Acquisition criteria when buying a medical or optometry practice

We frequently receive search requests from buyers seeking to acquire medical or optometry practices nationwide. Many buyers have a general idea of their acquisition criteria but may not have considered how these factors affect one another. Here are criteria which prospective buyers should consider when looking for a practice to buy:

• Profitability of the practice
  
  1. Total discretionary net income
  2. Ability of practice to support labor value of owner/operator
  3. Ability of practice to service debt on a practice acquisition loan
     
     • Ability of buyer to get a loan
     • Credit score, earnings history, and years of licensure
       
  4. Ability of practice to provide return on investment
  5. Opportunity cost to buyer
     
     • Obtaining employed position vs. acquiring practice
       
     • Risk/reward and capitalization of the ROI
• Size of the practice
  
  1. Fully mature vs. smaller or start-up alternative
  2. Number of providers
  3. Time/effort required to manage business aspects
     
• Geographic location of the practice
  
  1. Personal/family preference
  2. Local economy
  3. Environment for practicing medicine
  4. Growth and sustainability of practice
• Other qualities of the practice
  
  1. Work/life balance
  2. Payor mix
  3. Growth opportunity
     

This is by no means a complete list, but begins to touch on a number of factors which are important when buying a medical or optometry practice. It is important to realize that each practice opportunity is different and should be evaluated accordingly...many buyers who rely exclusively on anecdotal information, rules of thumb, colleague recommendations, and other subjective measures can find it difficult to prioritize their acquisition criteria.