A practice has a value which is based upon the total value of its Net Assets.
THE TRUE WORTH OF ANY BUSINESS IS THE VALUE OF ITS ASSETS MINUS THE VALUE OF ITS LIABILITIES.
Most of the above are not controversial when coming to produce a value, however the intangible value of the goodwill requires definite skills and a knowledge of the market to maximise its true worth.
The difference between the purchase price and the sum of the net assets is by definition the value of the "Goodwill" of the practice.
This price is dependent upon the purchasers willingness to pay for the benefits that practice will bring .
Calculating a Value:
Calculating a Value: There are many different methods of valuing a practices, at the VBA we use a multiplier of the Maintainable Profit - This is the most effective and trusted way of valuing a veterinary practice, the principle is to give an estimate of the maintainable earnings of the practice, and hence what the purchaser should get back for their investment.
Sole trader or partnership Sale.
If the practice is simply a partnership or sole trader the purchaser will normally buys the Goodwill and selected assets, leaving the seller to settle any debts and collect any monies outstanding.
Limited company sale
In most cases the the buyer will purchase the shares of the company, taking over all of the assets and liabilities, effectively taking over the company as a trading entity. The shareholders will obtain the calculated value of the shares on completion of the sale.