Have you future-proofed your business legacy?

Ultimately, business and exit planning isn’t just about money. This is particularly true for the owner operated businesses common among optometry practices. A well thought-out exit strategy will allow owners to ensure their legacy can survive; in terms of the business’ ongoing success and their own values.

Exit, or succession, planning in the SME sector often refers to planning for a family-owned business and its intergenerational transition. However, the business landscape for independently owned optometry practices is marginally different.

Optometry is seeing change in age, gender and ethnicity statistics for the sector as a whole. These trends are represented in ownership statistics too. There is a decrease in the average age of those taking ownership and a diversification of the roles that owners hold within a practice. These changes can bring fresh opportunities to the business structure. This is particularly interesting in terms of exit planning and affects what an exit plan may look like, who it may involve and when.

Different exit plan strategies

Before deciding which exit strategy to take, ask yourself the following questions:

• Am I retiring? Or am I wanting to take a step back and free up some assets?

• Am I wanting to relinquish all control over my practice? Including access to my client base?

• Do I need a business partner?

• Am I interested in a consultant or mentor role?

• What is the ownership structure? Do I own outright or are other stakeholders involved?

• Have I considered what this may mean for the way I run my practice?

• Is the employment security of my staff a key factor?

The answers to the above will influence what options you may see as viable for your exit plan. It is also important to review your opinions on the above as your answers may change over time, due to a range of factors.

The most common exit plan options are:

Succession – while often discussed in regard to family businesses, this can also include key staff or stakeholders involved with your practice. This is a great opportunity if you wish to retain some level of involvement or are keen to pass on specialist skills and relationships to your successor.

Sale – to a third party with whom you are not normally affiliated. This works best if you don’t want, or are unable, to continue to be involved in the business. In many cases, this involves work out clauses for a specified time period.

Mergers and acquisitions – bringing two businesses together. This works well if you want your business to grow and are the sole practice owner.

When should I start the planning process?

The earlier you start planning, the better. While one wouldn’t expect you to start a business thinking about how you are going to exit it, it is important that you have some thoughts on this and have communicated this to your trusted adviser. By beginning the planning process early, you are allowing yourself, your practice and your succession plan to grow organically. This is particularly useful in situations where a loyal staff member who has proven their worth to the practice becomes interested in future opportunities, or you may have a young, dynamic individual join your team who is also interested in future ownership opportunities within your practice. Including an employee as part of your succession plan often provides you with a sense of reassurance, as you know how they operate, that their values are likely to align with yours and you already know you can work together!

Following this trend, we are seeing an increasing number of dispensing opticians entering into practice ownership agreements. While this trend is still quite fresh and is likely to challenge a lot of preconceived notions that only optometrists can be practice owners, there are many benefits that are already proving positive for the industry and that are reflecting the vital role an empowered DO can play.

What makes a good exit plan?

A clear, fair exit plan will eliminate conflict. Communication and clarity are key to its success. You must communicate with all parties involved – frequently. Be clear on why you’ve chosen this course of action and people will generally more readily accept the outcomes. The most common problem comes from the fact that, normally, you can’t please everyone. Therefore, it is important to identify what your key objectives are, what other invested individuals expect, and to discuss these openly to try to manage these expectations and avoid disappointment or complications down the track.

It is important that you provide all parties with the necessary time to seek independent advice on the proposed changes and their role in the process.

Businesses change and so should your plan. Periodic reviews are the best way to ensure your plan is fit for purpose and up to date. Keep in regular communication with all the people involved.

It is important for the resilience of your practice to regularly assess your exit plan options and generate strategies surrounding these, then reassess and align these as required. Likewise, you want your employees and other people (like your loyal patients) who rely on your organisation, to remain looked after – something a good exit plan should ensure. A successful business transition will result in an ongoing relationship with the new owner, which will be positive and beneficial for all concerned, including the patient.

David Pearson is managing partner of chartered accountants and business advisors BDO Central and has a speciality interest in advisory services to the optometry sector. He has extensive experience assisting both small and medium sized entities with a range of advisory services. Contact David at david.pearson@bdo.co.nz or visit www.bdo.nz

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