Timothy D. Lott, CPA, CVA
Director, N/L Healthcare Management Advisors
tlott@nlgroup.com
CV
Tim provides consulting services to healthcare professionals and practices with expertise in start-ups, mergers, transitions, tax and retirement planning, financing assistance and budgeting. He has a specific concentration on consulting to the dental professional on associate, partner and shareholder arrangements, practice management, revenue enhancement, practice purchase, sales, buy-ins
and buy-outs and the related tax issues. His CVA (Certified Valuation Analyst) designation enables him to consult with the dentist who is looking to buy or sell a dental practice. His expertise in the dental arena serves as a useful tool to those dental professionals who want to know how their practices compare to others in the industry and he helps them monitor their key profitability statistics. Tim has been a speaker at various dental study club meetings, D.C. Dental meetings and other healthcare related groups.
Member of: AICPA, MACPA, NACVA, MSDA, AGD
Key Considerations in a Business Valuation:
- Purpose of Valuation - The reasons for a valuation are many and varied. These include buying or selling a business, estate or tax planning, divorce/marital dissolution, business disputes, civil litigation and business value planning and maximization.
- Standard of Value - Depending on the purpose for the valuation, different standards of value may apply. The IRS utilizes Fair Market Value as the standard for tax related transactions including estate valuation and planning, goodwill impairment and other IRS matters. Shareholder disputes and marital dissolutions may have a prescribed standard of value based on state or federal statute, such as Fair Value. In determining the acquisition or selling price of a business, Investment Value may be utilized. The standard of value is typically determined by the venue and purpose of the valuation.
- What is to be Valued - While seemingly a simple concept, this is often overlooked. Depending on whether the valuation is for all of the stock of a company, some percentage of the company - either a controlling or noncontrolling interest, or for the assets of the company - the determination of value will be impacted by the nature and amount of any discounts or premiums required. For instance, a 51% controlling interest is typically worth more than a 51% pro-rata share of the total value of the company, while a 49% minority interest is typically worth less than a 49% pro-rata share of the company value as a whole.
- Valuation Date - The value of any item is not a static amount. As the price of gasoline varies on a daily basis, the value of any asset or stock varies as well. Thus, the valuator must determine the value at a particular valuation date.
- Valuation Approach - Each business or entity is different. In valuing a company, the valuator must consider many elements of the business including its capital structure, assets, and operating history and determine the most appropriate method(s) of valuation. Three basic types of methods are used, based on Assets, Income or Market Comparisons.
- Level of Service - Differing levels of service may be appropriate, depending on the purpose and the intended usage of the valuation. For instance, in IRS matters, ESOP reports, litigation engagements or for less sophisticated users, a Formal Appraisal Report may be appropriate or required. For less formal purposes or for more sophisticated users, a concise Indication of Value Letter may be appropriate. For particularly narrow purposes, a Limited Scope Engagement in which only agreed upon procedures are performed may be applicable.
It is wise to consider these key elements in any valuation in order to obtain the proper valuation relevant for your situation, in the form it is needed and at the appropriate cost. Then you can start worrying about that cascading fountain of financial information.
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