This formulized Excel spread is an easy way to start measuring your company’s potential value by determining your Adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization. You can also add both tangible assets (like equipment) and intangible assets (like your management team and employees) to the figure. It is typically through this addition process that you arrive at your practice’s value as a multiple of EBITDA. For example, as a practice owner you pay yourself a $300,000 salary for a position that someone – like a buyer or competitor – could do for $150,000. That buyer would then add that extra $150,000 back into the value of your company once its absorbed. In this case, the number you arrive at is a form of adjusted EBITDA where you take into account subsidiaries and components of a company that can be absorbed for little to no cost. This can happen often in practices sales, since in selling the practice to someone in the identical/ similar field, the management team, office space, and other business expenses may fall by the wayside during the takeover.
This tool is easy to use and helps you take an active part in the valuation of your practice entity.