Asset valuation formulas

[Guest guest]

Group,

 

Can anyone out there give me a ball park idea on how a business entity might

value assets when valuing a PT clinic? Is it a 1 x gross profits, 3 x net

profits, etc?

 

Just curious.

 

Thanks in advance,

Hankins, PT

President

Synergy Therapies, LLC

[Guest guest]

Hi, -

It sounds like you have two distinct topics in your question: 1) Assets

and 2) Value of the business.

Assets are things you own. Your equipment, furniture, supplies,

automobiles, and real estate are examples of these, but so are your bank

accounts, the accounts which are receivable by you ( " A/R " ), the name of the

business, your third party contracts, and some others. The value of hard

assets is usually one of the following: 1) The cost of replacing the asset;

2) Depreciated value or; 3) What comparable items are being bought and sold

for. Bank accounts, being very liquid, are easy to assign value to.

Accounts receivable may be evaluated according to amounts by age of the

account, and rarely is worth its full face value. The name and the

notorious " good will " are much less easy to evaluate.

Your other topic is how to value the business. There are several

approaches, and I'm sure that you could easily get a half dozen different

views from members of this list serve. My personal view is that the value

of an enterprise is its ability to generate cash over several years. So, I

usually prepare a pro-forma three or five year operating budget, then

calculate the " Present Value " of the associated cash flows. I also feel

that a practice is centered upon one or more individuals. Any pro-forma

should reflect the presence or departure of such a key person.

Your CPA should be involved in calculating the value of the practice.

Hope this helps,

Dick Hillyer

Dr. Hillyer

Hillyer Consulting

Cape Coral, FL 33914

_____

From: PTManager [mailto:PTManager ] On Behalf

Of scott hankins

Sent: Wednesday, August 29, 2012 6:27 PM

To: PTManager

Subject: Asset valuation formulas

Group,

Can anyone out there give me a ball park idea on how a business entity might

value assets when valuing a PT clinic? Is it a 1 x gross profits, 3 x net

profits, etc?

Just curious.

Thanks in advance,

Hankins, PT

President

Synergy Therapies, LLC