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How do the Number of Years in Practice and Patient Files Affect Practice Valuation?

Craig A. Castelli, Ronald Gleitman, PhD

March 23, 2015

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Question

How do the number of years in practice and number of patient files influence the value of a hearing care practice?

Answer

Craig Castelli: It has an influence, to a degree.  A much more established business with a much larger file base presents greater stability and greater opportunity for the buyer.  However, once a practice is at least five to seven years old, especially when practices get to ten years old, they have been around long enough so that there is not much difference in the value of a 10-year old practice and a 40-year practice.  The value is driven by the P&L and some of those key risk factors. 

You may have a 40-year old business, but if you have some major customer concentration risk, you might not be worth as much as a 10-year old business that is more profitable and has none of the customer concentration risk.  There should be more stability in a mature practice, which is seven years or older. 

Ron Gleitman: I think the other issue is analyzing the marketing strategy.  If a seller has gone to the well and marketed to their database for the last three years to drive all their revenue, then your repeat business over predicted cash flow is going to be different in the future because repurchasing habits do not happen in one or two years.  There is more risk involved. 

This Ask the Expert was taken from the course, Advanced Transaction Strategies, by Craig Castelli and Ron Gleitman, presented in partnership with the Academy of Doctors of Audiology.


craig a castelli

Craig A. Castelli

Founder, Caber Hill Advisors

Craig Castelli is the Founder of Caber Hill Advisors and serves as the company's CEO.  He has over 10 years of audiology industry experience and has worked with hundreds of private practices.  He launched Caber Hill because he wanted to transform the business brokerage industry by bringing a higher level of service and professionalism that would produce above average results for his clients.  Caber Hill was formerly the Chicago office of Bridge Ventures, which Mr. Castelli founded in 2010 and rebranded as Caber Hill at the end of 2013. 

At Caber Hill, our mission is simple: to share our expertise with current and future business owners who want to buy, sell, or grow a private practice.  Contact Craig at craig@caberhill.com.


ronald gleitman

Ronald Gleitman, PhD

Vice President of Business Development and Practice Management, Siemens Hearing Instruments

Dr. Ronald Gleitman brings more than 20 years of hearing industry experience to Siemens Hearing Instruments, Inc. 
In his role as Vice President of Business Development and Practice Management, Ron is responsible for increasing market penetration in the Independent sales channel while overseeing the development and growth of SHI’s world-class preferred customer program. 
Ron is an industry veteran with an extensive background in both a corporate and clinical environment. Before joining Siemens, he served as CEO and Executive Vice President of Right Hear, LLC, providing vision and oversight for the company. Prior to that, he worked for Phonak as the Director of Practice Development. Ron also spent many years working as an Audiologist in a clinical setting, including owning his own private practice. 
 
In 1992, Ron earned his Ph.D. in Audiology from Purdue University. He has published numerous articles on 
hearing care and has taught at both Northwestern and Purdue University.


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