The Valuation Process

To value a healthcare practice properly the valuation analyst must possess the proper training and expertise (i.e., certified valuation experts who have received training and certification through a globally recognized valuation professional organization). Doctors Valuation works exclusively with highly credentialed industry specialized experts, such as Anchor Businss Valuations & Financial Services, LLC ("ABV") .

Five Key Steps in the Valuation Process

• 1. Purpose. During initial correspondence, the need and use of the valuation is determined. This step is necessary to develop the scope of the engagement. A valuation used for gifting purposes is often very different from that of one used to discern a sales price. Once the purpose of the valuation is determined, the valuation expert provides the client an engagement letter for review and execution, a document request list and a virtual databox link (upon request).
• 2. Information Gathering. This step requires the gathering of internal and external information as well as, a site visit when/if feasible). This may include all financial information for the past 5 years, including year-end financial statements, interim financial information, prior stock sales, completion of a detailed practice questionnaire, and federal tax returns.
• 3. Analysis. The 3rd step in the valuation process is information analysis and financial spreading/analysis. During this step, available comparative practice (competitors, peers, "comps", etc.) is often gathered to review against that of the subject practice. Adjustments are made to the financial statements to reflect any non-recurring, non-operating, and/or discretionary (personal) expenses which "add-back" to the practice profits.
• 4. Draft Review. Before the final report is provided, a draft report is sent to the client for review.
• 5. Final Report. Once the final report is provided a virtual or in-person meeting with the client is often scheduled to review the valuation expert’s findings.

VALUATION APPROACHES

There are 3 different valuation approaches:

The Income Approach determines the value of the medical (dental) practice through the analyzation of the cash flows (historical, future).

The Market Approach reviews quantitative and qualitative data from similar businesses against that of the subject practice to see where the client fits in the marketplace and with its peers.

The Asset Approach is typically not used, unless the subject entity is nearing bankruptcy as the assets of a practice are part and parcel to that of the obtained cash flow (i.e., the Income Approach).

Depending on the purpose, all three approaches may or may not be utilized to determine the current value of the healthcare practice. Our experts are available to walk the client through the valuation process and assist in the determination of the scope of the report needed (and, as a result, the appropriate approach/es to utilize in the valuation process).