The value of a limited company practice is made up of -.
1. The Goodwill .
2. The Fixed Assets (this is usually premises- however these may not be sold, but leased to the buyer.)
3. The Current Assets - Stock, trade debtors, Prepayments and accrued income.
4. The Current Liabilities - Trade creditors (Client debts). Social security and other taxes, any deferred income
5. The Directors Loan account will either be an asset or liability, and should be paid off prior to the sale or drawn down
2. The Fixed Assets (this is usually premises- however these may not be sold, but leased to the buyer.)
3. The Current Assets - Stock, trade debtors, Prepayments and accrued income.
4. The Current Liabilities - Trade creditors (Client debts). Social security and other taxes, any deferred income
5. The Directors Loan account will either be an asset or liability, and should be paid off prior to the sale or drawn down
4. The Current Liabilities - Trade creditors (Client debts). Social security and other taxes, any deferred income
5. The Directors Loan account will either be an asset or liability, and should be paid off prior to the sale or drawn down
The major factor in the sale is the Goodwill, and it is that the algorithm estimates, as a rule the other factors are valued as shown on the final balance before completing the sale.
Abnormal Valuation results The VetBiz algorithm can be used to calculate the present and potential Goodwill of your veterinary practice using our latest software Depending on the input information, the algorithm will produce accurate valuation range for the expected maintainable profit. Extreme figures outside the average norms for a veterinary practice will produce abnormal results for both the maintainable profit and, subsequently, the Goodwill. When completing the input information, it is essential to show profit & costs achievable by the seller are viable. They do not want to work 12 hours per day, seven days a week , with an understaffed practice paying the minimum wage
1. Abnormally high level of % profit
A practice with a turnover of £1,000,000 and a profit of £600,000 using two vets produces a profitability ratio of 6%, and a goodwill value of £3.7 -£4.2m.
The normal level of profit is within 10-25% of turnover. The expected value of practice with a £1m turnover would be £1m to £1.7m
The abnormal level of profit is unlikely to be maintained by a purchase, who would not pay the overstated value of £3m+/li>
2. Abnormally High profit due to Low wages and minimal costs
Wage-to-turnover ratios are within 40-50%. When this is abnormally low, it can again produce a high level of profit and Maintainable profit. Again the abnormal level of profit due to unusually low costs and overworked staff say on zero contract hours is unlikely to be maintained by a purchaser, who would not pay the estimated goodwill value of £3m plus.
2. Abnormally High profit due to Low wages and minimal costs Wage-to-turnover ratios are within 40-50%. When this is abnormally low, it can again produce a high level of profit and Maintainable profit. Again the abnormal level of profit due to unusually low costs and overworked staff say on zero contract hours is unlikely to be maintained by a purchaser, who would not pay the estimated goodwill value of £3m plus.
