1. Why is an Appraisal/Valuation required ?

• Banks usually require appraisals to qualify owners equity position, as validation for a loan, for practice expansion, or just a need for    cash.
• Divorce Proceedings: to assist in reaching equitable distribution of assets.
• Seller or buyer of a practice requires it to support their position
• Partnership buy-in or buy-out to support their position
• Succession Estate planning
• Principals need to determine personal “net-worth”

2. What formula do you use to reach a fair market value?

This is a very common misconception. Both the USA Internal Revenue Service (IRS) and the Canadian Revenue Agency (CRA) do not accept a formulaic appraisal as a legitimate valuation of a “small business”, therefore no legitimate valuator attempts to use a formula to appraise a small business; which includes a chiropractic practice.

3. How do you come up with an appraisal if there is no formula ?

There are internationally recognized practice valuation fundamentals:
Three key approaches to practice valuation explain what practice valuation is and to determine business worth. Asset approach, Market approach, Income approach. These three approaches are subject to 17 arithmetic calculations, and 31 intangible values based on the experienced judgment of the valuator. Then there are five final steps to establish a practice’s worth.

4. Does all of that provide an exact value?

No, because there is never an “exact value”, but there is a very defensible range of values; and that range depends on the skill and experience of the valuator.

5. My lawyer wants to know if you will act as a, “professional witness” if this valuation is challenged in a court-of-law.

Yes, but that must be negotiated separately, and before the fact.