Tim and Polly Dulley of Aves Optometrists in Essex
Apart from setting up from scratch, a commonly used route to ownership is to buy an existing practice. However, as Dominic Watson, a consultant at broker Myers La Roche, comments: ‘The biggest barrier to entry for most is the availability of suitable opportunities within a reasonable timeframe. In reality, most are not able to up sticks and relocate.’
As a result, it can take many years to find a suitable independent practice. Funding is another issue to deal with. But here, Watson reckons that this is a red herring pushed by ‘acquisitive chains’ to persuade owners to sell their businesses on part-cash, part deferred payment schedule as it helps their growth.
Claims about funding also ‘make first time buyers believe they can’t buy a decent sized practice, without entering into a joint venture or franchise arrangement with a chain when the reality is very different.’ He feels that ‘credible, dynamic first-time buyers looking to buy a practice that is already profitable do not struggle to raise funding.’
And he says this because ‘the optical sector has proven to be incredibly resilient’ and is ‘viewed by investors as an extremely safe sector.’ Interestingly, Polly Dulley, senior optometrist and director at Aves Optometrists, a Hakim Group independent practice, thinks differently.
‘The main barrier to owning an independent practice is cash. It’s almost impossible for young optometrists or dispensing opticians to borrow anything like the amount they would need from any high street bank,’ she says. As a result, she suggests a franchise with a multiple or to join Hakim Group where ‘you get the opportunity to own your own independent practice with the support of a back-office function.’
She also doesn’t feel competition to be a barrier: ‘As independents, we offer something completely different: continuity, personal service and the ability to give a unique service.’ In other words, patients go to practitioners they trust rather than select purely on price.
Barriers to entry
Another consideration is the potential lack of business acumen, especially among those new to optometry or where the buyer has only ever been employed. For Watson, appropriate support is critical. He says his firm exists to ensure that independent practitioners have help and support throughout all the stages of the business ownership journey.
Similarly, Dulley believes that entrants can learn the ropes through experience and courses. She adds that it was important to her that Hakim Group offered a lot of the help and training required. However, she says: ‘You need to walk before you run. Work for someone first and gain knowledge and experience before buying your own practice.’
First time buyers come in all shapes and sizes. Some start looking before they have even completed their pre-reg year while Watson regularly sees buyers in their 40s and 50s and, occasionally, even in their 60s.
For Dulley, her move came 13 years post-qualification and for her husband, Tim, 14 years after his. She says that the purchase was opportunistic as the two partners who owned the practice were ready to retire and Tim was already working for them.
She was working solely in a hospital, part-time, and says: ‘Having our own practice meant I could adjust my working hours around bringing up our boys. We considered how we wanted to practise and felt that owning was the only option that would give us full professional freedom.’
The commitment
It’s fair to say that not everyone walks into practice ownership fully aware of the challenges. Certainly, Watson has seen many would-be owners think that because they are a good clinician customers will flock to them. Too often he sees them spend on ‘flashy things like social media or websites, whilst failing to address weaknesses in their business model, pricing and customer journey or honing their management and delegation skills.’
But, with support, this can be learned and Watson is keen to emphasise that ‘the groups are deliberately waging a thought leadership campaign to make it seem like running an independent practice is harder than it really is.’
Even so, Dulley states that owning a practice is like having a child, ‘the responsibility is enormous.’ She continues: ‘You never really switch off from it and you care deeply about its success. It’s a great way to practice - with full professional freedom, but that comes with the burden of responsibility.’
Marrying sellers to buyers
For existing practice owners, it can be flattering to be approached about a possible sale of their business. However, Watson urges caution: ‘It is essential to take advice and be informed about the full range of options. Selling to first time buyers can be a satisfactory way to hand the baton over to someone of a similar ethos but it comes with challenges. Experienced buyers come with different merits and risks.’
If there’s one expression of interest, it follows that there may be others; this could be leveraged to the sellers benefit, leaving them to choose an option that, as Watson says, ‘gets the balance between risk, deal value and legacy.’
Dulley also sees difficulties on selling. She comments: ‘It’s really hard for a practitioner to find someone to take over their practice without some help.’ She says there are two routes; a company that values the practice and helps to find a buyer, or companies such as Hakim Group. She remarks Hakim ‘are great at finding young colleagues, like minded individuals, who want to get into practice ownership.’
For sellers looking to exit, the process, Watson says, should start as early as possible – several years beforehand – and involves the ‘shaping of business strategy and timing to maximise value.’ Sadly, he sees many owners think of exit planning as ‘simply taking stock of the value of a practice, perhaps six months prior to selling, and working out which parties to explore a sale with.’
For Dulley and her husband, Hakim Group came along at the right time. ‘We were introduced to the team at Hakim Group just when we were starting to think about an exit strategy. They gave us the opportunity to become business partners and this enabled us to pass over some of the back-office jobs to Hakim Group HQ, enabling us to focus on looking after our patients.’
Doing this gave Hakim Group ‘time to look for a suitable candidate to take over the practice when we decide to step down’, she adds.
At this juncture, Watson warns that ‘advocates for acquiring chains may be overly positive about the person they recommend you sell to. This is because they are often on a commission if they persuade you to sell to the party they are recommending.
Common mistakes
Buying a business can lead to mistakes being made. For Watson, a key one to note is where an owner ‘fails to get out of their own way and becomes a bottleneck by making all functions of their business hinge on them.’ He also sees practices ‘trying to be all things to all people and not developing a USP.’
Dulley sees similar mistakes through ‘a tendency to look at the multiples and to try to copy their model.’ She thinks it’s better to do the opposite: ‘Dare to be different and celebrate that difference.’
Another concern for Watson is failing to keep accurate business data or use practice management systems properly. As he says, ‘what gets looked at, gets addressed.’
Finally, Watson keenly recommends that new entrants ‘invest in specialist mentoring and training to help them develop their business and their staff. It is easy to go on a course and acquire knowledge of what you should be doing, the hard part is putting it into practice.’
It’s not easy to own and run a practice, but it’s not as hard as many think either. There is more than one way to approach the subject but the key to success is good advice.