Most owners of optical practices will, at some time, need to determine the value of their practice. For example, a formal valuation is essential to assist a practice sale or purchase and for partnership change, incorporation, re-financing, tax negotiations, probate or divorce settlement. R A Valuation Services Limited is an independent company set up in 1991 to provide optical practice valuations. We are the Association of Optometrists’ endorsed practice valuer.
Practice valuation is concerned mainly with an accurate assessment of a value for goodwill. In this context, goodwill is the recognition of past and present trading performance – mainly profitability – and is the potential premium payable for the business in the open market. Whilst fixtures, fittings and equipment come into it, goodwill is normally the most valuable part of a practice’s value. It is therefore vitally important for goodwill to be assessed accurately on a professional basis, particularly as the proceeds of a goodwill sale often underwrite a retiring optometrist’s retirement fund.
There are many misconceptions regarding goodwill valuation. The most widespread is that goodwill can be assessed as a multiple of annual turnover. In fact, turnover is not the most important criterion. An accurate goodwill valuation is based upon a detailed analysis of trading accounts and trends in profits, a knowledge of staff, patient profiles, the local business environment, practice location, likely future changes, and so on. Equally important is a thorough knowledge of what will be a successful selling price on the open market. To verify its valuation figures, RA Valuation Services is able to refer to its comprehensive database of valuation data derived from hundreds of practice sales in recent years.
Many practice owners leave the commissioning of a practice valuation until the last moment. This is unwise. It is better to plan a year or more ahead. Trading Accounts will need finalising or bringing up-to-date, fixed asset schedules need drafting, patient records tidied up, and so on. Further, if an owner intends to sell, it should be remembered that the selling process can take twelve months or more to complete, although it is often faster.
For our clients, the valuation process is simple. We need three years’ accounts together with many other details elicited mainly from questionnaires. Direct – but confidential – contact between R A Valuation Services and client may follow to obtain further relevant information. A site visit is not normally necessary. The valuation is presented in a formal bound report suitable for all of the uses referred to above. Fees vary according to the structure of the practice but AOP members enjoy a preferential discount.
If you wish to discuss a valuation for your practice, contact Anne Bebb or Mark Ridout at:
R A Valuation Services Limited
Elizabeth House
Unit 13 Fordingbridge Business Park
Ashford Road
Fordingbridge
Hants.
SP6 1BZ
Tel: 01425 402 402
Fax: 01425 650 565
e-mail: enquiries@ravaluationservices.com
website: www.ravaluationservices.com
