Valuation Multiples for Chiropractic Clinics
When valuing a chiropractic clinic, a business appraiser at Peak Business Valuation often uses valuation multiples for chiropractic clinics. This article discusses valuation multiples for chiropractic practices. It also talks about how to value a chiropractic clinic. For more information, schedule a free consultation with Peak Business Valuation, business appraiser.
The chiropractic industry is growing as the aging population seeks more care. In addition, more insurance plans are offering chiropractic services as a benefit. Both of these economic factors increase the value of a chiropractic office. As such, it may be a good time to buy a chiropractic office and sell a chiropractic practice. The first step of either process is understanding the value of a chiropractic practice. Peak Business Valuation, business appraiser, is here to help! We are happy to answer any questions you have about valuing a chiropractic office. Schedule your free consultation by clicking on the link below!
Valuing a Chiropractic Practice
As a business appraiser is valuing a chiropractic practice, there are many factors they will consider. As mentioned above, economics can play a large part. In addition, the business appraiser will consider the location, reputation, and use of technology, among other things. Using several valuation methods including multiples for chiropractic clinics, the business appraiser will determine a fair market value for the chiropractic office.
If you plan on selling a chiropractic practice, obtaining a business appraisal will help you prepare to sell. It is useful for determining a listing price and negotiating with potential buyers. Whereas, if you plan on buying a chiropractic clinic, a business valuation can help you negotiate a fair purchase price. It is an important part of the due diligence process when buying a business. In both scenarios, a business appraisal can help you feel confident in your business transaction.
As a business appraiser, Peak Business Valuation provides business appraisals for chiropractic clinics across the country. Through a consultation, we can answer your questions about valuing a chiropractic office. Schedule yours today to get started!
See also How to Value a Chiropractic Clinic as well as Value Drivers for a Chiropractic Office.
Valuation Multiples for Chiropractic Clinics
The below visual shows average valuation multiples for chiropractic clinics. Chiropractic offices commonly transact and are valued between these multiples. The visual shows REV, SDE, and EBITDA multiples for chiropractic practices. Know that these numbers are only averages and should only be used as a guide. For specific information, schedule a free consultation with Peak Business Valuation, business appraiser.
Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.
What is a Valuation Multiple?
A valuation expert commonly uses multiples for chiropractic practices when valuing a chiropractic clinic. Valuation multiples are ratios that compare two factors. For instance, the SDE multiple is a common valuation multiple. The SDE multiple compares the seller’s discretionary earnings with the implied value of the company.
When using multiples, the business appraiser will analyze your chiropractic clinic and compare its operations to similar chiropractic practices. Using several methods, the valuation expert determines a range of fair market value for the chiropractic office.
To illustrate, say the seller’s discretionary earnings of a chiropractic office are $206,000. If the chiropractic clinic transacts at a 1.82x SDE multiple, then the business has an implied value of $374,920. Whereas, if a 2.19x SDE multiple is more appropriate for the business transaction, the chiropractic clinic is worth approximately $451,140.
Peak Business Valuation, business appraiser, works with many individuals looking to buy or sell a chiropractic office. We provide business valuations for chiropractic clinics across the nation. If you plan to buy, grow, or sell a chiropractic office schedule a free consultation. A business valuation is key to understanding and maximizing the value of a chiropractic office.
SDE Multiples for a Chiropractic Practice
Average SDE Multiple range: 1.75x – 2.27x
In Peak’s database, chiropractic practices sell on average between a 1.75x – 2.27x SDE multiple. To calculate the implied value of the business, the business appraiser starts with the seller’s discretionary earnings. They then multiply it by the applicable SDE multiple. See the equation that follows.
SDE X Multiple = Value of the Business
For example, a chiropractic clinic has $293,000 in seller’s discretionary earnings. The business appraiser at Peak Business Valuation determines a 2.04x SDE multiple is most applicable. In this scenario, the value of the chiropractic office is approximately $597,720.
$293,000 X 2.04x = $597,720
The SDE multiple is a common cash flow multiple for small businesses to transact on. To calculate the seller’s discretionary earnings, start with the business’s operating profit and add back any expenses a new owner may not incur. Some of the common add-backs in business valuation include a fair owner’s compensation, any personal expenses the owner takes through the business, and any non-recurring or non-related business expenses among others. See Understanding Seller’s Discretionary Earnings for more information.
EBITDA Multiples for Chiropractic Clinics
Average EBITDA Multiple range: 2.86x – 3.83x
According to our data, the average EBITDA multiple for chiropractic clinics ranges from 2.86x – 3.83x. To calculate the implied value of the chiropractic office, multiply EBITDA by the applicable EBITDA multiple. See the calculation below.
EBITDA X Multiple = Value of the Business
For instance, the EBITDA of a chiropractic clinic is $202,000. It transacts at a 3.39x EBITDA multiple. Using the above metrics, the chiropractic clinic is worth approximately $684,780.
$202,000 X 3.39x = $684,780
The EBITDA multiple measures the return on investment or ROI one can expect to make from the business. The business appraiser may prefer to use this multiple as it normalizes differences in capital structure, fixed assets, and taxation. Normalized ratios allow the business appraiser to compare the business more easily with similar companies. In addition, normalized ratios can more accurately represent the future earnings a buyer may expect from the company.
REV Multiples for a Chiropractic Office
Average REV Multiple range: 0.37x – 0.74x
Last, in our database, the average REV multiple for a chiropractic clinic falls between 0.69x – 0.87x. To calculate the value of the chiropractic clinic using this multiple, start with the most recent 12-month period of revenue. Then multiply it by the applicable valuation multiple. It is important to use the 12 months of revenue prior to the stated valuation date. Refer to the equation below.
Revenue X Multiple = Value of the Business
Let’s say that a chiropractic clinic generates $775,000 in revenue. The valuation expert determines a 0.79x REV multiple is appropriate for the transaction. In this case, the chiropractic office’s implied value is $612,250.
$775,000 X 0.79x = $612,250
In every transaction, the business appraiser will determine what methods and multiples are most applicable. Often several business valuation approaches are used to determine the fair market value of a chiropractic clinic. Cash flow multiples are often applicable as they consider expenses such as COGS, salaries, and rent, among others that impact cash flow.
Summary
When reviewing valuation multiples for chiropractic clinics, understand that these numbers are only a guide. During the valuation process, the business appraiser will review company financial statements and analyze key value drivers. Comparing these to similar companies will help the business appraiser determine an applicable market multiple for your chiropractic office. For more information take a look at Value Drivers for a Chiropractic Office as well as How to Value a Chiropractic Office.
Our business appraisers at Peak Business Valuation value chiropractic offices across the nation. We are happy to answer any questions you have about valuing a chiropractic clinic. To get started, schedule a free consultation using the link below.
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