What to consider when selecting a valuation professional for a medical practice appraisal.
Obtaining a professional opinion of the value of your medical practice can be helpful in a number of capacities. One major catalyst when it comes to obtaining a practice appraisal is a transaction or anticipated transition in the practice. This may involve buying or selling a practice, divorce, estate planning, medical practice financing, merger, consolidation, or other business combination.
Various considerations come into play when seeking a qualified appraiser to value the practice. An appraiser should take into account the multiple valuation approach per industry standards and accepted guidelines, in addition to providing a competent application of these principles given the subject practice.
Medical practice appraisers should use a number of accepted methodologies suggested by the IRS, The Appraisal Foundation’s Uniform Standards of Professional Appraisal Practice, and standards of appraisal for medical practice valuation. Equally important is the value judgment when it comes to gauging the risk factors and growth rates applicable to the subject practice, the medical specialty, and industry as a whole.
A good medical practice appraiser will use correct assumptions of growth in the specific specialty and region, and will know how practice value is affected by supply and demand side factors, reimbursements, and structural changes to health systems. The valuation of medical practices can be confusing and fraught with conflicting information, especially when it comes to using appraised value for selling and buying practices.
The key to selecting a good practice appraiser is working with one who understands these dynamics yet can provide a valuation at arms-length. The appraiser should be keenly familiar with the medical practice focus, as general business appraisal principals can be grossly inaccurate when they aren’t nuanced for the specific nature of the practice environment.
Obtaining a practice valuation opinion is the first step in understanding what the practice may be worth and can be very helpful in structuring deals for outright sales, buy-ins, buy-outs, mergers, and consolidations. Having an informed basis makes it easier to justify value and price points to ultimately achieve the given transition objective.