How to to Sell or Buy an Optical Business
Part three of our series provides tips for sellers and buyers on riding into the sunset with a successful sale
By Erinn Morgan
Illustrations by Jon Krause

"I think there's almost a mid-life crisis in optometry," says Dick Kattouf, OD, an optical consultant in Bonita Springs, Fla., with a practice in Ohio. "A lot of ODs in their 40s and 50s are tired of being married to the place, so they call us and say they've decided they want a career change."

In this final installment of our practice buying and selling series, we will cover how to make a deal, including the choice of using a broker or not, where to list your business or find listings of those for sale, the fine details of the process, and avoiding the pitfalls of buying or selling too soon.

WHERE'S THE MARKET?

You may be wondering if today's economy has created a buyer's or seller's market for an optical business. Some say it is actually both, or neither.

"It just depends on where you are," says Gary Ware, president of Danville, Calif.-based Practice Management Consultants. "In California, I have more buyers than sellers, but they are picky about location. So I have practices that haven't sold yet. In the rest of the country, it's an OK market on either side. But there is a smaller pool of buyers and sellers, so it's harder to sell because the buyer wants certain things in certain areas."

Some say that the market is weighted on one side in the optometric field. "We're in a buyer's market, and that's not going to change," says Kattouf. "The majority of students enter optical school with more of a job mentality, and they can get a job at LensCrafters, Sears, or Pearle. When they are in debt coming out of school, they want that guaranteed income. I graduated in 1972, and, at that time, nearly everyone went into private practice."

Conversely, others say federal economic policy has helped make this a good time to sell a business. "It's been pretty advantageous because the tax gains rate is favorable and capital gains rates are at an all-time low. ECPs have to remember that the sale of a practice is a taxable event," says Bill Nolan of the Williams Group in Lincoln, Neb., an optometric consulting firm.

MAKING THE SALE

When you are ready to make your move, first gain a solid appraisal. Then, it's time to choose the route to making a sale.

Going for a broker. The person who does your appraisal can also likely act as your broker, should you choose to use one.

"A broker will make sure that there is no lingering liability or surprises," says Ware. "It's also easier for a third party to do it and get a structure for the deal that is fair to both buyer and seller."

Going it solo. Eyecare professionals may decide to handle the sale of their business themselves, and there are many avenues to reach potential buyers.

Sellers can place ads in journals, post their listing with state associations, and even spread the word to their lab reps. "They often know who is looking to buy a practice in a certain area," says Nolan.

In addition, optometric and ophthalmology schools typically have placement services. Sellers can post listings with schools in their vicinity and beyond, as some buyers may be looking for a lifestyle change. If you have a business in Colorado, you might consider putting your ad in with schools in Dallas or Phoenix.

One other consideration is to seek out the courtship of a corporate buyer, such as an optical chain, if your business and its location may be an attractive expansion to them. It is sometimes possible to sell your business to a larger corporation for more than it is worth to an individual.

Regardless of the sales tack you choose to take, the sale of an optical business may take some time.

"We used to sell practices in terms of months, but now sometimes it takes a year or more. They all sell, it just takes a little longer today," observers Kattouf.

"Determining how long it will take to sell a practice is harder than determining the price," says Ware. "Someone may come along tomorrow or it may take a year and we just can't tell. Even if the practice is priced right, it still doesn't tell us when the right buyer will show up. Timing is hard, but if [the practice] is in a typical suburban or a nice urban location, it will be easier to sell than a rural location."

The process of buying an optical business can be just as detailed as selling one. How can you find out what's for sale? There are several ways to tap into the market.

n Research. Buyers can check out brokers' Websites for listings, as well as mentions in trade and association journals, associations (i.e., AOA, OAA, etc.), and alma mater listings. "We often put ads in journals listing a practice location with our 800 watts line to call for more information," says Kattouf.

It doesn't hurt to ask. One other point of interest for buyers is that it is not out of line to approach a business that is not for sale.

"We get calls from people that say 'I want to live in Durango, Colo. Can you find me a practice in that area?' We get on the phone and call all the practices in that area and ask them if they have any interest in selling. You'd be amazed how many people say 'Yes, for the right price.'"

Professional assistance. Once the word is out you are looking, brokers may seek you out. "If I broker a practice, I usually appraise it, then my consulting company will go through a whole series of exercises to locate a buyer," says Kattouf. "If we have a practice from Indiana, we contact all the optometry schools and find out who is from Indiana. We also look to see who is applying for licensure in Indiana. We never identify who the practitioner is at that point. We just say that we have a practice in that geographic location."

If they are interested, Kattouf says he proceeds to interview the potential buyer to ensure they are serious. At this stage, he has them sign a confidentiality agreement and gives them the appraisal. If they want to make a bid, the potential buyer can then meet with the staff and the doctor/owner.

"When they go to visit the seller, the buyer has strict instructions not to discuss numbers," says Kattouf. "I do the negotiations."

This a benefit of using a broker to buy a business. They can organize the sale and get down to the nitty gritty on details.

Once the seller and buyer agree to all the points it is turned over to an attorney (located in the state where the business is) who handles the legal documentation.