Similar to hospitals for humans, veterinary practices are also influenced by factors such as location and quality of services. While these can point to the available potential, they aren’t enough to measure how profitable a business is. For the calculation of profit to get the right business value, these indicators work well.
- Annual Revenues: Some veterinary professionals might be making more money than others. This could be due to the location, variation of species, the professional’s skills, and cost of service. However, annual revenue reports point to the exact profits a business is making that can be used to calculate the right value.
- Discretionary Cash Flow: Varying with the type of practice, 24-41 of the gross revenue is an ideal percentage of discretionary cash flow for a veterinary business owner. Some might have lower cash flows due to their higher investments in retail products than others. This can be a key factor in calculating the net value of a business.
- EBITDA: A rise in EBITDA value in recent years points to a profitable business and vice versa. Combining this with other assets can help an appraiser land on a more accurate value for the vet.
- Expensive Tangibles: The appraiser should also take into account all the tangible assets. This can be a key driver as veterinaries today are equipped with more high-value assets than before. Knowing if those are bought, leased, or loaned can drive the value accordingly.
Valuation services for veterinaries also take into account other factors like compensation, monetary drivers, and others to give you the best appraisal for your business.