It’s the same process. That’s where you run into that issue specifically. Oftentimes, I’ve handled divorce cases involving medical practices, and the first thing they say is if they’re no longer the doctor, their patients are going to go some place else.
It is the same issue. Often, you are looking to see if they are in a professional association and is the association able to take on any of those patients? If so, then it would still have value interest and a professional association would still have value.
If you are a fellow practitioner, it’s going to be very difficult to find value in that practice, especially in the medical or legal field. If you’re a sole practitioner in a law firm and you’re not operating that law firm, there’s not going to be much value at all.
At that point, you really focus on things like whether they own other property within the business. Did they buy a building? Do they have equipment? What value is that equipment? You look at their cash flow and maybe your analysis goes from purely to a capitalization of their income. So, based on their 4 or 5 years of income, can you determine that there is a value even with that being the sole practice? It becomes more complicated, but it is basically the same process.
Our starting point generally is to hire a business appraiser that has testified before in court and that has worked and appraised that type of business. You have to make sure that the appraiser understands your business and has experience with that business. You need to make sure you have somebody that understands, not just the accounting principles, but also the business that you are dealing with.