Pediatric Practice Valuations

Odds are that you have had to confront one of these issues in the last few years:

  • associates who want to buy into your practice
  • a partner who want to retire and buy out of your practice
  • private equity parasites, in a variety of forms, have knocked on your door, perhaps even made you an offer

[Yes, I called them parasites - prove me wrong.]

It's impossible, or at least inappropriate, to dig into the considerations required to address these and other related scenarios without knowing how much your practice is really worth!  I've worked with too many practices who have sold out for a fraction of what they should have gotten or bought out retiring partners at a multiple of any reasonable value.  

Typically, getting a valuation for your practice requires the help of a third party - you need a neutral, expert opinion. There are many organizations, easily googled, who do this work, some probably even local to you.  Most of the time, I am not impressed by their results, as very few professional valuation companies understand pediatrics.   Further, many of these companies charge amazing amounts of money for what is clearly a formula and template driven 2-hour project for them.

So what do I do when I'm asked to help a practice with their partnership terms, which necessitates an understanding of the value of the business?  I direct people here, Paul Vanchiere's Practice Valuation content from Pediatric Support.  It features a long, detailed description of the elements that go into a proper valuation, an excellent graphic of the process, and his slide deck and video of a presentation telling you how to do the work yourself or, at least, ensure that the valuation company you're working with is being complete.  I sincerely don't think there's a better resource for pediatricians trying to understand what their practice might be worth.

I agree strongly with Paul's comment here:

How frequently should a practice determine its value? The answer is "every year." PMI recommends that pediatric practices adopt a framework or formula to calculate their practice's value and update the numbers annually.

Paul let me know he'd recently updated the content, so I thought it'd be a good time to draw attention to it.   Take the time to digest his content and consider making this a regular part of your routine.  I am adding it to the Pediatric Practice Management Calendar right now!