How to Value a Chiropractic Clinic
Chiropractors are trained professionals who have a chiropractic degree. These individuals diagnose and treat patients by realigning the vertebrae to relieve nerve pressure. According to IBIS World, there are about 67,000 chiropractic clinics in the United States. Together, these businesses generate about $3.9 billion dollars in revenue each year. The chiropractic industry will likely continue to grow over the next several years. This is ideal if you are buying, growing, or selling a chiropractic clinic. There are many factors to consider whether you are entering or exiting the chiropractic industry. To succeed, it is beneficial to learn how to value a chiropractic clinic.
To learn how to value a chiropractic clinic, it is best to receive a business valuation. During a business valuation, a valuation expert determines the value of a chiropractic clinic. Additionally, they will discuss the risks and advantages of buying or selling a chiropractic clinic. This information can help you take the next steps in maximizing the value of a chiropractic clinic.
Peak Business Valuation, business appraiser, works with chiropractic clinics throughout the country. We are passionate about helping chiropractic clinics find success in this industry. Peak can provide you with a business valuation and answer any questions about valuing a chiropractic clinic. Start now by scheduling a free consultation with Peak Business Valuation below!
How to Value a Chiropractic Clinic
Business appraisers consider various valuation approaches when determining the value of a chiropractic clinic. In many cases, they use the market approach and/or the income approach. The approach the business appraiser uses depends on various factors. The expert will determine the approach(es) during the business valuation. This can include using a combination of valuation approaches to value a chiropractic clinic.
Valuing a Chiropractic Clinic Using the Market Approach
The market approach is popular when deciding how to value a chiropractic clinic. This approach is similar to the real estate appraisal process. When a real estate appraiser values a property, they assess similar properties that recently sold in the same area. This allows them to accurately calculate the value of a chiropractic clinic. When a business appraiser values a chiropractic clinic, they analyze similar clinics that recently sold on the market. If the chiropractic clinic is private, the appraiser refers to private transaction databases.
Multiples for a Chiropractic Clinic
Valuation multiples are a key component of the market approach. Multiples are financial ratios that assess the value of a chiropractic clinic in relation to its earnings, cash flow, or sales. To find the appropriate valuation multiples for a chiropractic clinic, valuation experts use the proper NAICS or SIC code. The following section highlights SDE, EBITDA, and REVENUE multiples for a chiropractic clinic.
SDE (Seller’s Discretionary Earnings) Multiple for a Chiropractic Clinic
- SDE multiples are popular when valuing a chiropractic clinic. The SDE multiple values a chiropractic clinic in relation to its seller’s discretionary earnings.
EBITDA Multiple for a Chiropractic Clinic
- EBITDA multiples help calculate the return on investment (ROI) a chiropractic clinic can expect.
REVENUE or SALES Multiple for a Chiropractic Clinic
- REVENUE multiples measure the value of a chiropractic clinic based on the total amount of sales or revenue it generates.
The business appraiser will determine the most applicable multiple when valuing a chiropractic clinic. To learn more, see Valuation Multiples for Chiropractic Clinics.
Valuing a Chiropractic Clinic Using the Income Approach
The income approach is another common approach for valuing a chiropractic clinic. With the income approach, business appraisers rely on the future cash flow potential of a chiropractic clinic to determine its value. In addition, the income approach assesses the risks associated with buying or selling a chiropractic clinic. Below, we discuss a few common risks of a chiropractic clinic.
- Reputation. Chiropractors provide services for patients with health concerns. To succeed, chiropractic clinics need to have a strong reputation.
- Regulations. There are various policies and regulations to protect the patients of chiropractic clinics. It is vital for clinics to be aware of and comply with these regulations.
- Location. The location of a chiropractic clinic has a significant impact on its success. Chiropractic clinics should locate near large populations and other healthcare providers.
- Key Personnel. It is vital for chiropractic clinics to hire individuals with the proper qualifications. Failure to do so can put patients of your chiropractic clinic in jeopardy. Key personnel are also key to reducing owner dependence.
Methods to Value a Chiropractic Clinic Using the Income Approach
There are two popular methods business appraisers use under the income approach when valuing a chiropractic clinic. They are the capitalization of cash flow method and discounted cash flow method. Below, we discuss how to value a chiropractic clinic using these valuation approaches.
Capitalization of Cash Flow Method
- The capitalization of cash flow method is best for chiropractic clinics with long and stable histories. When using the capitalization of cash flow method, valuation analysts determine a reasonable amount of economic income for one period. The income is then divided by an appropriate capitalization rate. The capitalization rate reflects an accurate rate of return an investor can expect. In addition, the capitalization of cash flow method assesses any risks associated with buying or selling a chiropractic clinic.
Discounted Cash Flow Method
- Typically, the discounted cash flow method is ideal for chiropractic clinics with a strong financial history. Additionally, clinics that have built reliable forecasts benefit from the discounted cash flow method. This method uses 3-5 years of projections to determine the value of future cash flows at a chiropractic clinic. The business appraiser discounts the future cash flows using a discount rate instead of a capitalization rate. This process allows them to determine the fair market value of a chiropractic clinic. Please note, this method is less reliable since it uses future cash flow estimates which can be inaccurate.
Summary
There are various valuation methods a business appraiser may use to value a chiropractic clinic. At Peak Business Valuation, business appraisers often use the market approach and/or the income approach for valuing a chiropractic clinic. To understand which valuation method is best for your chiropractic clinic, receive a business valuation. During a business valuation, a valuation expert helps you understand the value of a chiropractic clinic. They may also discuss the risks and benefits of your chiropractic clinic. This is important whether you are buying, expanding, or selling a chiropractic clinic.
Peak Business Valuation, business appraiser, is happy to help! Peak works with chiropractic clinics on a regular basis. We are happy to provide you with a business valuation for a chiropractic clinic. In addition, we can answer any inquiries you may have about how to value a chiropractic clinic. Start now by scheduling a free consultation with Peak Business Valuation!
For more information see Valuing a Chiropractic Office, Valuation Multiples for Chiropractic Clinics, and Value Drivers for a Chiropractic Office.
Schedule Your Free Consultation Today!
