Looking at buying into an optician practice?
Starting your own optical practice from scratch is not impossible, but it does mean some real risks. Your new business could take months, or even years, to build up a big enough customer base to be profitable. It could mean a large investment in equipment, premises and working capital with no guarantee of return.
That’s why many qualified ophthalmologists prefer to buy into an established optical practice.
At Rangewell, we often work with professionals ready to buy into an existing business, and we know many ways to provide the funding they need.
Why buy into an existing practice?
High street opticians are highly competitive. Most towns have more than one optician already, and many of the busier high streets may have a franchised optician.
This means that a new start-up business will face a struggle bringing in enough new business to become profitable.
Buying into an existing practice as a partner, on the other hand, can let you take advantage of an income stream from day one in return for your investment. You can buy into a profitable business that is already fully-equipped and with established goodwill.
There’s another reason to buy into, rather than try to build, a business. Any start-up can be a problem when it comes to funding. Lenders are likely to look positively on applications from qualified professionals but, without a trading history to demonstrate the success of a business, they may see the risk as high. If they are prepared to lend to fund a startup, they will probably need a high rate of interest, which will make the loan expensive.
Buying into a proven business with a few years of accounts will almost certainly be possible at a much lower rate.
Many lenders will only work with established businesses so they can make lending decisions based on accounts that demonstrate the business is profitable and sound.
We helped a qualified ophthalmologist who was looking at the possibilities of going into business
“I’d been qualified for three years, but working for somebody else’s business simply means they enjoy the results of my hard work. I started looking at ways to run a business of my own, and I saw that it was time to start.”
Our client was originally looking at setting up a new practice to serve a growing commuter town in the South of England close to where he lived. There was a growing population, and he was sure there would be plenty of demand.
“I started looking at suitable premises in the high street. But although there were some properties available, the costs were high. Everybody else with a business to run could see that they provided the potential for passing trade.
Finding a suitable shop would mean committing to a high rental – I was worried about the costs involved.”
Our client had some money to invest in his business but he saw the costs of equipment were another major hurdle. Together with a long-term lease and providing working capital for a year, it came to more than £400,000. It is possible to arrange this level of funding as a loan secured on the value of the borrowers home. However, he was wary of risking his home and committing to the level of repayments that would be required.
Then he heard that the owner of the small optician's practice currently serving the town was thinking about taking on a partner to reduce her workload.
“If I was to buy into the business, it would be less of a risk, and probably less of a financial commitment. I found that with Rangewell’s help, I could afford to buy into the existing practice much more easily than set up on my own. The repayments were lower, and I was dealing with profitable customers from the moment I opened the door.”
Partner Buy-ins are common with professional practices and funding will be required from the joining partner. The sums involved will reflect the turnover and potential of the business. Our client was able to look at the accounts of the practice, and negotiate a sum which was fair for all concerned.
“There was lots of potential, and the practice had a good customer base. But there were downsides too. It would soon need new equipment in the consulting room, and the shopfront was tired. We agreed a lower payment because of the costs to come.”
Funding a Partner Buy-in
Solutions for funding a Partner Buy-in will depend on the scale of funding needed. The scale of funding required with larger businesses may make some form of Secured Loan necessary.
“I bought in as a junior partner, taking 25% of the business, with a Secured Loan. It was affordable, and I was able to start working to make the most of the business.”
However, after two years, the original owner began to feel that she wanted to retire. Our client came back to us to discuss additional funding - which could allow him to become the sole owner of the business.
“I was ready for the challenge, and I had plenty of ideas to take the practice further - but of course, I needed to buy out my partner. We agreed that a sum of £230,000 would be appropriate.”
The terms for buying out an existing partner in a successful business can be very attractive. We were able to agree funding of £150,000 with a major bank, at 3.25% above base rate, to run over 15 years. This was 80% of the total required - which our client was able to make up with his own savings.
“I knew it would be easy to arrange the additional funding. Rangewell helped at every step, from finding - or rather negotiating - the most cost-effective deal to helping with the paperwork, which they were able to keep to a minimum.”
Our client is now busy running his practice and is planning on arranging additional funds for new equipment in the next six months. Naturally, he will be calling on Rangewell for the help he needs.
To find out more about Rangewell’s financial solutions, whether you are setting up or buying a business, call us today.