As an optometry business owner, you’ve invested considerable time, effort, and resources into building a successful practice. Chances are, you’re probably already considering the next steps in your entrepreneurial journey.
Whether you plan to take on new partners or sell your practice, establishing the current value of your business is a necessary first step. By having data to support your decision, you’ll be equipped to make the best possible long-term decisions.
In theory, the value of a business should be easy to calculate. In its simplest definition, your practice’s worth, or fair market value, is the result of this equation:
Assets (What you own) - Liabilities (What you owe) = Equity (What’s left over)
However, this basic approach fails to represent a business’s total value. Business valuation is both a quantitative and qualitative exercise, and several factors determine your practice’s worth. Moreover, the most accurate business valuations are performed by an unbiased, outside observer—in short, not you or anyone at your clinic!
That’s why we recommend having your practice formally appraised.
A large part of the appraisal involves measuring, in detail, the quantitative components of your practice. The assessment includes a comprehensive financial analysis to evaluate the health of your business and uncover any hidden cashflow issues.
Your business appraiser will use several industry-standard valuation methodologies, such as, for example, EBITDA or Practice Earnings Multiples and Capitalization of Earnings, to develop a well-rounded and accurate portrait of your clinic.
Because your clinic is a service business, there are many other factors and intangible assets to consider when valuing it. These include:
These intangible factors will greatly contribute to the perceived value of your clinic. Even though you can’t necessarily assign a numerical value to an intangible asset, they can be measured in terms of their alignment with your value-creating strategies. Your clinic’s ability to evolve in a certain direction—its strategic readiness—is important information for anyone considering partnering with or buying it.
While there are many ways to value a business, your practice is ultimately worth what someone is willing to pay for it. To stay on top of things, make improving your optometric clinic’s value drivers part of your quarterly or annual goals. What steps can you take to increase your practice’s value? How can you build a financially healthy future?
Transition planning is one of the range of services offered by the Vision Entrepreneur program. To learn more about practice value and to get help finding the right resource, reach out to us at email@example.com.