3 Important Steps to Do Due Diligence For a Successful OD Practice Purchase


  • (1) Obtaining and analyzing financial documents from the last three years

  • (2) Analyzing the flow, mechanics and chemistry of the practice

  • (3) Analyze future profitability and growth potential

Purchasing a practice is an exciting yet daunting process for both new grad and seasoned optometrists alike.  One of the reasons purchasing a practice is so daunting is due to the uncertainty that comes with becoming the new owner of an existing business.  While a future business owner can never be certain of guaranteed success, the process of due diligence can greatly help a future owner determine if an existing business is a viable opportunity.

Due diligence is defined as reasonable steps taken by a person in order to satisfy a legal requirement, especially in buying or selling something.  The process of due diligence is different for every business; and is primarily based on the nature of the business, regulations around the business, and the relationality between the business’s operations and cash flow.  Due to this, many due diligence checklists exist both in print and online.  Some companies even charge for their “proprietary” due diligence checklist or methodology.

Due diligence methodology for purchasing an optometric practice has been nearly universally defined by prominent valuation experts in the field.  This is the methodology that we will be discussing. When purchasing an optometric practice, due diligence encompasses three important steps:

(1) Obtaining and analyzing financial documents from the last three years

  • (1) Tax Returns

  • (2) Profit and Loss statements, cash flow statements

  • (3) Frame/Contact Lens Inventory

  • (4) Equipment Inventory records

  • (5) Lab Inventory records

  • (6) Building lease/mortgage

  • (7) Legal documents

  • (8) Employee demographics and any special circumstances pertaining to employees

(2) Analyzing the flow, mechanics and chemistry of the practice

  • (1) Take some time to be in the office and learn how it runs, often it is best if you have worked as an associate in the office

  • (2) Take special notes on ruts and potholes that slow the office down or cause it to lose profitability - will you be able to fix these when you take over?

(3) Analyze future profitability and growth potential

  • (1) Take into account the economics and demographics of an area - Is population and industry steadily growing, like Fremont, CA; or is it rapidly declining, like Gary, IN? - this will play directly into your bottomline

  • (2) How many patients will leave when the practice switches hands?

  • (3) What is each patient worth? - Will you have to see 40 Medicaid patients a day or can you swing 6 multi-pairs cash patients a day to make ends meet?


Due diligence is a process.  It is not something that should be done overnight.  It should be methodical, and should optimally involve help from an accountant, lawyer and appraiser.  Read through documents carefully and study every aspect of the practice.  If you plan to invest a sizable amount of capital into an already established business, you want to make sure it will give a good return on investment.

Here is a laundry list of all necessary items to obtain from a potential seller (and his/her accountant) in order to perform due diligence.  If possible, involve your accountant, lawyer, appraiser and any potential practice management personnel in the process of due diligence:

Want to learn how to build your own practice? Check out  Recommended PM Resources

Need some financial consulting for your practice? Or how to start? Book a 1-hour Session with Mick Kling @ Practice Consulting 



Want to learn how to build your own portfolio? Check out  The Optometrist's Guide to Investing 101

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About Dr. Aaron Neufeld

Dr. Aaron Neufeld is a Co-Founder and editor for ODs on Finance. He owns a group private practice in Los Altos, CA and values a debt-free lifestyle as well as serial investing in real estate and index funds. Contact him: aneufeldod@gmail.com

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