Medical Practice Valuation
Medical practice valuations (medical practice appraisals), is a formal opinion from a medical practice broker or transition specialist that estimates a practice’s market value. This comprehensive report is usually from 20 to 40 pages and includes supporting financial and demographic documentation including practice assets.
Practice valuations are paramount when buying or selling a medical practice. Using historical financial and empirical practice data, your medical practice value is determined.
Medical Practice Valuations for sellers
Every doctor should request a medical practice valuation when considering selling their practice. The medical practice valuation can be surprisingly higher than the seller had in mind or it can be lower than the seller anticipated.
Practice valuations are subjective but based on our professional opinion of the fair market value and considers the unique attributes of the practice and current market conditions.
Medical Practice Appraisals for buyers
When considering a purchase of a medical practice, buyers should ask for a copy of a recent medical practice appraisal and consult with a competent financial advisor, CFO or CPA to determine if the appraisal is reasonable and fact based. No one wants to overpay for a medical practice.
Other reasons for a Practice Appraisal
- Sale of the entire practice
- Sale of a portion of the practice
- Future sale to an associate
- Valuation needed for long-term financial planning
- Creation of a new partnership or future partnership or doctor recruiting
- Valuation needed for a divorce settlement
How much is a Medical Practice Appraisal?
The cost of a medical practice appraisal can range from $3,500 to $10,000, depending on the size and complexity of the practice, and the scope of the appraisal. Some consultants and transition specialists may offer free appraisals, but these are usually based on a rule of thumb and are not true valuations.
Rules of thumb for Practice Value
- 0.6 to 0.8 times revenue
- 1.0 to 2.0 times net income
- 3.0 to 4.0 times earnings before interest and taxes (EBIT)
- 3.0 to 4.0 times EBITDA
How can a business practice consultant help?
Practice consultants are experienced in all aspects of operating, promoting, and protecting your practice.
Using this experience, we begin every relationship with a proprietary Comprehensive Practice Analysis of your practice financials, fee schedules, patient demographics, practice operations, office policies, market share, marketing and advertising.
Data drives your marketing efforts and advertising for more of the wrong patients, with lower-paying fee schedules, will not solve your problems.
When we understand the needs of your practice, we will develop a customized program to grow your revenue, profitability, and market share.
