Starting your own optical practice is a big step to take in your career. There are a lot of advantages of being your own boss and operating your practice exactly how you envision it, but along with the excitement comes challenges and a whole lot of responsibility.
Why might you consider owning your own business?
Owning your own optical practice has many benefits. You are in control of your own earnings and the growth of your business. By being your own employer the harder you work, the more successful your practice and the more you earn or are able to reinvest in the growth of your practice. You can operate the way you believe delivers the best clinical and retail service for your patients and you can employ your team according to your required standards of skill, expertise and experience. Remember you can never sell your job but you can always sell your optical practice!
What challenges might you have to overcome to become an independent practice owner?
The first challenge is being able to acquire an existing practice or premises in which to establish one. Cost will depend on location and size. Either way you will need to have a way to fund your business needs.
At an early stage, businesses will need long-term backing to fund the business through to revenue
and profit; this could be through business angels and/or venture capital and is commonly in different rounds with different parties. In the shorter term, equity investment can support an aggressive growth strategy. In simple terms, equity financing is the raising of capital through the sale of shares in a business.
Equity can be sold to third-party investors with no existing stake in the business. Alternatively, equity financing can be raised solely from existing shareholders, through a rights issue. Founding shareholders will have put the initial equity into the business. Friends or family may have ‘invested’ in the early stage of a business’s journey. Business angels may then take an equity stake.
Venture capital (VC) investors (also known as venture capitalists), corporate venture capitalists or private equity (PE) investors tend to be an option at the growth phase. Financial institutions or the wider public may invest in equity through a listing of the company’s shares.
The public may also acquire equity stakes through equity crowdfunding platforms. In reality, it is not quite that simple – business angels, for instance, may invest at many stages in the business’s growth. As it progresses, a company’s shareholder register will be a mix of investors who have taken stakes at different stages of its journey.
Unlike debt providers, or lenders, equity investors do not have rights to interest, or to have their capital repaid by a certain date. Shareholders’ return is usually paid in dividends or realised through capital growth. Both are dependent on the business’s growth in profitability, and its ability to generate cash. Because of the risk to their returns, equity investors will expect a higher return than debt providers. Where a project requires longer term investment than conventional debt offers, equity will be the most suitable form of finance.
Debt is a form of loan which can be an overdraft, lease, mortgage etc, that will need to be repaid at some time in the future. Bank loans and overdrafts are common for established businesses but require security. There are many sources of debt finance from the high street banks and peer-to-peer lending platforms.
Grant funding is usually funding for a specific project or operation. This might be from a government or a social enterprise that assist businesses with their projects that meet their objectives.
Donations are similar to grants and crowd sourced funding is becoming more popular where money is donated to a business and the donor receives some form of acknowledgment in the form of a reward.
Whatever form of funding you seek, it has a cost to your business. The cost is the reward to the funder!
Opticians are allowed to operate in any legal structure, however, you must register with the General Optical Council (GOC) to use the title ‘Optician’ in your business name.
Most businesses register as a sole trader, limited company or partnership. Find out more about being a sole trader and how to register at www.gov.uk/set-up-business
Sole traders – It’s simpler to set up as a sole trader, but you’re personally responsible for your business’s debts. You also have some accounting responsibilities.
Limited companies – If you form a limited company, its finances are separate from your personal finances, but there are more reporting and management responsibilities.
Some people get help from a professional, for example an accountant, but you can set up a company yourself.
Partnerships – A partnership is the simplest way for two or more people to run a business together. You share responsibility for your business’s debts. You also have accounting responsibilities.
Having enough cash to cover the bills is a must for any business, but it is also a must for every individual. Whether it is your business or your life, one will likely emerge as a capital drain that puts pressure on the other. In order to head off this problem, small business owners must either be heavily capitalised or be able to pick up extra income to shore up cash reserves when needed. This is why many small businesses start out with the founders working a job and building a business simultaneously. While this split focus can make it difficult to grow a business, running out of cash makes growing a business impossible.
Money management becomes even more important when cash is flowing into the business and to the owner. Although handling business accounting and taxes may be within the capabilities of most business owners, professional help is usually a good idea. The complexity of a business’s books goes up with each client and employee, so getting help with the bookkeeping can prevent it from becoming a reason not to expand.
What are the key considerations for an independent practice owner?
Remember: running your own practice should be creative, satisfying and enjoyable. It’s a chance to express yourself, meet interesting and creative people, potentially make a lot of money and create a whole new life for yourself. Good luck!
SightCare Chief Executive
SightCare is a leading business and networking association for independent opticians representing approximately 400 members from single independent practices to small independent practice groups, each sharing similar business aims and challenges and the same commitment to outstanding quality of service. www.sightcare.co.uk