Buy/sell agreements, financial and/or tax planning concerns, divorces, and designing owner exit strategies all commonly require accurate and comprehensive determinations of a practice's value. An expert, and independent professional business appraiser with appropriate appraisal training and knowledge of the veterinary profession is critical to the determination of value of a veterinary practice.
Firms that appraise small, closely-held businesses and professional practices require no licensing from professional bodies. Membership in business appraisal associations is voluntary. Business valuation associations do offer designations following the successful completion of examinations and the demonstration of appraisal competency. Nevertheless, the most reasonable advice to the user of appraisal services is "buyer beware".
Common Reasons for Valuing Veterinary Practices
Buy-Sell Related Purposes
It is essential to establish a value for a practice which is honest and fair to both the buyer and the seller. This value maximizes the return on the seller's investment while being affordable for the buyer. Each practice valuation must include a Justification for Purchase. This justification utilizes proforma cash flow statements to ensure that the purchaser will have sufficient cash flow to operate the practice and satisfy financial obligations. The vendor should exhibit equal interest in this pro forma, since the vendor often finances a large portion of the sale price.
Management Related
Practice valuations are a superb management tool. Regularly performed valuations call attention to the drivers of practice value. Attention paid to these value drivers will afford systematic increments and eventual maximization of a practice's worth.
Legal/Tax Related Reasons
A well designed and supported valuation process is often incorporated into partnership/shareholder agreements, buy-sell documents and other legal documents where future practice valuations are likely.
Valuations are also frequently performed for tax planning purposes, the development of exit strategies.
Litigation Reasons
Legal actions, such as marriage dissolution and stockholder disputes often require a practice valuation. A comprehensive and complete valuation which complies with the requirements of the courts is critical.
Valuation Process
|