What exactly are you "buying" when you buy a Practice?

When you buy a Practice, you are buying the Net Income and Cash Flow of the Practice, autonomy and job security, as well as any subjective attributes that have attracted you to the Practice in the first place. Of course Goodwill always plays a key role and the hope for the buyer is that the Practice is a going-concern with lots of ongoing patient treatment plan momentum.

Ultimately both buyer and seller are investors and to arrive at investment value one needs to use the Capitalization of Earning Method within the Income Approach to valuation. Comparing this value to the market price value of recently sold comparable practices in your geographic area is the only way for you to know if the return your were hoping to get from your investment into your practice was realistic and for the buyer, whether or not the asking price represents a good deal when seen from an investment perspective.

The income approach to valuation is the best way to understand you practice from an investment perspective.