As I visit with optometrists about the potential purchase or sale of a practice, there is one health indicator that gauges the value of the practice.  This gauge is the practice net and it assists you as the CEO in managing the health of the practice.  There are many ways to calculate the risk of an optometry practice.  It is important to understand and know the cash flow of the practice which ultimately is in the net income of the practice.  At the end of the month, how much money is leftover to celebrate the hard work of being an optometrist and CEO.

As my wings spread in coaching ODs regarding the buying and selling of their practice I find that numerous ODs do not regularly calculate their practice net or the practice net is not calculated correctly.  I find this very surprising as your practice net serves as a barometer of practice health.  Sometimes there is confusion in calculating the net, so a slide from a presentation that I have done is included for reference. (reference First in Practice Academy – MBA)  It outlines all items that are a part of the practice net and not a part of overall expenses.

SELLER: If you are looking to sell your practice and you have calculated the net and not included all items as listed, you may be under calculating your practice net which can lead to a lower valuation of your practice.

BUYER: As you look to purchase a practice it is important for you or your CPA (CPA I recommend for buying/selling a practice) to review the books and verify that the current practice net is being calculated correctly and the higher the net the more you should be willing to pay for the practice.  This is one of many factors to consider as it serves as a good principle to follow when purchasing a practice.

Knowing your true practice net is paramount to running a successful optometry practice.