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Articles

Volume 24: Matrimonial Practice Valuations

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In the last three months we have completed eight matrimonial practice valuations. One was for a spouse and the other seven were for doctors. This is not the most pleasant time for the doctor but one should try not to be too upset. You are going through something that many others have experienced before.

From our position as an appraiser, we recommend having the valuation done as soon as possible after the separation date. The valuation will be presumed as if it was done on the date of separation. Subsequent events are not considered when doing the valuation. Counting the charts in the practice and documenting the assets should be completed as close to the separation date as possible.

We represented the spouse in one of our valuations, as the original valuation was unacceptable in form and value. The valuation should be written on the basis that it will stand up in court. Ideally, the appraiser will not be required in court as both sides would see the valuation as realistic and representing fair market value. Last month I received a letter from a spouse’s lawyer stating, "Your report was instrumental in settling the issues between the parties, and the trial will not proceed next week given the settlement".

Remember, the practice value does not include bank accounts, accounts receivable, accounts payable, artwork and personal items such as automobiles. The value is based on an asset sale not a share sale even if the dentist is incorporated.

If the dentist owned a practice on the date of marriage a Letter of Opinion as to the value on that date may be necessary to offset the current value of the practice. Information back that many years makes a full comprehensive valuation impossible. Typically, we rely heavily on current financial statements because it is impossible to count charts or look at equipment back when the marriage took place.

We have, in the past, been able to use our previous valuations to up-date the asset value for matrimonial purposes. This also lends credence to the current fair market value. Past valuations can also come back to haunt you. If your past valuation was higher than fair market value you would have a hard time explaining why the value declined in the matrimonial valuation when the billings and patient base had both increased in the interim. This specifically happened recently where others had overvalued the practice prior to the separation date, then considerably reduced the matrimonial valuation. We were called in to review the situation. In essence, the error was in the first valuation as our value was a little higher than the matrimonial value but the original valuation was not in the realm of reasonableness.

I highly recommend that the dentist use their accountant to produce financial statements prior to preparing the tax returns. There is more weight given to an accountant produced financial results than the report that comes from your computer. This is quite incongruous as the accountant uses your computer report to prepare the financial statements.

Remember, the appraiser is independent of both parties. They are there to establish fair market value and document why the value is reasonable and to detail the basis of the valuation, which should also be supported by other sales of similar practices.

The Professional Advisory

  1. One Year Later

  2. Dealing with Unsolicited Offers

  3. Covid-19 Practice Sales Update

  4. When is the Right Time to Sell Your Practice and Why?

  5. Partnership Pitfalls

  6. The Real Cost of a Dental Practice Set-up

  7. Smaller Practice Realities

  8. Dental Market Update - 2019

  9. Creating Your Own Most Valuable Practice (MVP)

  10. Small Practice Economics

  11. The Market is Very Efficient

  12. How Can Dental Practice Values be Rising and Declining?

  13. Hygiene as a Value Driver

  14. The Value of a Good Team

  15. Is it Time to Move?

  16. Staging A Dental Practice

  17. The High Cost of Dying

  18. Deal-Busters

  19. Patients - Attract and Retain

  20. Should I Stay or Should I Go?

  21. Is There a Buyer for Every Practice?

  22. Good, Better, Best - The Market has Spoken

  23. Smooth-Sale-ing

  24. Buying Time

  25. Patients, Patience, Patients

  26. A Real Patient

  27. Why Do a Practice Valuation? I'm not Selling

  28. Irrational Exuberance or The New Normal?

  29. Do dental equipment and dental technology affect a practice value?

  30. Finding and Being a Mentor

  31. Bigger is Better

  32. Dave's Top Ten List for Buyers (Vendors should read this too!)

  33. How Well Do You Know Your Practice?

  34. Dave's Top Ten List for Vendors

  35. What will happen to dental practice Values in the next 10 years?

  36. Your Premises Lease is an Important Asset

  37. What are Associates Thinking?

  38. There is Life Outside the GTA

  39. When Is the Right Time to Sell My Dental Practice?

  40. Mergers are a Viable Option

  41. Is Your Associate an Asset or a Liability?

  42. Has your Practice Facility Kept Up With Your Billings?

  43. The 100 per cent of Gross Myth

  44. The Past, The Present and The Future

  45. Caveat Emptor

  46. Overpaid Long Term Staff

  47. Selling your Practice in Stages

  48. A Potential Pitfall of Selling Shares

  49. Value in Your Practice Through Balance

  50. Only Trusted Staff Can Defraud You

  51. To Own or Not to Own Practice Real Estate? That is the Question.

  52. Coping With A Large Patient Base

  53. Successful Dental Practice Transitions

  54. Taking Care of Business

  55. The Investing Dentist Phenomenon

  56. Two areas to focus upon that could negatively impact the value of your practice

  57. Organize your Debt in Order to Sell your Practice

  58. Having a Better Team

  59. How Do I Prepare My Practice For Sale

  60. How Do I Prepare My Practice For Sale? Part 3

  61. How Do I Prepare My Practice For Sale? Part 2

  62. How Do I Prepare My Practice For Sale? Part 1

  63. Advice to My Son or Daughter Graduating from Dental School

  64. Transition - What to Expect

  65. Discussion on Digital X-Rays

  66. Partnerships and Shotguns

  67. Strategic Planning - How to Get Started

  68. Calling All Vendors - Practices have Gone Up in Value

  69. Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates

  70. Matrimonial Practice Valuations

  71. Purchaser's Guide to Affording a Practice

  72. Location Improvements Throughout Your Career

  73. Small Practice Valuations

  74. Partnerships – The Best and The Worst

  75. Changing Location When the Opportunity Comes Along

  76. Visual Presentation of Your Practice

  77. Presentation of Charts

  78. Your Premises Lease Can Be Your Worst Enemy

  79. How to Select an Appraiser for Your Practice

  80. How Are Your Billing Ratios?

  81. It Pays to Invest in Your Tangible Assets

  82. The Importance of Separate Financial Statements

  83. Five Time Frame Levels to Sell a Practice

  84. 12 Suggestions to Safeguard Computer Data

  85. How to Buy a Visible Practice

  86. Why is there a shortage of good practices today?

  87. The Importance of Equipment in the Purchase of a Practice

  88. The Balanced Practice

  89. Will My Practice Be Saleable in The Future?

  90. Buyer Be Aware

  91. Excess Profit - The Second Key

  92. Patients and Profits are the Keys

  93. Plan Ahead

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