AudiologyOnline Phone: 800-753-2160


Starkey Signature Series - Learn More

Selling Your Practice: Asking Price

Granville Y. Brady, AuD Jr, FAAA

December 13, 2010

Share:

Question

How can I sell a very active practice with average $200K net income per year and how much should my asking price be?

Answer

This is a simple question for which the answer is very complicated. First of all, you should do your homework. The asking price can be based on a number of factors including: asset value, liquidation value, income capitalization, what similar practices are worth or a formula based on a multiple of the net income. For this practice, it seems as if a multiple of the net income seems appropriate.

To arrive at the true net income of a practice, the seller (and buyer) should be aware of factors that might reduce the reportable income to the IRS but add to the overall value. These are referred to as "add backs". Add backs are perks that do not always show up on the profit and loss statement as income. For example, the children of a practice owner might be listed on the payroll but do little to build the practice. Likewise the owner's salary and over inflated benefits reduce the reportable net income. To arrive at a true net income, the seller needs to list all of the add backs. You might have an additional $50-100K in add backs that the new owner would not incur, thus making the net income plus add backs higher than originally stated. If we believe that the true net income, including add backs is $200K, then a multiple is commonly applied. Anywhere from one to three times net income is a good rule of thumb. Taking the net income of $200K, the asking price might be anywhere between $200K (1X net) to $600K (3Xnet). In these economic times, a factor of 1.5 - 1.75 or $300-$350K might be a realistic asking price.

For more information, please register for Dr. Brady's upcoming AudiologyOnline seminar entitled, Buying or Selling a Practice? What You Need to Know on Wednesday, January 12th, 2011 at 12pm EST. Can't make the live course? View the recording in our Recorded Course library (available after the live session) at your convenience.

Granville Y. Brady, Jr., Au.D., F.A.A.A. earned his Au.D. from Arizona School of Health Sciences. He is a licensed audiologist and speech-language pathologist with offices in Clifton and East Brunswick, NJ. Dr. Brady teaches business development and accounting at A.T. Still University. In addition to his clinical experience, Dr. Brady has served as councilman and finance chairman for the Borough of Somerville, NJ and was responsible for the budget, insurance and retirement operations of the municipality. He serves as treasurer of the Audiology Foundation of America.


granville y brady

Granville Y. Brady, AuD Jr, FAAA

licensed audiologist and speech-language pathologist with offices in Clifton and East Brunswick, NJ

Granville Y. Brady, Jr., Au.D., F.A.A.A. earned his Au.D. from Arizona School of Health Sciences. He is a licensed audiologist and speech-language pathologist with offices in Clifton and East Brunswick, NJ. Dr. Brady teaches business development and accounting at A.T. Still University. In addition to his clinical experience, Dr. Brady has served as councilman and finance chairman for the Borough of Somerville, NJ and was responsible for the budget, insurance and retirement operations of the municipality. He serves as treasurer of the Audiology Foundation of America.


Related Courses

Understanding Privilege, for Healthcare Professionals
Presented by Esther Clervaud, EdS
Recorded Webinar
AudiologyOnline

Presenter

Esther Clervaud, EdS
Course: #36096Level: Intermediate1 Hour
  'Instructor and information presented should make work places better for everyone'   Read Reviews
Systems of privilege have created a wide division of inequality. This course will help hearing care professionals identify their privilege and determine how to make a difference in their places of employment.

View this Course for FREE.
Need CEUs? Become a AudiologyOnline member to get unlimited CEUs.

Only $129/yr

Learn More

Creating Leadership in Audiology Through a Mentoring Circle
Presented by Natalie Phillips, AuD
Recorded Webinar
AudiologyOnline

Presenter

Natalie Phillips, AuD
Course: #37632Level: Introductory1 Hour
  'I had no idea the value of a mentor in audiology!'   Read Reviews
There are so many components to quality patient care that it is challenging to “master” them all. What if you could come together with other professionals who possess knowledge or experience that could help you or your practice? There are a number of veteran audiologists as well as rising professionals who have wisdom, qualifications, narratives, and unique journeys to share. The purpose of this talk is to rethink the traditional mentor/mentee vertical relationship and explore collaboration in the form of circle…where all professionals, regardless of age or experience, learn from each other.

View this Course for FREE.
Need CEUs? Become a AudiologyOnline member to get unlimited CEUs.

Only $129/yr

Learn More

Using Patient-Reported Outcome Measures (PROMs) to Improve Patient-Clinician Communication and Enhance Treatment Efficacy
Presented by Carren Stika, PhD
Recorded Webinar
ReSound

Presenter

Carren Stika, PhD
Course: #35841Level: Introductory1 Hour
  'Good refresher'   Read Reviews
Due to the recent increased focus on providing patient-centered healthcare, use of patient-reported outcome measures (PROMs) have become an essential component of assessing whether the services provided improved patients’ health and sense of well-being. This course will discuss the role of PROMs in healthcare and how using these measures in clinical practice can enhance treatment efficacy, improve patient-clinician communication, and assist clinicians in providing better person-centered care.

View this Course for FREE.
Need CEUs? Become a AudiologyOnline member to get unlimited CEUs.

Only $129/yr

Learn More

Learn to Earn the Salary You Deserve: Negotiating Like a Boss
Presented by Natalie Phillips, AuD
Recorded Webinar
AudiologyOnline

Presenter

Natalie Phillips, AuD
Course: #32770Level: Introductory1 Hour
  'I am going into a negotiation during my first year review and I did not negotiate in my first offer'   Read Reviews
The ability to negotiate your income displays immediate knowledge and confidence in your skillset and worth. In this course, we will examine a revenue and pay justification method to put into place as audiology business owners, employers, and employees.

View this Course for FREE.
Need CEUs? Become a AudiologyOnline member to get unlimited CEUs.

Only $129/yr

Learn More

Core Topics for Audiology Assistants
Presented by James W. Hall III, PhD, Kathleen Weissberg, OTD, OTR/L, Amit Gosalia, AuD
Recorded Webinar
AudiologyOnline

Presenters

James W. Hall III, PhDKathleen Weissberg, OTD, OTR/LAmit Gosalia, AuD
Course: #37123Level: Introductory3 Hours
  'Great instruction, boring material'   Read Reviews
This course includes one hour of content on each of the following topics: 1) ethical concepts and decision-making; 2) universal safety precautions, including the Occupational Safety & Health Administration's (OSHA) bloodborne pathogens standard, and 3) patient confidentiality and the Health Insurance Portability & Accountability Act (HIPAA).

View this Course for FREE.
Need CEUs? Become a AudiologyOnline member to get unlimited CEUs.

Only $129/yr

Learn More

Our site uses cookies to improve your experience. By using our site, you agree to our Privacy Policy.