So I was all gung-ho about opening a practice until...

[Princeod2583]

Advertisement - Members don't see this ad

I am all excited to open a practice cold; I know that, as a new grad, it's pretty much impossible to get a loan straight out of school. you have to work for a year and then hope you have a convincing business plan + cash flow to get approved for a loan. I called one of the lenders to verify the steps I should take within the next year so I can start the process. (i am very serious about this). Then I call a realtor from Re-max (big mistake). Ha. He set my dream back a little bit (well probably not, cause I still think I;m going to pursue it in the end). He goes on to tell me I should not open a business any time soon. i will not get the funding necessary to start my own and that the business will likely fail unless i work in the field for at least 3 years. I disagree! I understand working for a private practice doctor can teach me certain things about running a practice, but I think most people learn how to run a practice, by RUNNING a practice. So i'm going to just ignore what he said. What does he know right? he's just a realtor in the business for 25 years ......

 

[imemily]

Have you thought about maybe buying an established practice?

It seems like an easier route towards owning your own practice.

 

[Shnurek]

Well make sure the area doesn't have any other comprehensive OMDs or ODs and get a second opinion from another realtor. I dunno what else to do.

 

[20DOC20]

I'm looking into starting cold myself. Mine isn't an ice-cold start. I've been practicing in my target location for the last 6 years. Had to take a time-out until a non-compete clause expires.

Some problems I've found getting $$$
1. Some banks aren't financing cold starts, even if it's not a true cold-start such as mine. Exceptions: Pro-Med Financial and Transitions Consultants. I recommend the latter.
2. The banks are more than happy to lend for Hard costs and soft costs, but they're being stingy on the Working Capital. Working Capital is stuff like payroll, rent payments, loan payments, utilities, etc... They calculate this figure by adding the hard costs plus soft costs and multiplying by 15%. You will need at least 20K WC for a cold start. Transitions Consultants, thankfully, offers a line-of-credit (like a cc) up to 75K to give you more WC.

Gotta go back to work! ...

 

[20DOC20]

OK.

So the banks will give you about 15K WC on a combined soft and hard cost of 100K. And with the addition of a working line of credit, that should give you enough WC. I'd say you'd need about 30K to be comfortable.

One bank told me that the loan was contingent upon me working at an additional location until they felt I could support myself. My personal calculations (on my 5-year break even analysis) told me that I'd have to work weekends at the other location for 2 to 3 and 1/2 years.

I would do this working part-time at my practice and part-time at the other.

I got a lot of my numbers out of an example given in a book called Business Aspects of Optometry. It seems a pretty good book. Get it.

The banks also liked that I have 15 years experience.

But ... I don't think it's an impossibility for a young OD to start cold in the right location during a recession. You'll have to work hard and you'll have to continue living like a college student, but I think it can be done.

I have a mortgage that would be similar to a student loan payment and even with that, I can do it.

Good luck. One word of advice: after you fill out your credit applications, you'll get a loan quote. If you take that quote to other lendors, you can get them to compete with one another and you might get a better rate and loan conditions.

 

[20DOC20]

I was also going to say ...

You WILL be happier in the long-term working in your own private practice. I've been stuck in the world of commercial optometry for 15 years and my number one regret is not having done this ten years ago! Commercial optometry is NOT FUN! And most of the commercial outfits hire psychopathic district managers to make your existence akin to hell and brimstone. No kidding there.

I'm excited, too, about starting my own practice. It's kinda scary and I've had a few nightmares. But I'm having fun choosing my flooring and my paint and my location. And you can get leases SO CHEAP in this recession. It's great!

Remember that the number one reason for failure is that people never try. And remember YODA: "No, try not. Do, or do not. There is no try."

HA!!!! I'm such a Star Wars nerd.

 

[20DOC20]

And forget advice from that realtor! Talk to a Practice Consultant ... the folks selling practices and the folks who are the middle man between you and the bank. They are a wealth of information and they're out there on the front lines. What does a realtor know about optometry???

 

[Princeod2583]

And forget advice from that realtor! Talk to a Practice Consultant ... the folks selling practices and the folks who are the middle man between you and the bank. They are a wealth of information and they're out there on the front lines. What does a realtor know about optometry???

Good advice. But what drives me crazy is the conflicting information I keep getting. I called a consultant to find out his fees; he says the following (i get it, everyone has a different mindset, but this is what HE feels I should do)- take a loan out for 325k, enlist him to help with the start-up, he claims i will get financing for this amount. He guarantees a gross of 250k 1st yr, 425k 2nd year. Then I talked a dr. who opened a practice 2 years ago, his advice-don't use a consultant, its not worth the money. (this consultant btw, wants to charge 19k for his services.) the doc who opened 2 yrs ago is just now netting 400k and grossing 120k (but i have a feeling he had his friends who are successful optometrists show him the ropes) I talked to matsco they say to work for at least 1 year, keep steady cash flow, then apply. Then I ve talked to several realtors who think they know what is good for me, and they say it is to NOT open an optometric practice. They think failure is more certain than not. Mind you, none of this matters to me, once I make up my mind I'm going to do something, I'm going to do it. That doesn't mean I'll be reckless about it, but I rather say I gave it a shot and failed then to never have tried at all. IN then end, for me its not about the $, its about personal career and life satisfaction.

 

[DawgOD]

I think the big thing about whether or not you fail opening a practice with a "lack of experience" is location. SCO sort of pounds that into our heads.

 

[Tippytoe]

Good advice. But what drives me crazy is the conflicting information I keep getting. I called a consultant to find out his fees; he says the following (i get it, everyone has a different mindset, but this is what HE feels I should do)- take a loan out for 325k, enlist him to help with the start-up, he claims i will get financing for this amount. He guarantees a gross of 250k 1st yr, 425k 2nd year.do

Please don't pay a consultant. Everything they will tell you is common sense. As far as the guy guaranteeing $425,000 in year two.......that's HIGHLY suspect. The average for ALL optometric practices in the country is like $400,000. If you go with him, I'd make him guarantee this income or make him pay you out of his pocket.

The magical method he will tell you is to.......wait for it...........Sell everyone 2 or even 3 pair of glasses. Because you know, everyone needs an extra $300 pair for driving and another $300 pair for fishing along with their regular $500 pair.

It can work. Don't get me wrong. But you will have to be a HELLOVA salesman and have ZERO ethics to get to that income, that fast. Lenscrafters can do it. But see, they are a big, faceless corp entity. They can gouge people from far away and not feel it. They can offer a fake 50% off sale (that happens to run all year, every year) knowing the sheeple will not realize they just mark their stuff up 100% and then mark it down 50%.

So can you look at an old lady in her cataract-filled eyes and honestly, with a straight face, tell her to forget out taking that senior bus trip she's always dreamed about because she REALLY needs a seperate pair of glasses for sewing and another single vision pair for pecking away at the computer and a pair of progressives with Hi-index and AR coating....... (The 'consultant' will tell you that her money concerns are not your problem).

If you can do that and sleep well, you will quickly make money (IF your in the right location). This is what commercial opticals do. Because they don't care. It's just what they do. They are run by MBA's from a far away office who's job is to maximize profits............not professionals with a heart. So what if granny doesn't visit her grandkids this year! But see we are at a disadvantage. We care. We will see her back again and her kids and grandkids. Walmart optical won't. Or at least the same people won't be there in 6 months to see her again. They don't care. We do. THAT puts us at a disadvantage from the get-go.

Damn.......I went off on a tangent again.

But seriously. I opened cold. It went something like (total office gross): $90,000 the first year.
$125,000 the second.
$200,000 the third,
$300,000 the 4th year,
$400,000 the 5th
and I maxed out at $450,000. Ironically, right about where the national average is for optometric practices. Hmmm.....

Of course, then it starting going down as the storm of things happened (on-line, commercial, insurance problems, the econonmy, opening of more schools......all discussed before but all exploding just in the past decade).

So honestly, I repect your desire to open a place. I wish you well. But I sure woudn't pay tens of thousand of dollars to a consulant. Running a business is all common sense. There are good docs on ODwire.org that can help you out for free. No need to re-invent the wheel.

Good luck.

 

[Princeod2583]

thanks for the outlook tippytoe-

question for you, how much do you gross? A lot of pp docs complain on these forums that their profits are shrinking etc. What do you take home? Would U be willing to breakdown the costs of running the practice, taxes, other costs and what you actually live off of? I think too many people on these forums complain about corporate and shrinking profits, schools opening, saturation, etc, but we never see how this affects private practice docs and their bottom line. Is it really THAT bad? It would be refreshing to see a private practice doc offer words of encouragement rather than shoot down the private practice dream.

*please don't take these comments personally*

 

[Tippytoe]

thanks for the outlook tippytoe-

question for you, how much do you gross? A lot of pp docs complain on these forums that their profits are shrinking etc. What do you take home? Would U be willing to breakdown the costs of running the practice, taxes, other costs and what you actually live off of? I think too many people on these forums complain about corporate and shrinking profits, schools opening, saturation, etc, but we never see how this affects private practice docs and their bottom line. Is it really THAT bad? It would be refreshing to see a private practice doc offer words of encouragement rather than shoot down the private practice dream.

*please don't take these comments personally*

I actually did post most of these numbers in another post. Maybe you could search it under my name. Not too many people are comfortable discussing personal and corp income on-line for a number of reasons.

P.S. You do want to set up as an s-corp (for tax purposes). Lets you have a few more $$ at the end of the month.

OH yea (is that he same thing as P.S. ?) You do want to find a GOOD accountant. Some crazies try to do all the accounting themselves but it's almost impossible. It will be money well spent.

 

[20DOC20]

I would NOT pay a consultant.

What I meant by consultant is the person you connect with when you inquire about a practice loan. This is probably a loan officer specializing in optometry loans. I talked to a great one at Transitions Consultants. They work through Bank of America.

My projection figures are slightly different. I'm assuming figures for a recession. So that starts out around 20 patients per month at average total revenue per patient at $210 (includes glasses and exam). I would initially be open 20 hours per week (4-five hour days) with one optician/receptionist. Her pay is $12.5 per hour with 6% commission on net sales with an additional bonus based upon what she sells, that is, if she sells the type of product I want her to sell, she gets a "point" and each point is worth 50 cents and that is added up each pay period. The employee number and open hours increases over time. Lease is 1000 per month. Loans are upgraded, starting in year one around 600 per month, going up to around 1200. This does not take into account the possibility of revenue from outside prescriptions. I had no idea how much that would be, so I omitted it from projections.

So, this is my projections for a bad economy:

Year one: $65,520 total revenue. Still in the red at the end.
Year two: $117,600 "". We're getting in the black. Break-even point occurred at month 13.
Year three: $156,240 "".
Year four: $181,440 "".
Year five: 197,820 "". At this point I'm at about 50% capacity. I assume I'd be at full capacity around year eight at this growth rate and that is around 160 patients per month. Full capacity would bring me to about 400K.

Now, I'm living in a medium-sized rural community in a poorer area. I plan on padding my fees on services and products, giving non-insured's a 20% discount on everything. If folks want a second pair they get 30% off the second pair. This would be a running sale. The discount would only apply to prescription products. My average price for a frame will be around ... oh ... 70 dollars ranging from 39 to 150. The number of frames in the 39 to 49 range will equal the number in the 140 to 150 range. I'd have some high end stuff, some low end, but most of the frames should fall in the middle, sort of like a bell curve. Just a tentative plan.

P.S. You do want to set up as an s-corp (for tax purposes). Lets you have a few more $$ at the end of the month.

I'm planning on setting up initially as LLC / Sole-proprietorship. I could change to an S-Corp at some point. Why is that advantageous? I could never figure it out because the articles I'd read say there's no advantage switching from a single-member LLC sole-proprietor to a single-member LLC S-Corp. If there are multiple members, there are advantages. What are the tax advantages? Thanks!

 

[20DOC20]

But seriously. I opened cold. It went something like (total office gross): $90,000 the first year.
$125,000 the second.
$200,000 the third,
$300,000 the 4th year,
$400,000 the 5th
and I maxed out at $450,000. Ironically, right about where the national average is for optometric practices. Hmmm.....

This is really encouraging.

It looks like you really took off, almost exponentially, starting with year three. Is there anything you did to make that happen, or is that the natural course of a new, growing practice?

 

[20DOC20]

It also won't cost you 300K to start a practice.

My estimates
25000 Equipment and supplies I already own
55000 Equipment, cabinetry, fixtures
25000 Leasehold Improvements (fortunately, I won't need to do anything that requires permits)
30000 Working Capital

Total Needed: 135,000
This includes OD link PM software, 3 computers, chair and stand, manual projector, phoropter, expensive slit-lamp, 2 motorized tables, FDT, NCT, GAT, Autorefractor, and Keratometer, high plus lenses, direct, retinoscope kits. Supplies. Includes 2 expensive optician tool sets, frame warmer, US cleaner, 1500 dollar sofa and loveseat combo, flatscreen for patients, coffeemaker, microwave, fridge, 5000 new floor, 4000 for frameboards (recommend you have a contractor do it. Also check e-bay). 2 computers, 1 laptop. 6 cabinets. Reception desk. All the fixtures. Mirrors. 2 disp tables. Seating. Paint. Deposit on lease. 1 month's rent. 1500 in initial advertising. About 15,000 for your frame inventory. This is the basic stuff to get you going. You don't need to buy an edger or an optos or even a retinal camera initially. You can always borrow more later. You want to maximize working capital by keeping that loan payment low. Don't overdo it and don't borrow 300K. You won't need it because your lendor should provide, in addition to the WC a line-of-credit for you. It's a low-interest credit card and it should extend to you about 30 to 75K of credit. You can pull wc off that if you get low.

You can get costly in the Leasehold improvement area if you were to rent a cave with nothing in it. Building permits can easily run you 10,000. A full-buildout could run you ... oh ... maybe 100K. But if you look around, you can find little turn-keys here and there. You don't need a stadium, just 900 to 1500 sq feet to start. So even with 100K in build-out, you'd still only need to borrow 210K.

Really ... check out e-bay for refurbished ophthalmic equipment. Use your brain and buy from those with good ratings. Make sure it's not sold "as-is" but has some sort of warranty. I got some killer deals and it saved me thousands of dollars.

 

[Tippytoe]

This is really encouraging.

It looks like you really took off, almost exponentially, starting with year three. Is there anything you did to make that happen, or is that the natural course of a new, growing practice?

Mostly lucked up (by sucked up) and got a contract with the local VA to see their overflow. Other than that, worked 80 hrs per week (in and out of the office), visiting every local family doc, PA, NP, nurse, school, nursing home, and business around. Literally begged every patient I saw to tell their family and friends about me.

Threw myself into learning about insurance as if I was working on a PhD. I taught at a community college and a university part-time. I begged a couple of nursing homes to let me do some eye exams in between their diaper changes (glamorous work, that is). I sucked up to a local prision to do some eye exams on thug inmates (even more glamorous work). I worked part-time at various commercial places, a few private OD offices and a few private OMD offices.

But most importantly, I had a smart and hard working wife help me out all along the way. No way could I have done all this and built up the office trusting some employee. No way.

For all this, I make a decent income........but am still only at about 60% capacity (ie. After 12 years I still do not have enough patients to work full-time in my own office).

 

[Shnurek]

For all this, I make a decent income........but am still only at about 60% capacity (ie. After 12 years I still do not have enough patients to work full-time in my own office).

May I ask whether you practice in a big city, small city, rural environment? Could it be a saturation issue? KHE says he is booked 2 weeks out.

 

[KHE]

May I ask whether you practice in a big city, small city, rural environment? Could it be a saturation issue? KHE says he is booked 2 weeks out.

Huh?

I don't recall ever saying that. I most certainly am NOT booked two weeks out. I have a reasonable schedule 2 weeks out but it is a far cry from "full." You could get an appointment to see me tomorrow if you wanted to.

 

[Tippytoe]

May I ask whether you practice in a big city, small city, rural environment? Could it be a saturation issue? KHE says he is booked 2 weeks out.

Southeast US. County size of 240,000. A thousand miles from the nearest OD school.

45 ODs and 18 OMDs. The entire state I'm in is saturated with ODs (or 5) in every little town. We even had an OD in a town of 500 trying to make a go of it until he closed down a few years ago.

So that's a 1 ECP per 3,809 patients. 10 of the ODs have come here since 1999.

* (ECP = eye care provider)

This is the story in most every place in the U.S. with the exception of some mexican border towns, I'm told.

 

[20DOC20]

[QUOTESo that's a 1 ECP per 3,809 patients. 10 of the ODs have come here since 1999.][/QUOTE]

Sounds like a saturation issue.

I read that the ideal ratio is 1 ECP: 9000 is urban environments and 1 ECP: 6000 in rural.

Also read that your practice is still growing as long as 10% of the patients you're seeing are new patients. If that's true in your case, you can take heart in that at least.

Sounds like a tough area.

In your numbers, are you counting the ophthalmologists?

 

[blazenmadison]

Huh?

I don't recall ever saying that. I most certainly am NOT booked two weeks out. I have a reasonable schedule 2 weeks out but it is a far cry from "full." You could get an appointment to see me tomorrow if you wanted to.

Spending too much time moderating SDN? 🙂