“What’s my practice worth?”
I hear that question on a very frequent basis. In fact, you’re probably thinking it right now.
There are a lot of people out there who are happy to fool you with an answer. They might say something like, “well, your practice is worth X times pro forma EBITDA,” or maybe something like “it’s worth the appraised value of the leases plus Y times gross.” They might even have a super complicated formula sort of like the ones economists use to make you think that they are scientists.
But that’s all bullshit.
The real answer is that it’s worth what an actual buyer will pay you to acquire your practice. So, if buyer A will actually pay $30,000,000 and buyer B will actually pay $40,000,000, then the practice is worth $40,000,000. Even if buyer B is a fool. $40,000,000 is the exact answer. It is not off by even one penny.
So, while you can look to the greater market for trends, such as the fact that in your specialty practices are selling like hotcakes, to gauge the likelihood that there is a potential buyer in the wings, the only way of actually knowing whether one or, preferably, multiple, are there for you is to engage in the process of looking for one.
By no means does this mean that you have to sell or even that you should consider selling. In essence, the process isn’t a straight line, it’s a series of circles.
And at the same time you’re engaged in that process, you should be engaged in many other strategic circles, but that’s a topic for another post.
