Finance and valuation
Practice appraisal
A practice appraisal is a formal written valuation of a practice by a qualified appraiser who documents the data, the methods and the reasoning behind the value.
An appraisal is a more formal form of practice valuation. An IRS guide on valuing medical practices says a valuation appraisal should include all recognized approaches to estimating business enterprise value, including the market approach, cost approach and income approach. The IRS Internal Revenue Manual says the appraiser should analyze historical financial statements and adjust them where needed, then select suitable discount rates, capitalization rates or multiples. The IRS guide covers medical practices, not dental ones, but the methods are alike. Owners who plan a sale should ask what credentials an appraiser holds, which method is used and what the report covers. The ADA also offers a valuation document checklist.