Three tips to prepare your practice for business valuation

The ongoing proliferation of retail healthcare (urgent care centers, in-pharmacy care centers, etc.) and the competition it brings to the marketplace means that healthcare practice owners will want to ensure the best value in a rapidly changing industry.

Even if you don’t have immediate plans to sell or transfer your practice, there are some things you can do to help ensure that your practice is well positioned when the time comes to execute a formal valuation.

Prioritize collections. Cash is always king, so collecting on your accounts receivable from payment sources is critical. Understanding payment trends and using outside services to assist in collecting balances are important in the ongoing cash flow of a practice.

Nix owner discretionary expenses. As an owner, you might want to treat the business as your own personal checkbook. However, it is much easier to remove these discretionary items from the practice than explain why a buyer wouldn’t incur those same expenses. Remove any discretionary expenses and pay personally in order to maximize the cash flows of the practice.

Understand your intangible assets. When it comes time to sell, the practice might have significant value stemming from name recognition or a dedicated staff that has been in place for many years. These intangible assets have value over and above the hard assets like computers and equipment. There are valuation techniques that can be used to value tradenames as well as the assembled workforce. Understanding the strengths of those particular items will help in the valuation process.

These are just a few simple steps you can take to prepare. Clark Schaefer Hackett’s expert healthcare and business valuation advisors can offer more guidance on putting your practice’s best financial foot forward.

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