If you are a physician pondering this question, then please read on.

Oftentimes we are approached by physicians who think that they need a valuation of their practice. Typical reasons include but may not be limited to buy-out of a retiring physician, buy-in for a new partner, or the potential sale of the practice.

The term “valuation” has different meanings to different individuals. Those with valuation credentials, understand “valuation”, or “appraisal” as it’s often referred to, to mean any process designed to determine the value of an investment, asset or security. In any hospital/physician transaction involving the sale of assets or equity or the provision of a service by physicians to the hospital, the hospital is requiring a valuation to support Fair Market Value under the transaction. While the details behind this are beyond the scope of this article, suffice it to say that it has to do with regulatory compliance.

In our experience, more often than not; however, physicians need advisory services, as opposed to a valuation. This is not to say that advisory services wouldn’t include some level of analysis related to pricing or value; however, advisory services are generally more consultative and flexible to adapt to the particular needs of the physician (practice).

Notwithstanding, there are legitimate reasons when a valuation is required. Examples include but are not limited to the following: to comply with the terms of buy/sell provisions in governing documents, estate taxes, marital dissolution, or even to “counter” a valuation provided by a potential buyer (e.g., hospital).

Whatever the circumstances, our experts at Root Valuation and Root Partners understand the nuances and complexities of both and can help you navigate the process.