Magazine article Medical Economics

Money Management Q&A

Magazine article Medical Economics

Money Management Q&A

Article excerpt

How to value clinic stock

Q: How do my partners and I value the stock of our multispecialty clinic?

A: Anyone who owns a business that is not publicly traded wrestles with this question. In a sense, the issue is similar to that of valuing real estate. A reputable appraiser will look at the size and amenities of a home, location, interest rates, comparable properties, and anything else he or she deems relevant. From that information, they'll provide an estimated value.

Reality dictates that genuine value is determined when a property actually sells, however. It's the price established between a willing buyer and a willing seller. Anything else is just an estimate.

The same dynamic is true in your practice. Until you actually sell the practice (or your share in it), you have no way of knowing its value for sure. Until then, you're left with the problem of estimating value.

One way to do so is to hire a business valuation specialist He or she will visit your practice, ask questions, collect financial and other data, and then render an estimate of value. You can expect to pay $5,000 to $10,000 for this service for a small practice - more as the size of the practice increases.

Another approach is to rely on industry benchmarks. There are several ways to do this, all generally involving a multiple of annual revenues confirmed by discounting future cash flows. It's an informal process but probably a reasonable way to estimate value.

A certified public accountant can help you outline a reasonable approach for informal purposes. He or she also can help you locate a business valuation specialist if you need one.

DECIDING WHEN TO RETIRE

Q: I was planning to retire from my practice at 65, but now that the age at which one can collect full Social Security benefits has increased, should I postpone my retirement?

A: Retirement ages changed with the Social Security Amendments of 1983. …

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