VALUATIONS – How Jobtel can assist you in carrying out Valuations

Of course we are called almost every day by practitioners giving us most rudimentary information and asking for an immediate valuation as for a sale.

Often we can assist them in the general sense to understand what the “going rate” is for practices or varying sizes and in different geographical locations. For example at present the market is rising and deals would be expected for an averagely profitable practice in a metropolitan area where the principle is selling out to be £1.15 plus paid as to 50% to 60% up front with remainder downstream after a year for a small practice and 40% up front and the remainder over two or three years for larger practices.. This is of course a “standard” which does not exactly exist as each practice is different and has its own advantages and problems (this is elaborated in the book that you can buy and test your own firm against the benchmarks shown)The selling prices of larger practices use the same basis but there is considerably more involved than just the turnover.

Whenever we take on board a sale contract we always ask for the completion of a questionnaire and give a target valuation figure which we will aim to achieve.

THESE ARE HOWEVER CASUAL VALUATIONS and the more serious valuations are for those cases which by definition cannot be tested out in the market. In these cases the valuation has to assume market conditions. Indeed the bases of valuation might change with circumstances even though the practice remains the same .

SO JOBTEL CARRY OUT FORMAL VALUATIONS SUITABLE FOR PRESENTATION TO THIRD PARTIES.

We have been asked to carry out valuations for clients and these generally cover the following types

1) Transferring from partnership to Ltd Co format so that a value is given for Goodwill in particular

2) Partnership Splits – where partners wish to separate a practice between the partners – sometimes minority interests are reviewed.

3) Buy In Partnerships – working for individuals who have been offered a partnership for a price and want to validate the Goodwill valuation

4) Partnership Development – where a dominant practitioner wishes to have on record a valuation that he can use to put a scheme to his current managers.

5) Probate, Divorce – where a practitioner has died and his estate seeks a valuation perhaps for an internal sale or where a practitioner or partner are divorcing.

Jobtel do up to a dozen real deals a year and because of this we provide a realistic valuation based on real knowledge of what goes on in the market place from deals actually done – so we can pick examples which are similar to a theoretical valuation.

All our valuations are carried out on a fixed price basis. Generally we charge £500 plus VAT plus travel expenses. That’s the standard but it would be less if it is clear that this is a small and uncomplicated valuation but more if it involves reading a substantial amount of data, meeting many people and more still if it involved situations where the result is likely to be hotly contested and even used in legal proceedings in some way. If you are interested you should ask for a quote but whatever we agree we will keep to!

What we do – Generally we carry out valuations using all or a mix of

• GRF valuation based on a value per £ of fees/turnover
• SPM Simulated profit multiple based on a number of years purchase of profits
• NPV net present value of forward cash flows

Not all these valuations are suitable for every case and judgement is applied in assessing which to use and how to interpret the differences between them. On occasion we will use an average of all three. Generally we test one valuation against another.

How we do it. –

Firstly we prepare a questionnaire and ask the person concerned to complete it and then
Secondly send us also additional supporting papers which might be necessary such as leasehold agreements, partnership agreements, and for larger practices CVs of employees, Contracts of employment, organisation charts copies of advertising and PR material and perhaps reviews of working capital, efficiency ratios etc etc.
Thirdly we visit the practice concerned (wherever possible) to see the situation on thee ground and seek with the key parties involved. We always ask for a client list and do some verification work on it.
Fourthly we prepare a draft report with final queries which we send to the client for his confirmation of factual information used and clarification of final points
Fifthly after additional information is obtained we prepare the final version for distribution.

So if you are

• Just casually trying to find out what your practice would sell for – then give us a call and we would be glad to assist (or buy the books)
• Interested as a buyer as to the competition in the market place and approximate price you might have to pay call (or buy the books)
• Have a problem as evidenced by the types of cases shown on the first page – then call for a longer discussion and quotation

Note the valuations referred to are in all cases valuation of Goodwill, we don’t get involved in equipment or leasehold valuations (though we will offer an opinion if crucial to the case) or the collectibility of Debtors or WIP (though here again we may offer opinions). We don’t do taxation or pensions work.