Dr. ,
Going to SECO? Let’s get a cup of coffee! I will be wandering the Georgia Convention halls Friday 3/6 and Saturday 3/7 and would love to put a face with an email address. You can just reply to this email to set up a time to say hi.
Most of my readers are established practice owners, and a recurring conversation I have with clients is “who is going to buy your practice?”. Besides the values being at all-time highs, I think one reason Private Equity is able to purchase so many practices is that they are the proverbial “bird in the hand”—present, willing and able to purchase in 90 days from a signed LOI (letter of intent).
At a recent speaking engagement about the math behind selling to private equity, the number one conversation that was sparked wasn’t about the future of optometry, who the best acquirer is or how to market your practice. The hot topic was how Associates don’t seem interested in practice ownership, and owners are concerned about who they’ll be able to sell their practice to one day.
The Case for Practice Ownership
Associates, listen up. Practice owners, forward this email to your youngers docs. It may be hard to think about retirement in your 30s, but you will have to someday, and the earlier you plan for it, the easier it is to build up to the right retirement numbers.
Let’s compare 3 different scenarios on how much each of these doctors would need to save annually over 20 years to accumulate $2million in retirement assets, assuming a 6% investment return and 2% inflation rate.
* Side note: If you read last week’s email, you know that the 4% guideline says that $2million should provide an $80,000 lifestyle for 30-ish years.
- No practice ownership
- Owning a practice that nets $500,000 after taxes in today’s dollars (this could be a ballpark number for a practice with $1mm in gross collected revenues)
- Owning a practice that nets $1mm after taxes in today’s dollars (possibly a practice with $2mm in gross collected revenues, give or take)
