By Bob Schultz, President & CEO,
and Ken Ferreira, EVP &Chief Credit Officer,
Vision One Credit Union
August 22, 2018
This is the first in a series of articles on utilizing strategic investments and financing for practice growth and personal wealth building.
We commonly hear this question from independent practice owners: “How can I use my private practice to retire with $2 million or more to replace my $150,000 per year salary?”
Increasing practice value occurs by growing practice cash flow and revenues. Building wealth happens when you build value and reduce debt. Periodic strategic investments are required to facilitate practice growth and to remain relevant in your market.
Most single-location practices will only fund one-third of a required retirement fund. Therefore, investments outside the practice are required to earn the remainder. These investments may include a tax deferred retirement account, the purchase or startup of additional practice locations, or the purchase of practice real estate. These outside investments require strong cash flow support from your primary practice.
The best approach to wealth building is to plan practice growth based on investment sequencing and timing that itself is based on a defined investment strategy. This strategy needs to be coupled with a judicious debt management that accelerates debt reduction while preserving practice cash flow.
To help OD-owners to fully understand this, we have broken down both practice and related investment sequencing into the attached “Wealth Building Timeline” (Click HERE, or the image below, to Download a PDF version) that spans a 40-year optometry career.
This timeline is not just for those beginning a career. Every practice owner can find themselves at their particular career stage on this timeline. The investments depicted are generally found in, or related to, a private optometric practice. Each investment has a cost range, career stage timing and a minimum holding period to achieve value. The optimal debt structures for each investment type are outlined.
A financial institution that can increase your success should be an essential member of your team. Your banker should understand your long-term wealth goals and know how an optometric practice makes money. Your banker also should be able to provide the required financing to the practice throughout its life cycle. This type of relationship is our specialty at Vision One Credit Union and contributes to our mission of advancing independent optometry.
We work with optometrists of all ages and stages of practice. We understand that practice financing is an essential component at every stage of practice ownership to build value and wealth. The financial institution that deserves a place on your team is one that truly understands your practice and applies these principles to your specific situation. Your total investment in your practice may range into the millions of dollars, making it crucial to find a knowledgeable relationship-oriented financial institution that can assist you in achieving your wealth-building goals.
A few other articles that may interest you
Six Strategies to Take Your Practice to the Next Level
Anatomy of a Bad Deal: Buyer Beware
Grow or Die: Complacency is a Practice Killer
ABOUT VISION ONE CREDIT UNION
Vision One Credit Union is a not-for-profit banking organization founded in 1951 by ODs for ODs with a mission to advance independent optometry. To accomplish this, we use deposits from the optometric industry to finance privately owned optometric practices. We believe that owning an independent optometry practice is a viable means to generate the income and wealth needed to provide a good living and to meet your retirement goal. If our mission is not achieved, then economic viability and ultimately industry sustainability is compromised. We have participated in the practice acquisition and wealth building process with hundreds of practices by financing the series of strategic investments required to build practice value and personal wealth.
–Bob Schultz, President & CEO, Vision One Credit Union.