Volume 24: Matrimonial Practice Valuations
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
- One Year Later
- Dealing with Unsolicited Offers
- Covid-19 Practice Sales Update
- When is the Right Time to Sell Your Practice and Why?
- Partnership Pitfalls
- The Real Cost of a Dental Practice Set-up
- Smaller Practice Realities
- Dental Market Update - 2019
- Creating Your Own Most Valuable Practice (MVP)
- Small Practice Economics
- The Market is Very Efficient
- How Can Dental Practice Values be Rising and Declining?
- Hygiene as a Value Driver
- The Value of a Good Team
- Is it Time to Move?
- Staging A Dental Practice
- The High Cost of Dying
- Patients - Attract and Retain
- Should I Stay or Should I Go?
- Is There a Buyer for Every Practice?
- Good, Better, Best - The Market has Spoken
- Buying Time
- Patients, Patience, Patients
- A Real Patient
- Why Do a Practice Valuation? I'm not Selling
- Irrational Exuberance or The New Normal?
- Do dental equipment and dental technology affect a practice value?
- Finding and Being a Mentor
- Bigger is Better
- Dave's Top Ten List for Buyers (Vendors should read this too!)
- How Well Do You Know Your Practice?
- Dave's Top Ten List for Vendors
- What will happen to dental practice Values in the next 10 years?
- Your Premises Lease is an Important Asset
- What are Associates Thinking?
- There is Life Outside the GTA
- When Is the Right Time to Sell My Dental Practice?
- Mergers are a Viable Option
- Is Your Associate an Asset or a Liability?
- Has your Practice Facility Kept Up With Your Billings?
- The 100 per cent of Gross Myth
- The Past, The Present and The Future
- Caveat Emptor
- Overpaid Long Term Staff
- Selling your Practice in Stages
- A Potential Pitfall of Selling Shares
- Value in Your Practice Through Balance
- Only Trusted Staff Can Defraud You
- To Own or Not to Own Practice Real Estate? That is the Question.
- Coping With A Large Patient Base
- Successful Dental Practice Transitions
- Taking Care of Business
- The Investing Dentist Phenomenon
- Two areas to focus upon that could negatively impact the value of your practice
- Organize your Debt in Order to Sell your Practice
- Having a Better Team
- How Do I Prepare My Practice For Sale
- How Do I Prepare My Practice For Sale? Part 3
- How Do I Prepare My Practice For Sale? Part 2
- How Do I Prepare My Practice For Sale? Part 1
- Advice to My Son or Daughter Graduating from Dental School
- Transition - What to Expect
- Discussion on Digital X-Rays
- Partnerships and Shotguns
- Strategic Planning - How to Get Started
- Calling All Vendors - Practices have Gone Up in Value
- Purchasers: Expect to Pay More for a Practice because of Lower Professional Corporation Tax Rates
- Matrimonial Practice Valuations
- Purchaser's Guide to Affording a Practice
- Location Improvements Throughout Your Career
- Small Practice Valuations
- Partnerships – The Best and The Worst
- Changing Location When the Opportunity Comes Along
- Visual Presentation of Your Practice
- Presentation of Charts
- Your Premises Lease Can Be Your Worst Enemy
- How to Select an Appraiser for Your Practice
- How Are Your Billing Ratios?
- It Pays to Invest in Your Tangible Assets
- The Importance of Separate Financial Statements
- Five Time Frame Levels to Sell a Practice
- 12 Suggestions to Safeguard Computer Data
- How to Buy a Visible Practice
- Why is there a shortage of good practices today?
- The Importance of Equipment in the Purchase of a Practice
- The Balanced Practice
- Will My Practice Be Saleable in The Future?
- Buyer Be Aware
- Excess Profit - The Second Key
- Patients and Profits are the Keys
- Plan Ahead