Smart businessmen and women understand that it is important to consider selling a business before the day arrives. Yet all too often, medical professionals -- from wellness providers and holistic health care providers to medical and dental practitioners -- do not have an understanding of key business concepts that can help sell their practice. Learn how to value a company and why you need to do this before you put a medical practice on the market.
How to Value a Company in a Medical Field
There are many different company valuation methods that a business appraiser might use to value a company. Commonly used methods include the asset, income, and market approach.
Asset-based company valuations focus on the value of business equipment and assets. If you have a lot of modern specialized equipment, such as x-ray and diagnostic imaging machines, then an asset-based approach may benefit you.
An income-based approach may examine your cash flow or take capitalization of earnings. The latter method works well for established, stable businesses such as an orthodontist office that has a demonstrated pattern of regular patient growth over time.
A market approach might compare the medical business to those similar to it, or use multiples of growth revenue. This approach works best when there are similar businesses in the community to compare your medical business to, and does not work as well in rural areas.
While you do not need to know the fine details of these different methods, it is helpful to understand the basics so you can review your appraisal report. After the appraisal, you may decide to make strategic business investment to grow the value of your company before a sale, especially if the sale you anticipate is far off.
A business appraiser can discuss your needs, your business history, your growth, and your reasons for selling the business. Based on the information gathered, the appraiser can then select the right approach or combination of approaches to obtain a fair market value for your business.
Why You Need a Business Appraisal for a Healthcare Practice
If you try to sell your healthcare practice without getting an appraisal first, you risk setting yourself up for a frustrating experience because you do not understand the true fair market value of your company. You might be sentimental about your company and set a price too high to receive an offer. Alternately, you may undervalue your business due to personal fears and end up selling the company for less than you deserve.
Knowing the valuation of a company, you can understand its unique selling points and better market your medical practice to new dentists, doctors, or health and wellness experts. You can decide if you want to sell the business as-is, sell equipment separate from the business, or sell your practice separate from real estate. You might retain building ownership and transition into being a landlord renting office space.
If you are considering selling your practice to a hospital, as is common at the present, you may want a business appraisal as a form of leverage. When you know your practice's value, you are in a better position during negotiations.
At Business Valuation Specialists, we perform business appraisals for a wide range of companies, including medical practices. Let us take the lead in your business valuation, so you can sell your medical business for a fair price.