The True Value of Your Optical Practice: Why 'DIY' Valuations Can Cost You Dearly
"What is my optical practice worth?" is a question we hear all the time. It's a natural question to ask, and it's smart business to know the value of your assets, even if you're not planning to sell for years. However, it's also human nature to try and save a few quid, which is where many practice owners stumble
Date: October
Written by: Dominic Watson
Unfortunately, relying on a DIY valuation or advice from someone who isn't up-to-date with the optical market can have some serious, and very expensive, consequences.
The Dangers of DIY Valuations
The "low price, high cost" of a DIY valuation is a real problem. We've seen owners make two major mistakes:
- Overvaluing their practice: They think their business is worth more than it is, leading to a nasty shock when it's time to sell. This can force them to delay retirement or other life plans.
- Undervaluing their practice: By setting the price too low, they can leave tens or even hundreds of thousands of pounds on the table.
The advice of a professional who understands the current market is absolutely crucial. As one of our team members experienced, advice from someone who hasn't been involved in a sale for decades is not just outdated, it's dangerous.
Myth Busting: The Turnover Fallacy
One of the biggest myths that just won't go away is that you can value an optical practice based on a percentage of its turnover. This simply isn't true. It's like walking into a practice and asking for a prescription just by saying you're short-sighted!.
Real-world examples prove this myth is farcical. We recently sold over 40 practices, and the ratio of sale price to turnover varied wildly. Some sold for around 30% of turnover, while others went for over 120%. The true value is based on a multiple of adjusted net profit, not turnover.
The Perils of 'Window Shopping'
Just like with house prices, it's tempting to "look through the keyhole" and try to guess the value of your practice by checking out what's on the market. We all do it with Rightmove. But this approach is fundamentally flawed for a few key reasons:
- It's not the full picture: The publicly accessible listings only show a small, often unrepresentative, slice of the market. A high percentage of practices are sold discreetly, without ever being openly advertised.
- Asking price vs. sold price: You're seeing the price being asked, not the price actually achieved. Many asking prices are overly optimistic. Unlike the housing market, there's no publicly available data on what practices actually sell for.
Every practice is unique, and there's no "one size fits all" rule. A professional valuation takes into account a huge number of factors, from profitability to potential.
Don't Take the Risk!
We've seen the devastating impact of getting it wrong. One owner, relying on outdated advice from his accountant, had to make a forced sale for half of what he had hoped for after a family crisis. Don't let that be you.
Your business is a store of personal wealth and a key part of your retirement plan. Make sure you have the right people in your corner. We've been valuing and selling optical businesses for over 25 years. Our advice is honest, accurate and, most importantly, based on real-time market data.
As our client Mark says, "You need to find people you trust to ask for help". When it comes to the value of your life's work, that's the best advice you'll ever get.
Ready to find out the true value of your practice and get the expert team on your side? Give our friendly team a call on 0161 929 8389.
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