Well before you sell, check your practice vitals

I see a pattern repeating itself every few months. A practice owner contacts me for a valuation. They’re planning to step back or transition within the next year or so. Most owners go into the process expecting to stay on for a period after the sale – they’ve made peace with that.

What they haven’t expected is the valuation process: it doesn’t reward untapped potential. Those who wait to optimise their financials until they’re ready to sell miss a vital window. A practice’s valuation is based not on projection but what it has earned in the last three years.

Your practice value is often calculated as a multiple of your average EBITDA – earnings before interest, taxes, depreciation and amortisation – where the latter is spreading the cost of an intangible asset over its useful life (accounting) or paying down a debt over time through regular, structured payments (loans).

EBITDA is simply a way of looking at how profitable your practice is before financing and accounting factors muddy the waters. That means the small costs you’ve been tolerating quietly in the background are also multiplied. That multiple commonly sits around 2.5–4 times, depending on the strength and quality of the business. It’s essentially the 'maintainable profit’ a new owner can reasonably expect, going forward. Say you have $50,000 of unnecessary costs sitting quietly on your profit and loss (P&L) sheet – excess wages, outdated subscriptions, or a line item you’ve been putting off addressing – that’s not just $50,000 you’re losing each year. It’s $50,000 of profit that could be flowing back to you. When multiplied in a sale, that’s hundreds of thousands off your sale price. That can be the difference between retiring or having to keep going for another year – or several years – because the valuation fell short.

On top of that, there’s often a disconnect between what you think your practice is worth, what the market will actually pay for it and what you need for your next chapter. Discovering that gap when you’re already tired and ready to move on is a tough moment for many owners.

The time to optimise is before you’re thinking about selling. Buyers don’t buy on, and banks don’t lend on, theoretical potential – deals are done on the financials. Bottom line: every dollar of profit you leave on the table in the years before sale gets multiplied when valuation happens.

To avoid that, the best place to start is to work out what funds you need. For most, that’s a retirement number. But not everyone is retiring. Some want to keep working clinically but step away from ownership. Others want more flexibility, time, or capital for their next move. Regardless, knowing your number sets your timeline and whether you have a gap to close.

Profit isn’t a dirty word

You wouldn’t let a patient’s intraocular pressure creep up year after year without investigation. You’d monitor it. You’d intervene. You’d tell them what they need to hear. But when it comes to our own businesses, we avoid tackling the vital financial signs. This comes down to who we are as optometrists. We’re in this field because our drivers are about helping others, not optimising resources. In healthcare, ‘profit’ is often a dirty word.

We default to favouring relationships over governance, even when it costs us. We keep suppliers on out of loyalty, even when the stock isn’t serving the practice; we avoid pricing increases because we worry about the impact on our patients, even though our own business costs have gone up. We know we’re overstaffed or relying too heavily on locums, but we know these people, we know their kids and their personal situations. Empathy makes us great clinicians but it can also cost us financially.

You don’t need to become an economics expert to monitor your practice’s health. You just need a simple rhythm where you step back and check the vitals. Start with the 80/20 principle, which states that roughly 80% of outcomes result from 20% of causes. Rank your P&L expenses from largest to smallest. The top two or three lines are almost always where the leverage is.

Here are four vital signs worth keeping an eye on:

Wages – watch your wage percentage, whether it’s tracking to industry norms and whether it’s creeping up over time.
Gross profit – keep an eye on your margins and whether your pricing has increased proportionately with your costs.
Stock health – notice what’s working and what’s not. Be objective and use data. Make every frame earn its place on your displays.
Owner dependence – if you are the main clinician, the main decision-maker and the main problem-solver, the business can quickly start to feel heavy. It becomes harder to take time off, harder to reduce your days and harder to transition when the time comes. Reducing owner dependence not only increases your valuation, it increases your enjoyment of work, even if you’re not preparing for sale.

The goal is not perfection but visibility – if you can see the numbers early, you have choices. And choices stop you making rushed decisions when you’re tired, under pressure, or ready to step back.

In my next Focus on Business column, I’ll unpack what drives these vital signs and the practical levers you can pull to improve them, without losing what makes independent practice special.

Your P&L is your scoreboard. When your effort is producing a healthy, sustainable business that rewards your efforts, the blood, sweat and tears feel worthwhile. But when you don’t see that upside, you start to resent coming to work. So the practice owners who get this right don’t just achieve better valuations – their last few years of ownership are more enjoyable. They’re able to exit on their own terms and retire the way they dreamed of doing.

I work on the acquisition side as the owner of Ocula Group, but this comes from a place of respect for independent optometry. I want independent owners to be well-rewarded for what they’ve built. A strong valuation is good for owners and a healthier independent sector is good for our industry – a rising tide lifts all boats.

A simple starting point

If you want to take one small step right now, try this simple ‘practice health check’:

Pull your last 12 months’ P&L statement.
Compare your wages as a percentage of turnover across the last three years. Notice the impact on your bottom line. Then do the same for gross profit.
Identify one thing you can improve in the next 90 days.
Book a quarterly practice health check meeting with yourself and protect it like a patient appointment.

Small changes, done consistently, are what create value over time.

The take-homes

In New Zealand optometry, practice valuations commonly land at around 2.5–4 times the average EBITDA over the last three years, depending on the strength of the business. Essentially, it’s the ‘maintainable profit’ a new owner can reasonably expect.
Unnecessary costs (eg. excess wages, outdated subscriptions) and unrealised revenue potential (eg. outdated pricing, poor stock strategy) frequently reduce sale prices by hundreds of thousands of dollars.
Wage costs (relative to turnover) are often a key lever. It is less about the ‘perfect number’ and more about noticing drift over time.

Running your business as if you could sell it tomorrow creates better outcomes, whether you’re ready to part ways with it or not. It’s not an exit strategy, it’s a principle of responsible ownership. You never know when your personal situation might change. And, even if it doesn’t, a financially healthy practice is simply a better way to work. Your business deserves the same preventive care you give your patients.