updates. To legitimize the loan, be sure to create a signed promissory note between the individual lender and the practice that will specify terms such as the total loan amount, interest rate, monthly principal and interest payments and duration. Review all specifics with your accountant and attorney.

Increased retirement savings
As an associate or employed optometrist you may have the option to participate in a 401K/Roth 401K plan or have some form of an individual IRA. The downside of these options are relatively low annual contribution limits.

As a principal in your own practice, in addition to the above options, you may be able to utilize retirement planning strategies often unavailable to employed individuals with potentially much higher annual contributions. Ask your CPA and financial advisor about the option of creating a Profit Sharing Plan or a combined Profit Sharing and 401K Plan. Be sure to investigate creating a Top Heavy Profit Sharing Plan that particularly favors the practice owners while still benefiting your employees. Over a long career, maximizing annual contributions to these retirement savings options can potentially create million-dollar plus tax-deferred accounts.

Alan P. Levitt, OD, now retired, was a practice owner in Miami, Fla, for over three decades before selling his practice in 2021. To contact him:

Last year, after 40 years in practice, Dr. Levitt sold his solo private practice to a younger colleague. He first entered practice by working as an associate for his family optometrist; three years after graduation, he left to cold-open his own private practice in 1984. This article includes several strategies that Dr. Levitt used to create a successful practice, travel the world and fund a secure retirement.

Sincere thanks to the following individuals for their input:

David L. Popper, OD    C. J. Roffis, OD

Anna Sobkiv, Vice President Healthcare Business Banking, PNC Financial Services, Ft. Lauderdale, Fla.


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