Excess earnings are most important in valuing your practice

Excess earnings are most important in valuing your practice.

The historical excess earnings trend is the most important financial variable in determining your practice’s value—not gross revenue as commonly thought. Typically, a practice’s future earnings will reflect its actual performance in the current and prior years and thereby serve as a reasonable base to which incremental changes reflecting economic and business assumptions can be applied.

The affordability of buying a practice depends on the excess earnings available to pay the new owner a competitive professional income, cover the debt service costs and produce a reasonable return on investment.

Goodwill is also crucial. And you need to know what to look at.

Goodwill is also highly important to the valuation process for closely-held professional businesses. These intangible assets generate value over and above the value of a practice’s tangible assets.

Business goodwill for a veterinary practice encompasses a range of intangible assets such as the practice’s location and facility, trade area demographics and competition, market reputation, advertising and marketing, size and expertise of the professional staff, ability to attract and retain clients, scope of services and a proven record of generating cash flows from a stable client base. Working together, we’ll put a value on each of these.

It is called a practice valuation but no one looks at the practice.
Making the Transition Work for You.
We’ll start by creating the best transition plan for your specific practice.

The most successful businesses always have a plan. Working with you and your financials, we will create a customized plan for your practice which will clearly define and set measurable goals for:

  1. What is your practice’s fundamental reason for being?
  2. Where do you want to be in 2-3 years?
  3. What are your specific goals for this transition?
  4. When do you want the transition to begin… and end?

We look at everything because even “little things” can make a big difference

We’ll closely examine virtually every area of the practice to identify potential areas for more accurately tracking production, adding income, reducing costs and improving efficiency. Such as:

  • Understanding your economic and work/life goals and incorporating these into the plan.
  • Review of service code list. The service code list must often be “cleaned up” if the doctors are to be paid on production.
  • Review all service fees and apply our proprietary FairFees® system to show new owner(s) what the potential of the practice is. FairFees is the only software approved by the Texas Veterinary Medical Association for veterinarians to set fees.
  • Review the clinic’s treatment plans.
  • Identify, evaluate and prioritize new equipment needs for the practice.
  • Establish an Inventory Monthly Budget.
  • Work with the doctor and her/his CPA to create a Profit & Loss statement.
  • Create spreadsheet where associates will know their production and where the doctor may choose to pay a base plus production.

You’re probably leaving money on the table right now. You don’t have to. In the first year alone, our clients have achieved an average annual revenue increase of 18%.

What if you suddenly need a new buyer?

We’re also very experienced in finding buyers for practices. If your associates are suddenly out of the picture for whatever the reasons may be, we’ll find new buyers, pre-qualify them and help them to secure financing.

IMPORTANT NOTE: There are several services which we do not provide and are not included in our transition program. We have a team of professionals that we have a relationship that provide these services and will be glad to set up meetings to make sure you are comfortable. These include real estate appraisal, environmental studies, building inspection, tax accounting, legal issues including but not limited to buyer/seller contracts and financial planning.