by Gabriel Andrada, MHA, CSAF, CHBC, CVA
As a physician, have you ever wondered about the true value of your practice? Whether you’re considering buying or selling a business, planning for taxes, or simply curious about your practice’s worth, a physician practice valuation can provide you with invaluable insights.
Physicians can derive a wealth of information from receiving a valuation. These analyses will not only establish a value, but may also help identify improvements that could lead to a more efficient (and valuable) practice going forward.
Let’s dive into the importance of seeking out a valuation of your physician practice, the various reasons to obtain an appraisal, the potential benefits beyond transactional purposes, and the value of engaging your own appraiser for regulatory compliance.
Comprehensive Insight into Your Practice
Valuing your physician practice goes beyond determining its monetary worth. It offers a holistic understanding of the financial, operational, and market trends that impact your day-to-day business. Even when you’re not actively seeking a transaction, the appraisal process itself reveals vital information. By examining key metrics, such as revenue, expenses, patient demographics, and operational efficiencies, you gain valuable insights that can help you make informed decisions about your practice’s future.
Transactional Considerations
When buying or selling a practice, a valuation becomes crucial. It provides an objective assessment of fair market value (FMV), ensuring that both parties reach a fair agreement. Having an independent appraisal helps you negotiate from a position of strength, whether you’re the buyer or the seller. By understanding the true worth of your practice, you can confidently navigate the transactional landscape and make well-informed decisions.
Regulatory Compliance and Due Diligence
In healthcare transactions, acquiring entities often perform their own appraisals for regulatory compliance. However, as a physician, it is wise to engage your own appraiser to ensure your interests are protected. Your appraiser can provide valuable guidance during the diligence process, perform an independent appraisal, and advocate for necessary changes. This proactive approach safeguards your financial well-being and helps you understand the nuances of the valuation process.
Tax Planning and Marital Dissolution
Practice valuation plays a crucial role in tax planning strategies. Understanding the value of your practice allows you to make informed decisions regarding estate planning, gifting, and succession. Additionally, in cases of marital dissolution, a practice valuation is essential for equitable division of assets. By obtaining an accurate appraisal, you can navigate complex tax implications and ensure fair distribution.
Strategic Planning and Practice Enhancement
Beyond transactional and compliance purposes, practice valuations enable strategic planning. By identifying strengths, weaknesses, and areas for improvement, you can develop an effective roadmap for growth and increased efficiency. An appraisal uncovers operational inefficiencies, market trends, and competitive positioning, empowering you to optimize your practice and enhance its long-term value.
A practice valuation is a powerful tool that provides physicians with comprehensive insights. Engaging your own appraiser is crucial to protect your interests and ensure a fair assessment. This work can take several forms, and may include preparation of a separate independent appraisal, assisting with the diligence process, and/or working with the physicians to understand the work performed by the other appraiser and advocate for any changes that may be warranted.
So, whether you’re exploring a potential sale, planning for taxes, or seeking to enhance your practice’s value, you should consider obtaining a practice valuation. This will help you unleash the true potential of your business by harnessing the knowledge and opportunities it provides.
At Root Valuation, we help physician leaders successfully navigate business and employment transactions to that their value is fully realized. Have a question about your physician practice valuation, contact us at info@rootvaluation.com.