The Optometric Minute

Plan a Practice Exit Strategy Early On

Sept. 23, 2015

Kenneth Daniels, OD, FAAO, Dipl. ABO, owner of See Life – Hopewell & Lambertville Eye Associates in Hopewell and Lambertville, N.J., explains how he began planning early on for exiting practice ownership. He structured his practice as a C-corporation, and he offers associates the option to buy company stock that bears dividends that can be reinvested to further build equity. In your exit strategy, take an optimistic approach, he advises, but build in protections for all parties should unfortunate scenarios occur.

Structure Your Exit Strategy
Plan for the Worst

ODs in their 50s should be well into executing their practice exit strategy, says Kenneth Daniels, OD, FAAO, Dipl. ABO. In fact, planning for a practice exit  should begin from the first day in practice.

As early as possible, estimate how long you would like to keep working, ideally, including how many hours per week you want to be working at the different stages of your career, and the kind of associates you would like to bring into the practice as potential successors.

One strategy is to structure your practice as a C-corporation, allowing associates to buy practice “stock,” which bears dividends that can be reinvested to further build equity. By year seven or eight, says Dr. Daniels, associates may own as much as half the practice.

Offering associates the option of buying into the practice gradually over the years, rather than requiring an upfront commitment of a large sum of money, makes it practice ownership at a young age feasible for associates who may still be paying off their student debt.

It’s good to be optimistic and expect the best, but you also should plan for the worst, right from the beginning, says Dr. Daniels.

It is key for practice owners to stipulate in sales of the practice that the associate is buying practice “stock,” or value, as a promissory note. You also should include in the associate’s contract that if the worst happens, and you as practice owner die while still working, that the value in the practice that you still own reverts to your survivors.

Also plan for the possibility that the associate may choose to relocate, in which case they can cash out their value in the practice. The departing associate should be paid back over time, according to a repurchasing plan and schedule that you stipulate in the contract.

The biggest problem is that practice owners don’t think of the what-ifs, says Dr. Daniels, and the what-ifs are the most important parts of life.

Kenneth Daniels, OD, FAAO, Dipl. ABO, is owner of See Life – Hopewell & Lambertville Eye Associates in Hopewell and Lambertville, N.J. To contact him:

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