ProVision has developed a new Practice Value Calculator that it says helps overcome one of the major pain points for practice owners looking to sell: profitability trends.
And the online tool is available to independent optometry practices, not just ProVision members, said ProVision Business Services Manager, Mark Corduff.
“When it comes time to sell your practice, understanding your profitability trends is one of the most powerful tools you have,” Mr Corduff said.
“Buyers don’t just look at what you earned last year, they examine how your profits have evolved over time to gauge the health, stability, and future earning potential of the business.”
He said a consistent upward trend in revenue and profit signals a well-managed practice with efficient operations and loyal patients. On the other hand, fluctuating or declining profits can raise red flags, prompting deeper scrutiny from buyers and a reduced opinion of the value of the practice.
“Profitability trends help pinpoint where value has been created or lost. There are levers that can be pulled to improve areas such as patient retention, recall performance, cost of goods, staffing levels, occupancy cost, and other expenses that can be fine-tuned so owners can both enjoy the increased profitability while also ensuring their practice ticks the boxes for prospective buyers when it comes time to sell,” Mr Corduff said.
ABOUT THE PRACTICE VALUE CALCULATOR
Mr Corduff said the Practice Value Calculator aims to help all practices – not just ProVision members – see a three-year snapshot of adjusted net profit, which can help to reveal trends and areas for improvement.
“Our new Practice Value Calculator is there for anyone to use and takes just a few minutes to give some really valuable feedback on profitability as well as a goodwill estimate of practice value.
“All you need to have is three years of P&L (profit and loss) statements on hand, input some key figures, and the rest is all automatic.”
He said the tool was completely confidential, and the figures entered by users were not visible to ProVision, but rather private to the user. However he cautioned that the calculator is not a formal assessment, and for legal, tax or sales purposes, a professionally prepared valuation is essential.
CASE STUDY
Mr Corduff said it is often possible to identify opportunities for immediate improvement in profitability.
“One good example is an owner I worked with around three years ago. They approached me to prepare their practice for sale, hoping to sell within the next six months. Right away I noticed their profit margin was lower than I anticipated. This prompted some questions, and subsequently the owner reviewed their range and picked up on some significant wholesale prices that hadn’t been adjusted to the retail pricing. They were big ticket items that, once changed, lifted the profitability by over 10%, which in turn improved the value of the practice.
“The sale process was paused for a three-year period, enabling the changes to be clearly represented in the financials. A list of other improvements were made to ensure the practice was attractive to a broad range of buyers. During this period the owner benefited from the increased net profit, then sold their practice for an improved price.”
To try out the Practice Value Calculator, visit: optom.provision.com.au/valuecalc.