How much is your medical practice worth?
The answer often depends on who wants to know and why—and is dictated by a valuation of your practice. Regardless of the reason, you can’t afford to not get it right.
As a Certified Valuation Analyst and medical practice consultant, I focus exclusively on healthcare valuations. Here are a few things you should know about the valuation process.
Why would my medical practice need a valuation?
As I mentioned, there are several reasons why your medical practice might need a valuation. These include the following:
- You’re selling your practice to a third party.
- Your practice is being acquired by a hospital or other entity
- You’re retiring or withdrawing from your practice.
- One of your partners is retiring or withdrawing from the practice.
- You or a partner are getting a divorce.
- Your practice is merging with another practice.
- An associate physician is buying into your practice.
- You’re facing litigation.
- You’re engaging in tax and estate planning.
What is the goal of a physician practice valuation?
The goal of a physician practice valuation is to place a quantifiable value (i.e., a number) on a practice. The manner in which a valuation is performed depends on the reason behind it; the number it provides is often a starting point. For instance, in the event of a divorce valuation, the number will be dependent on state laws. For the sale of a practice, the seller would typically add a premium to the valuation number to arrive at a selling price.
What does a valuation involve?
While there are set methodologies used to ascertain values, this is only part of the valuation process. It’s important to also address the practice’s unique circumstances that set it apart. In other words, physician practice valuation is an art and not a science.
First, we determine the type of valuation engagement you’ll need: Will you require a calculation of value, or a conclusion of value? A calculation of value is sufficient for when you just need a number, such as for estate planning or associate buy-in. A conclusion of value involves issuing a larger report. This type of valuation is normally used in litigation and practice sale engagements.
Next, I’ll provide you with a data-gathering checklist. After analyzing the requested practice data and current state of the healthcare industry and, if necessary, holding discussions with your physician owner(s) and management, I apply three methods to the valuation to arrive at the appropriate value: the income approach, the asset approach, and the market approach. (For a calculation of value engagement, you and I will work together to determine which valuation methods to follow.)
At the end of any valuation, I make sure you agree with the number.
How often does my physician practice need a valuation?
Again, it depends on the reason for the valuation. Typically, a practice will need a valuation only once. However, certain situations, such as buying out a partner’s interest or multiple doctor-owners leaving the practice, could require multiple valuations.
Proven medical practice valuation solutions for you.
Just as physician practices aren’t your typical businesses, healthcare valuations aren’t your typical valuations. If you’re facing a valuation issue, I can help. Contact me today.