You Can Afford the Practice of Your Dreams

Optometric Management, Sep 2005 by Milburn, Timothy

For the second purchase, there was no need to reinvent the wheel. I took the contract from my first purchase and adapted it to fit the terms and conditions of the new sale. However, should the other party in your deal desire to write the contract, let them! Just be persistent in making changes that you desire. Regardless of the contract's author, insist that the final document be fair. Consult an attorney, but on your terms.

Using an accountant

For the first practice, I hired a CPA at the request of the bank that issued my credit line. The bank required a business plan and projections for the first two years. Initially, this seemed like a difficult task. How could I possibly predict the future? Finally, I sat down and set some reasonable business goals. Then, I calculated how many pntients T would have to see and how many glasses or contact lenses I would have to sell to meet those goals. I handed these projections over to my accountant and he charged me $250 to type my business projections on his letterhead, sign his name, and mail it to the bank. The CPA did not check my numbers, offered no suggestions and he offered no advice on how to improve my business plan. He simply took my money and mailed my numbers to the bank.

I did not use an accountant for the second practice. I developed a business proposal including three-year projections, a budget, and a business plan. Near the end of my loan approval process, one of the loan officers confided that my failure to use a CPA had a negative impact on my loan approval process. Nevertheless, the loan was approved and I saved $250 by serving as my own accountant. I would NOT advise anyone to do his or her own business taxes, but this is different. At times, the services of a CPA are very important, but depending on the bank, it may not be necessary to use a CPA to prepare the loan application.

Diligence is due, look before you leap

A practice broker or a management consultant can be helpful in assessing the value of your future practice. It's important to not over-pay and it is also important to verify all of the statements and claims of the seller before you buy. Do your homework before spending a few hundred thousand dollars. The pros call this "due diligence."

For both purchases, I did my own due diligence and did not use a consultant. I requested: copies of the sellers' signed Schedule C tax returns from the last three years, a letter signed by the seller's CPA verifying the Schedule C returns, copies of the profit and loss statements, copies of the banks' records and cancelled checks for the last 24 months, and copies of optical laboratory statements.

Finding closure

The path to the closing table can be a minefield. Dealing with lawyers, negotiating with sellers, appraising the value of the practice, and applying for a loan can all be overwhelming. Play if safe - play it smart. Always keep your financial risk to a bare minimum until you sign at closing. Remember, some deals fall apart and never close. Don't be left holding the bag with a huge legal bill for a practice you can't buy.