Setting Up a New Practice

Starting your own ophthalmic or optometry practice is an exciting and hopefully lucrative initiative. But preparing your practice for the overwhelming volume of red tape and compliance requirements can be a daunting challenge. With that in mind, we highlight some of the issues you’ll need to consider when setting out on your own.

Decide what kind of practice you’d like to operate

For many prospective small-medium business owners, the decision to start out on their own is quickly followed by some expert advice as to what kind of structure will tax effectively maximise returns.

For optometry practitioners however, there is another more fundamental consideration to be taken into account first. Will you go it alone or align yourself with one of the big players in the market? This decision will have a significant effect on your future life in business, and there are a number of pros and cons. For further analysis, read our article Should You Join a Franchise.

For ophthalmologists, ophthalmic surgeons or eye surgeons, the decision may involve considering a partnership or shared rooms in a specialist centre.  

Choose the most appropriate and tax effective structure for your needs

Before you start earning any money, where should that income be earned? We all want to make our contribution to society, but no one wants to pay more tax than they have to.

Getting your structure right from the beginning helps to ensure that you maximise your return from the practice. It involves considering your family circumstances, current tax law and your future requirements. One issue that is critical in determining how to structure your financial operations is whether the income from your practice is generated by you personally or by the proposed business structure. Advice from a good Tax Agent and Business Adviser is essential.

Establish the chosen entity or entities 

Once you have determined the best structure for your practice, you’ll need to establish the entity or entities needed to make it work. This might involve setting up a company or trust and if so, you’ll want to make sure that the shareholders and/or beneficiaries are set up correctly from the start, so that you can distribute income in the most tax effective manner.

Attend to any Registrations/Licences with Government Departments that are required 

Your practice will need to operate not only with correct legal and regulatory governance, but also in accordance industry practice and guidelines. You'll need to ensure that you are registered with the Optometry Board of Australia or the Medical Board of Australia. Depending on your circumstances other registrations and/or licenses may also be necessary. Further information on the registrations and licences that may be required can be found at the Business Licence Registration Service.

Apply for various government numbers and registrations for your practice 

This includes:  

• Lodging a Tax File Number (TFN) application with the Australian Taxation Office (ATO);
• Lodging an Australian Business Number (ABN) application with the Australian Business Register;
• Registering for Pay-As-You-Go (PAYG) withholding tax with the ATO; and
• Registering for Goods and Services Tax (GST) with the ATO.

Establish relevant bank accounts 

Whatever structure you decide upon, you’re going to need bank accounts in order to operate. This will require you to set up an account in the name of the entity (e.g. the company), which means you’ll need to show appropriate documentation to prove that the entity exists and that you are authorised to open an account on its behalf.

You might also want to consider here what funding requirements you will have. For example, you might need to arrange an overdraft to get started.

Select your premises and how you plan to finance it 

Where do you plan to operate, and what kind of premises will you need? And how will you finance your premises? Will you buy a property or lease it? There are pros and cons for both options and it will depend on your plans for the practice and your personal objectives too. If you decide to buy, you’ll want to consider the most tax effective way to purchase the property. For example, what entity will you purchase it in? If you decide to lease, you need to make sure you check your lease agreement thoroughly and query anything you’re not sure about. Perhaps instead you will share rooms with other practitioners. In this case, you'll still need to thoroughly check the terms of any agreement you make to ensure that there are no hidden surprises and that you get everything you need.

Consider equipment requirements

Chances are you've probably already thought long and hard about what equipment you will need to make your practice work. This includes optical and medical equipment but also office equipment and your fit-out.

A key consideration will be how you’re going to pay for it, and once again, the two most common options will be to buy or lease. When it comes to equipment, ‘leasing’ can refer to a variety of alternatives, including volume based contracts. For example, in the case of printers and photocopiers, leasing arrangements are often structured such that you get all of your consumables and paper included for a monthly charge that is determined by how many copies you print. It’s worth speaking to other people in your industry to find out what they do, what works for them and what the pitfalls to avoid are.

It may be that you also need to think about more general finance to get you up and running, in the form of a business loan.

Think about what stock you will carry and make arrangements with suppliers

Along with consulting, the other key component of an optometrist's income is sales. You'll need to think about what frames, lenses and other accessories you will stock, and negotiate agreements with suppliers. You won't be able to carry everything, so it's important to think about who your customers are likely to be and the demographics of the area you are working in. As you progress, you will have the opportunity to try new and different products and see what works and what doesn't, adjusting your buying patterns accordingly. It's worth speaking to others in the industry or representative bodies about who you should approach for inventory.

You'll also need a suitable computer inventory system to keep track of it all for accounting purposes. This will usually be a part of any specialist software you implement, but it is worth having a look at it first to make sure it will give you the information you need.

Arrange all appropriate insurances 

It goes without saying that this is at least as critical for those in the eye care industry as for any other. Medical defence cover is absolutely essential. You’ll also need insurance for business equipment and assets and insurance for property (this is likely to be the case even if you lease the premises).

You should also make sure you think about various other forms of risk management insurance - income protection, business expenses insurance and life cover. And if you’re going into partnership with someone else, a buy/sell agreement is critical. This provides a pre-defined course of action to take, and the means by which it will be funded, should something happen to one partner that prevents him or her from working.

Consider Patent/Trademark Registrations 

If you have a service or product that is new and unique, or a particular marketing idea, you'll want to make sure that you protect your intellectual property through patent registration or Trademark.

Consider staffing requirements 

You also need to make sure that if you’re employing others, you have your head around the requirements of the Fair Work Act, the National Employment Standards and the relevant awards for your employees. If you employ enough people, you might want to consider employing an experienced Office Manager to take care of the employment side of things, along with all the other day-today operational requirements of the practice.

Organise your marketing/referral plan

When starting out, you may already have some loyal customers/clients and referees. If your practice is going to survive into the long term future however, you’re going to need to develop your brand a little. Every business has an image, whether they choose to nurture and promote it or not. The key to generating referrals and retaining clients is in making sure that what you’re doing is consistent with the image you would like to project. Your ‘brand’ can then develop into one of your most valuable assets. 

Regardless of how you approach it, you'll need to give consideration to a range of issues. While direct advertising and promotion may not necessarily be appropriate for you, you will still need to think about what your stationery will look like, how you would like your premises to look and ‘feel’, and what networking events you might attend. Even such minor matters as what your staff will wear (smart professional dress or uniforms, etc.) and how they speak to your clients will contribute to reinforcing your brand or, if done badly, reducing the value of it. You might even want to engage a marketing consultant to help you. We recommend Lowen Partridge of Peartree Marketing.

Another important thing to consider here is whether you will have any kind of online presence. Even if you're not sure at this point, it's worth at least registering your domain name to ensure that someone else doesn't get it before you. This is the part that goes before '.com' (so for example, in our case, we have registered dewings.com.au as well as some other alternatives). Having the right domain name is critical in making sure that people can find you online easily and can recall your email address with a minimum of fuss. It also helps from a marketing perspective to have your business name in your email address, rather than using say Hotmail, Gmail, or the name of your ISP, because it adds credibility and enhances your professional image. This can be set up with very little cost and doesn't necessarily mean you have to go to the extra expense of setting up a full-blown website (though this may still be a good idea too).

Ensure your personal assets are protected

This is an area that is often overlooked by many business owners, regardless of the industry they operate in. To some extent, you will consider this when thinking about what kind of structure to operate in since, for example, a company offers better asset protection than simply operating under your own name. But you also need to make sure that you consider the protection of your personal assets from a range of angles. For example, if you have a life partner, should your house be held in his or her name rather than your own?

Set up an appropriate computer system

These days very few practices operate without specialised software. This will usually be used to manage, at a minimum, your billings, stock, client database, appointments and so on. But it can also be used for sending out reminders and generating prescriptions. In addition, it can be integrated with your accounting and payroll software. There are a range of popular alternatives out there, so it’s worth doing some research, speaking to an expert and also other businesses that are using software. Dedicated software can be expensive, so you’ll also need to give consideration to how you will finance it.

Monitor cash flow and business performance monthly

Once you’re set up and running it’s important to monitor your results. When you have your financial statements and income tax returns prepared by an accountant, the information is usually for compliance purposes and is retrospective, reflecting a period that was some time ago. To manage your practice and take pro-active steps to deal with any potential problems while there is still time, you will need monthly reports, and also reports that you don’t get when merely meeting your tax obligations. Budgets and statements of cash flow help here, and preparing monthly income and expense reports helps you to see where you are doing well and where things can be improved, on a more timely basis.

Attend to payment of wages and on-costs in a timely manner 

Once again, you may choose to appoint an Office Manager to take care of this for you. Regardless of what you do, however, you need to make sure you have systems in place that keep you on top of your payroll obligations and that you have remitted the various amounts that are due on behalf of employees by the prescribed deadlines. This includes Pay-As-You-Go (PAYG) withholding tax, worker’s compensation insurance (which is to a statutory body in many states), payroll tax and superannuation (quarterly as a minimum).

Attend to lodgement of Business Activity Statements (BAS) when required 

Your BAS will most likely be due on a quarterly basis. It’s a summary of your business activity for the quarter, including your income and operating expenses, and is often the means by which you remit taxes that you have withheld, such as GST and PAYG. It doesn’t necessarily need to be based on final figures, as some adjustment is often necessary at the end of the financial year, but it highlights again the importance of having up-to-date accounting systems in place and a mechanism for ensuring that your BAS is completed and submitted with a minimum of fuss.
 

We can help! Call Dewings on (08) 8291 7900 if you are looking to set up a new optometry practice.

For a more detailed consideration of the personal and business planning issues you should think about before starting your own practice, get a copy of ODMA's 'Start Your Own Practice' publication free of charge by contacting ODMA direct.