Will Private Equity lead Optometry down the same Path that Pharmacy took?

Private equity firms and ODs have a completely different mindset. ODs tend to give priority to the needs of their patients, forgetting that their office is a business that needs to be profitable as well. To make sure that their practice remains successful, they need to put themselves in the shoes of private equity workers – business owners who buy optometric practices.

Medicine is about diagnosing, treating and serving people and keeping them out of harm’s way. But, running a business is in some ways something completely different. Opportunities need to be recognized and captured, and risks need to be managed along the way.

Private equity firms view the opportunities that ODs have in front of them in a different manner than the ODs themselves do. And the trends that private equity firms have introduced are gaining pace, whether it pleases the ODs or not.

Optometry is likely to be considered as an underestimated industry by private equity firms. Usually practices have a heavy flow of cash but they lack effective management. Private equity firms understand that there is a possible opportunity there but with a small manageable risk factor. ODs can capture the same opportunities that these firms recognize and benefit from. All they need to do is think outside the box and apply business strategies, like a business manager.

ODs need to change their perspective in the following ways.

Prepare an Exit Plan From the Start

ODs usually make long-term plans for their practices, hoping that their prolonged dedication is going to be fruitful after their retirement. They don’t make an exit plan. Private equity firms spot businesses that don’t have much value and plan an exit strategy from the very beginning. They construct a plan for a few years to build and grow the business and later sell it for more than they invested. They invest in technology and software that can help them grow the business and can change the optical business with partnerships with various companies to receive maximum discounts.

Value Growth and Potential

ODs sometimes overestimate their practices. It’s a fact that whatever a buyer is willing to pay for a business defines its value. Owners need to build value in their practice by spotting growth opportunities.

Private equity firms seek practices that can expand with strong management, overall services, budget control, objectives and vision. Not only do they increase the optical business but the OD business as well, by hiring young ODs or keeping the owner on for a few years.

ODs usually open practices in areas that are already overloaded with other practices. Private equity firms look for potential. The demand for medical attention is higher in rural areas and places where there is a demand by patients. Some private equity firms may look at other factors, such as an OD who has multiple practices, states that do not require an optician to be licensed and many other appealing factors.

Look at the Bigger Picture

ODs shouldn’t miss opportunities. There’s always a bigger fish. Private equity firms are starting small. They are buying existing practices one at a time and slowly converting those practice under one umbrella.

As many ODs look to sell to private equity firms, what does that mean for the future of independent optometry? Many young ODs would like to start as an employed OD, but many would like to have the flexibility and ownership in the future. If most of the practices are being sold to private equity companies, that leaves less practices for young ODs to purchase and more competition. The more competition might inhibit younger ODs to take the leap to ownership and wish to be employed. What are we passing on to the next generation of ODs? What if many of these private equity firms merge and create larger networks or sell to investors outside the industry that might not necessarily see eye to eye with ODs. Is private equity leading optometry down the road that pharmacy took?

In conclusion, the role that private equity firms play in practice transitions is important but not a necessity because once an OD starts thinking like a private equity firm, he or she will be on the way to success. There are also other exit strategies that can just as fruitful as selling to a private equity firm and help ensure independent optometry, whether in private practice or leasing space from a corporate optical.

Leave a Comment