FEATURE LEASE The existence and type of lease may have a huge impact on the saleability of a practice. Generally, when selling a practice it is vital to ensure that there is a clearly documented long-term lease with opportunity for a new owner to renew. A minimum of three years is ideal to allow the purchaser the oppor-tunity to establish the business. We have seen situations where the seller literally has a handshake arrangement with a property owner, which may be fine for the existing doctor, but will often make the practice unsellable. OFFICE SPACE MANAGEMENT End game 11 factors that influence true value of your business Is the office space updated and set up for good traffic flow for both clients and the office team? Is it aesthetically pleas-ing and modern, or is it old and tired? Is there potential for expansion? Does it have adequate parking? Does it need new paint and furnishings? ESTABLISHED PRACTICE T BY FRAZER SMITH when establishing the market price of a practice. When you place value on goodwill, you effectively put a price on the reproducibility of that practice. The following 11 factors will influ-ence the overall goodwill valuation when selling your practice. With this in mind, consider scoring your practice out of 10 in each of the following 11 items. here are two main com-ponents that determine the value of a business: assets and goodwill. Assets are the things you own and are set up on a depreciating market value basis. Goodwill is less tangible and therefore more variable. Unlike in other business valuations where the assets make up a higher percentage, goodwill makes up the majority of the value of a chiropractic practice. Assets are generally depreciated annually on a declining basis of 25 to 30 per cent per year until they cap out at market value, which is the price you could sell the asset for. Goodwill, on the other hand, is more difficult to appraise as it factors in many different intangibles. There are many variables that we consider How long has the practice been in the community and at the current loca-tion? If the practice has a long history in a particular community, it may be considered the “go-to practice” for that area. Longevity generally in-creases the valuation versus a practice that was only recently established. TECHNIQUE LOCATION The practice location in a given com-munity influences the ability for a new owner to reproduce the profit. Is it centrally located in a place that has easy access and visibility for new and existing clientele or is it behind the back of a building in an industrial park? Based on your practice location, rate yourself from one to 10. Technique influences how many po-tential buyers will be interested in a practice. The pool of buyers for a chiropractic practice starts out small because you are generally limited to chiropractors. If the practice utilizes an uncommon technique, you simply reduce that pool of potential buyers to those that would be comfortable pur-chasing the practice and utilizing that particular technique. TEAM DR. FRAZER SMITH has been a chiropractor for more than 17 years, practicing in Smiths Falls, Ont. He is also an associate coach at Full Circle Coaching and Consulting. Contact him at [email protected]. 28 Canadian Chiropractor September 2015 Is the team trained in systems and procedures? How often a team refers new clients indicates how engaged they are. The ability to maintain cur-rent team members also greatly influ-ences the purchaser’s ability to main-tain existing clients and recreate profit. Potential buyers typically want to keep the team to help them build rapport and minimize attrition. www.canadianchiropractor.ca Photo: Fotolia
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