Medical Practice Valuation
Let an expert help you evaluate your medical practice.
What is Your Medical Practice Worth?
A medical practice valuation can help a new physician who is buying into a business determine how profitable it is and can help retiring physicians work out how much their practice is worth including the amount of non-tangible assets such as goodwill. Here’s a few things you should know about a medical practice valuation if you’re planning on joining, buying or selling a practice.
In order to reach a fair and accurate price, there needs to be a rational basis for how a medical practice valuation is determined and in order to properly assess how much a practice is worth rigorous and uniform valuation methods must be used. Understanding the factors that help to determine medical practice valuation can assist physicians to make an informed decision when buying or selling a practice.There are several things to consider when determining the value of a practice such as the location, profitability, and reputation of the clinic as well as the age of the seller and if he or she will continue to work at the clinic.
During the valuation the tangible assets and intangible assets of the medical practice are also considered.Tangible assets include things that can be readily observed such as, medical equipment, inventory, facilities, medical records, leaseholds, real estate and accounts receivable.
An intangible asset includes things that are not always easily identified but are generally highly valued, such as the existing patient base, buy/sell agreements, goodwill, staff and administrative processes in place.Practice appraisers will use tangible assets and intangible assets as well as other factors to help them determine how much the practice is worth to reach a fair market value (FMV) calculation.
Frequently Asked Questions
Factors such as tangible assets and intangible assets are carefully evaluated to help determine how much a practice is worth and the FMV. For example, two similar medical clinics in the same location may not have the same FMV, as other factors such as profitability, cash flows and how smoothly the practice is operating are also taken into consideration. A medical practice valuation is a complex and subjective process as the ‘asking price’ is not always indicative of what the practice is worth or what it will sell for. In many cases, sellers will believe that their practice is worth more than it actually is because they associate their hard work and time spent building the practice to the price. However, this has no relevance to the buyer and is often what causes disparity between the buyer and seller.