If you are thinking about purchasing or buying into a practice, first consider these six key factors for determining purchase success:

1. Demographics – Research thoroughly the potential opportunity of the city or community that you are planning to practice in, avoiding practices that have a population or draw of less than 7,800 persons per ophthalmic professional. It generally takes a population of at least 7,800 to support one practice grossing $650,000 (today’s average practice). The preferred location is a growth area with a population exceeding 12,000, allowing for the possibility of a million-plus dollar practice.
   
   
2. Competition – While scanning the demographics of your preferred practice area, also look at the competition. How many optometric and ophthalmic practices are in the area? Will the population support an additional vision care practice? Again, the ‘rule’ is that the population or draw should be about 7,800 persons per ophthalmic professional (O.D. or M.D.) in private, commercial or HMO practice. There may be exceptions due to unusual and various patient populations, such as the elderly, military, etc.
   
   
3. Fair Market Value – If one pays too much for a practice, it likely will not generate adequate cash flow and profitability after paying for debt services, cost of sales, labor, rent, etc.  To prevent over-paying, hire a professional ophthalmic appraiser to establish the true or fair market value of the practice. Over-paying for a practice is a common mistake because many young doctors think they can save money by managing the purchase process themselves, relying on the selling doctor’s word for valuation and terms rather than professional financial or business consultants. This usually turns out to be a tremendous mistake.
   
   Most practices’ fair market value will range from 45% to 80% of one year’s gross revenue. Variables that affect market value include community location and size, participation and amount of insurance, office décor, ambience and newness, amount and value of hard assets (equipment, fixtures, furniture and inventory) and number and quality of patient records.
   
   
4. Funding – No purchase can be concluded without proper and adequate financing. Types of funding can include self or family, seller carry, bank or institutional lending, or a combination of these options.  Make sure you have adequate funding in place before signing any contract or making financial commitment(s) for space, construction or medical and/or office equipment.
   
   
5. Type of Purchase – If buying into a partnership, structure the transaction as a stock purchase as this gives you a share of the complete operation along with its growth potential. When purchasing a practice outright, an asset purchase allows you maximum tax deductions and depreciation as you can take full advantage of the substantial IRS Section 179 equipment write-off. Again, consult with your financial advisor or CPA to confirm your best purchase option and eligibility for tax deductions. 
   
   
6. Professional Ability – Perhaps most importantly when contemplating a practice purchase, consider whether you have the temperament to manage the business and its employees. Do you have the personality to build and maintain a patient base, and the stamina to work hard and long to achieve true success and profitability? 

Once these issues have been considered and resolved by you and your professional advisors, complete the purchase knowing you will be serving your community well by delivering excellent eye health care and flourishing as an ophthalmic professional.