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Student HCPE FAQs

What should be included in an optometry associate contract?

An associate is an employee and as such holds no ownership interest in the business entity for which the employee works. The associate contract is typically prepared by the employer’s attorney and should include the conditions of employment such as working conditions, special duties, hours and practice locations.

The term of the employment will include the specific dates of the contract. The salary and how it’s paid, including any bonus income is spelled out in detail. Other items that can be negotiated are the employee benefits such as dues, continuing education, insurances and moving expenses, details of paid vacation and the terms of a non-compete clause. Any equipment provided by the employee needs to be listed.

It is important to remember that contracts are legally binding, so do not rely on verbal representations by your employer if they differ in any way from the written document. Know what you are agreeing to and have an attorney review your contract before you sign anything.

How do I know if the time is right for the practice I am considering to hire me as an associate?

The right time to hire an associate depends on their stage of practice and whether they want to bring in another OD for economic reasons or for practice transition reasons.

For ODs more than ten years from retirement, hiring an associate OD is usually an economic decision based on practice production. Some practice owners make the mistake of hiring an OD when they feel ‘busy’ when the better financial move is to increase production on a solo basis by delegating more to its non OD staff.

For example, the median production for a solo OD is about $600,000 per year in gross collected revenue while it’s not uncommon in today’s world for solo ODs to produce $1 Million +.

It’s also important to note that the median net income for private practice ODs is 30% of gross or $180,000 for a $600,000 practice.

Median production per non OD staff is about $130,000 per employee. Which means proper staffing for a $600,000 practice would require 4.6 FTE (full time equivalent) employees ($600,000 ÷ $130,000).

In our opinion, a practice owner producing less than $600,000 solo and $180,000 in net income who still wants to work full time is not a candidate to bring in an associate based solely on feeling busy. As you can see from the examples below, the actual breakeven point for hiring an associate is around $800,000 in solo production.

On the other hand, ODs within a ten year horizon for retirement may want to consider hiring an associate for transition reasons.

How much should I expect to be paid as an associate?

The median annual compensation for an associate employed by an optometrist(s) is $85,000. But the real answer is that associate compensation should be viewed as a function of how much revenue and gross profit you can expect to produce in their practice.

As a rule of thumb, associate compensation should equal 15 – 18% of your annual production. Using this guideline, if a full time associate produces $500,000 in a practice, they should be paid $75,000 on the low end ($500,000 x 15%) to $90,000 on the high end ($500,000 x 18%).

The same general formula can be applied to part time associates.

The key is to making an employed OD work financially is patient demand. That depends on the ability of the practice to supply you with enough patients from their overflow or the ability to generate your own patient flow.

What should I look for in a partnership agreement?

This is a very broad question, but the basic components of any partnership agreement are ICE; Income, Control and Equity.

Income; how will the partners be paid? It is usually based on some combination of production and percentage of ownership.

Control; which partner has final say so on management decisions, hiring and firing, buying equipment, and how the practice spends money? A common misunderstanding is that control is based solely on majority ownership. The fact is, the level of control each partner has can be negotiated and specified in the partnership agreement independent of equity.

Equity; this is percentage of ownership.

Other important criteria to include in the partnership agreement are;

  • Partner duties and responsibilities
  • Dissolution clauses, non competes
  • Right of first refusal on selling shares

Is an attorney needed to write the contract?

It is highly recommended that you have an attorney draft your partnership agreement.

How is the value of a practice determined?

As a rule-of-thumb, most practices are appraised between 50% to 70% of annual collected gross revenues. The range is typically dependent on the net income of the practice. For example, a $600,000 practice netting 35% will appraise for significantly more than a $600,000 practice netting 25%.

To evaluate the worth of a practice, the potential buyer should consider the gross and net income of the practice, scope of practice offered by the selling practitioner, practice location, office lease, patient records, transition period, physical resources of the practice, and the accounts receivable.

The most important principle is that of “future benefits” – what are the anticipated future earnings capitalized to reflect a present value. There are various methods to valuing a practice. They include the asset-based approach (most applicable for a newer practice in which a track record of tax returns or profit and loss statements does not yet exist), the income approach (takes into account both income and excess profits using a capitalization rate methodology), and the market approach (most applicable when there are a number of comparable sales).

The purchase of a practice may be the single largest investment that an optometrist makes. This investment should not be made without consulting with various experts including an optometric practice appraiser, an attorney, and an accountant.



Doctor HCPE FAQs 

What should be included in an optometry associate contract?

An associate is an employee and as such holds no ownership interest in the business entity for which the employee works. The associate contract is typically prepared by your attorney and should include the conditions of employment such as working conditions, special duties, hours and practice locations.

The term of the employment will include the specific dates of the contract. The salary and how it’s paid, including any bonus income is spelled out in detail. Other items that can be negotiated are the employee benefits such as dues, continuing education, insurances and moving expenses, details of paid vacation and the terms of a non-compete clause. Any equipment provided by the employee needs to be listed.

It is important to remember that contracts are legally binding, so do not rely on verbal representations from the employee if they differ in any way from the written document. Know what you are agreeing to and have an attorney review your contract before you sign anything.

How do I know if the time is right for my practice to hire an associate?

The right time to hire an associate depends on your stage of practice and whether you want to bring in another OD for economic reasons or for practice transition reasons.

For ODs more than ten years from retirement, hiring an associate OD is usually an economic decision based on practice production. Some practice owners make the mistake of hiring an OD when they feel ‘busy’ when the better financial move is to increase production on a solo basis by delegating more to its non OD staff.

For example, the median production for a solo OD is about $600,000 per year in gross collected revenue while it’s not uncommon in today’s world for solo ODs to produce $1 Million +.

It’s also important to note that the median net income for private practice ODs is 30% of gross or $180,000 for a $600,000 practice.

Median production per non OD staff is about $130,000 per employee. Which means proper staffing for a $600,000 practice would require 4.6 FTE (full time equivalent) employees ($600,000 ÷ $130,000).

In our opinion, a practice owner producing less than $600,000 solo and $180,000 in net income who still wants to work full time is not a candidate to bring in an associate based solely on feeling busy. As you can see from the examples below, the actual breakeven point for hiring an associate is around $800,000 in solo production.

On the other hand, ODs within a ten year horizon for retirement may want to consider hiring an associate for transition reasons.

How much should I expect to pay an associate doctor?

The median annual compensation for an associate employed by an optometrist(s) is $85,000. But the real answer is that associate compensation should be viewed as a function of how much revenue and gross profit they can be expected to produce in your practice.

As a rule of thumb, associate compensation should equal 15 – 18% of their annual production. Using this guideline, if a full time associate produces $500,000 in your practice, they should be paid $75,000 on the low end ($500,000 x 15%) to $90,000 on the high end ($500,000 x 18%).

The same general formula can be applied to part time associates.

The key is to making an employed OD work financially is patient demand. That depends on the ability of your practice to supply them with enough patients from your overflow or, the associate’s ability to generate their own patient flow.

What should I look for in a partnership agreement?

This is a very broad question, but the basic components of any partnership agreement are ICE; Income, Control and Equity.

Income; how will the partners be paid? It is usually based on some combination of production and percentage of ownership.

Control; which partner has final say so on management decisions, hiring and firing, buying equipment, and how the practice spends money? A common misunderstanding is that control is based solely on majority ownership. The fact is, the level of control each partner has can be negotiated and specified in the partnership agreement independent of equity.

Equity; this is percentage of ownership.

Other important criteria to include in the partnership agreement are;

  • Partner duties and responsibilities
  • Dissolution clauses, non competes
  • Right of first refusal on selling shares

Is an attorney needed to write the contract?

It is highly recommended that you have an attorney draft your partnership agreement.


How is the value of my practice determined?

As a rule-of-thumb, most practices are appraised between 50% to 70% of annual collected gross revenues. The range is typically dependent on the net income of the practice. For example, a $600,000 practice netting 35% will appraise for significantly more than a $600,000 practice netting 25%.

To evaluate the worth of a practice, the potential buyer should consider the gross and net income of the practice, scope of practice offered by the selling practitioner, practice location, office lease, patient records, transition period, physical resources of the practice, and the accounts receivable.

The most important principle is that of “future benefits” – what are the anticipated future earnings capitalized to reflect a present value. There are various methods to valuing a practice. They include the asset-based approach (most applicable for a newer practice in which a track record of tax returns or profit and loss statements does not yet exist), the income approach (takes into account both income and excess profits using a capitalization rate methodology), and the market approach (most applicable when there are a number of comparable sales).

The selling of your practice may be one of the single largest financial transactions that an optometrist makes. This transaction should not be made without consulting with various experts including an optometric practice appraiser, an attorney, and an accountant.