Identify the practice’s actual revenue model
A practice may employ practitioners, engage contractors or provide rooms and administration under a service arrangement. These structures can produce very different financial statements. Reconcile gross activity to the revenue retained by the entity being valued.
If a practitioner’s gross billings pass through a collection account, they are not automatically all practice income. Establish how fees are collected, shared and recorded. The valuation should analyse the relevant business rather than applying a percentage to an unexplained billings total.
Understand practitioner and owner dependence
Review revenue concentration by practitioner and the work performed by owners. A principal may combine clinical services with recruitment, administration and management. Removing their remuneration without replacing the necessary work can overstate sustainable earnings.
Continuity also depends on the actual arrangements with the team and the ability to maintain service delivery. Record departures, planned changes and recruitment needs. Do not assume every practitioner or patient relationship transfers automatically as part of a proposed transaction. Changes in referral sources should also be identified when explaining recent trading.
Capacity does not equal achievable revenue
Available rooms or appointment slots are not the same as demand that can be profitably served. Examine utilisation, cancellations, staffing, support costs and the cost of additional equipment. A forecast should explain how unused capacity becomes paying activity.
Lease terms, fit-out, equipment finance and recurring maintenance may materially affect cash needs. Provider arrangements, licences and patient-information handling can also require specialist advice. This business valuation scope does not itself establish regulatory compliance or clinical quality.
Use aggregated operational records
Patient-identifiable records are not needed for an initial enquiry. Begin with the purpose, business structure and aggregated financial information; appropriate document arrangements can be discussed once the scope is clear.
Before we begin
Your industry information checklist
- Accounts and revenue reconciliations
- Aggregated revenue by service and practitioner
- Owner duties and staffing arrangements
- Premises lease and equipment schedules
- Ownership agreement and intended valuation purpose
We confirm the documents needed once the purpose and scope are clear. For the common starting documents, see our valuation preparation guide.
General business valuation guidance. Service suitability, specialist input and fee are assessed for the individual matter.