How Do I Value My Practice?
Considering selling your practice? You need to speak with an experienced practice broker, one who is fair and places your interest at the forefront – practice valuation is not an exact science, and even the most knowledgeable professionals can differ in their opinions. There are numerous methods used to establish value; the Asset Approach, Market Approach, Income Approach, and lastly, the “Rule of Thumb” Approach. An important factor in valuation is why and how a value is achieved.
Evaluating a practice based on the average of the last 3 years of gross collections and net income adjusted for certain deductions (EBITA) is a fair and equitable method. Then, compare your evaluation against the current market for like-type practices in certain demographics. How your practice is presented to a buyer can have a major affect on the likelihood of them pursuing it. If they can see the opportunity for them to build on your life’s work and treat your patients (and future ones) with the same clinical philosophy that you prescribe too and of course, a healthy financial return, then that practice can sustain debt service, practice expenses, and personal living expenses.
Remember, this is a major commitment not just for the buyer but for yourself – consulting with an informed broker will allow you to make an educated decision on how much to, when to, and whom to sell the practice to, which is exactly what you deserve after years of dedication and self-service.