Office Value

[muucow]

How do you get the value of your office?
How do you calculate what your patient files are worth? For an optical store.
Or is it just the value of equipment?
How do you price what your office is worth if you were selling?

[chip anderson]

Nowadays office files and patient records are worth practically nothing. Only selling an established business with a proven black bottom line has any value at all. Some equipment has some value. Inventory seems to be worth about ten cents on the dollar.

In days past records, etc. seemed to be worth 1.5 years gross but no more.

Chip

[PAkev]

Just been there ..........and a big lawer bill to prove it

You look at it totally different depending on if you are a buyer or seller.

Here in USA a start would be reviewing the past 5 years business tax returns. However, this does not always substantiate true profit or loss as many business expenses are construed as costs in order to minimize taxes. For instance, one company could pay it's employees well and not show great profitability while another demonstrates profit but has a high employee turnover as folks find greener pastures. Therefore, businesses with a "sell" strategy will often make it a point to show profitability whereas businesses with a "service" strategy may not subscribe to impressing perspective investors. A positive trend (increasing cash flow) is often evidence of a growing business whereas a negative trend (decreasing cash flow) may suggest problem areas which increase investment risk.

An industry PE (price/earnings) ratio is often used to get you in the ballpark. This common sense barometer means your investment is expected to be higher for proven profitability and less as additional risk is taken. For instance a dispensary that generates 500K in sales with a 3:1 PE ratio would probably have a starting value around 1.5M. Both buyers and sellers often have unique circumstances which are brought to the table in support of their interests for negotiation to or from this figure. The prevailing economic climate has driven PE down across the board of many industries as buyers have less financing alternatives available while also assuming a greater amount of sellers debt.


If the business is more than 5 years old chances are the equipment and fixtures have been depreciated and have significant diminished value than their original cost. They may still have a lot of servicable life left and often benefit the buyer rather than seller.

Custody of the files is no guarantee that folks will continue purchasing from the established business and often carry greater value to the buyer when there is a non compete agreement from seller.

Hope it helps

[Refractingoptician.com]

How do you get the value of your office?
How do you calculate what your patient files are worth? For an optical store.
Or is it just the value of equipment?
How do you price what your office is worth if you were selling?

Dear Bellowing Farm Animal :
Minimum values are easy to determine . Add up the resale net realizable value of the equipment and inventory . Use values that you can realistically achieve within say one years time frame if you are personally running the store .

An average store might have equipment that could be resold for say 25,000.00 and may have inventory of say 1000 frames . So if you can resell the frames within one year for say 150.00 each then one way to look at the business value is (1000 X 150.00=) 150,000.00 plus equipment = 175,000.00 . But be conservative .

Then add or subtract for the good or bad value of the lease . If the store is in a good location and the lease rates and length of the lease are both good then that might be worth a premium .

There are lots of different ways to evaluate a business, but the net realizable value ,within one year, method can provide a starting point.

Other methods might start with realizable equipment values and fire sale prices ,less than wholesale cost for frames , but then you have to consider whether you are buying or selling a going concern or a liquidating a losing proposition.

You have not given us much info to go on . Is this a business you are buying or selling ? How long has the business been running ? Etc, Is there only one or two possible buyers for the business such as an existing partner ? Can the business be moved ? Wil employees that know the existing customer base be hired with the purchase or sale ? Can the business be sold to anyone ?

[LandLord]

Use a factor of net earnings, not gross revenues. Say, 5X.

[Johns]

An average store might have equipment that could be resold for say 25,000.00 and may have inventory of say 1000 frames .

Antique dealers are now using the "Ebay Rule of Thumb". Whatever you can sell the equipment for on ebay (since that's the competition) is what it's really worth.

Without a lane, I can't see an average optical having $25K worth of equipment. Starting in the back room of my office, and working my way forward:

-Optronics 7 E Edger paid $40k+ Worth: $18,000
-Hand stone paid $80 Worth: $50
-Industrial Dremel Drill paid $75 Worth: $40
-Hand tools Paid $400+ Worth: $100
-Cabinets Paid $5,600 Worth: $450
-Desks Paid $0 Worth $10
-File cabinets Paid $70 Worth $10
-Chairs Paid $600 Worth $50
-Reception counter Paid $125 Worth $10
-Salt Pan Paid $45 Worth $15
-Oak Dispensing Tables Paid $300 Worth $75
-Oak Dispensing Chairs Paid $400 Worth $150
-Swing Mirrors Paid $180 Worth $60
-Oak Fashion Optical Dispalys Paid $5500 Worth $1500
-Contact lens Table/Cabinet Paid $800 Worth $250
-5 desk-top computers Paid $7,900 Worth $700
-Ophthalmic Lane Paid 14,500 Worth $5,500
-Lensometers (3) Paid $2,300 Worth $1,200

This is for an office that is 1200 sq ft. and is very profitable. Most of the fixtures and the equipment, with the exception of the lane, the edger, and the office chairs were purchased used, but in excellent condition (from an OD that was only opened 9 months).

The "worth" prices are realistic, as I sell used equipment on the side, and have a pretty good handle on what this stuff brings.

I paid approximately $65K for everything in my office (excepting products). I think I could realistically sell everything in it for around $26k. If I didn't have the higher end edger, and the lane, I think I'd consider myself lucky to get $7,500 for everything. Think about the last time you went to an auction, or checked e-bay for a desk top computer, an office chair, or a hanging mirror. That's real life.




This chair and stand is very similar to what I have in my office. It is currently listed on e-bay for $1700.

As far as locations go, in this economy, you can pick your place and name your price.

I agree with Chip. The files are worth slightly less than the paper they are printed on, and in some cases are actually a liability in that you have to maintain them and have them available for past customers.

I would agree with the others that the value of the practice should be more heavily weighted against the last 5 years tax returns and sales figures, and if they are not showing a reasonable upward climb, I'd walk. Gross receipts mean zero to me. Show me cash flow, good traffic into the office, and some areas that can be improved, and I'll be writing a check before someone else grabs the office.

From my experieince, an office is usually not worth what the owner thinks it is, and usually worth much more than what a buyer is willing to pay.

[Chris Ryser]

From my experieince, an office is usually not worth what the owner thinks it is, and usually worth much more than what a buyer is willing to pay.

\

There also used to be a term called "Goodwill" which was worth some cash.
Have not seen anybody mentioning that on this thread.

Goodwill is an accounting term used to reflect the portion of the book value of a business entity not directly attributable to its assets and liabilities; it normally arises only in case of an acquisition. It reflects the ability of the entity to make a higher profit than would be derived from selling the tangible assets. Goodwill is considered an intangible asset.

http://en.wikipedia.org/wiki/Goodwill_(accounting)

Goodwill as a term was originally used to reflect the fact that an ongoing business had some "intrinsic value" beyond its assets, such as the reputation the firm enjoyed with its clients. Likewise, a buyer may agree to "overpay" because he sees potential synergy with his own business. The accounting sense of goodwill followed as a plausible explanation of why a firm sells for more than the value of its net assets.