Private Equity in Optometry

At graduation, many Optometrists chose between launching a new business, acquiring an existing practice, or getting employed. Those career paths are similar in terms of taking care of patients, however, when it comes to becoming your own boss it is the most difficult path and the most rewarding sometimes. I say “sometimes”, because to achieve success in owning and managing your own practice you need to be a good entrepreneur; a thing they don’t wholly teach at Optometry schools. In both cases, if you succeed or not, the road of entrepreneurship is much harder than deciding to become an employed Optometrist. Challenges constantly emerge, and while your plan and your commitments are for the long term, no one can predict the changing dynamics of the market even for the short term. Among those changes that fundamentally transformed the eye care private practices industry is the penetration of private equity in Optometry.

Private equity has come among the latest additions in the Optometry business during the past couple of decades. It opened new horizons and provided new options for those who wanted to exit the business. Before private equity, at the end of their careers, ODs who owned and managed their practice had to sell to an associate or a new graduate. The price of the practice was determined by the ability/availability of the buyer to pay. The practice seller would often neglect the intrinsic value of the practice and accept the offer proposed.

Warren Buffet always says “Intrinsic value can be defined simply: It is the discounted value of the cash that can be taken out of a business during its remaining life”. When private equity started in Optometry the valuation of the optometry business became relevant. Private equity placed the practice’s long-term value into a new perspective. And a new market for buying and selling private practices emerged. The rules of the market for practices selling and buying changed in a way the barriers to entry became higher, moreover exiting the market became more frequent and probable. A practice owner would consider selling at an earlier age, remain the CEO of the practice, still get paid at the end of the month for the services he still provides, and collect a significant amount of money that allows him to enjoy his increased free time.