#1 Driver of Practice Value
There are three drivers of practice value. (Written for the veterinary profession but applies to other professions as well.)
#3 - Transferability: For a financially healthy practice, the majority of the value of the practice is going to be from goodwill. This is the benefit a new owner would receive by having your current clients, team members, phone number, website, social media connections and the cash flow stream they generate.
#2 - Desirability: The more desirable your practice is the more value it is going to have. Desirability is driven largely by geographic location. A practice in a suburban area experiencing tremendous growth is going to be more desirable and therefore more valuable than a practice in a rural area with a declining population. Desirablity is also driven by what the facility and equipment are like in the practice; the more modern, the more valuable.
#1 - Profitability: The main driver of practice value is the profitability the practice is generating. Buyers are paying for the future cash flow stream of the practice. The profit is the money the buyer has available to them to be able to afford to make their debt payments on the practice. Profit is also what provides the owner a return on their investment. As a business owner, you took a risk of either purchasing or starting your practice and you deserve a return on this risk.
Do you ever struggle to be able to cover your employee's payroll? Do you ever give up your own paycheck because there isn't enough money in the bank?
Does the stress of successfully running your business keep you awake at night?
Do you have a successful practice but want to take it to the next level?
Are you a veterinary consultant or advisor that have clients with the above issues?
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