A medical practice valuation is the arithmetic of any small business with two particulars: the owner's clinical salary is the largest add-back, and the payer mix and the referral base decide whether a buyer believes the earnings will follow the sale. The physician doing the sum before an appraiser does it starts from the practice's profit, adds back what the buyer will not carry, and multiplies by the number they were quoted. This page works that on the hub's own example, says what a practice valuation calculator has to carry for supplies and equipment, and works a home health agency the same way; the free small business valuation tool on this site does it from your own figures, with no account, and publishes no multiple.
The physician practice valuation: the earnings and the add-backs
Net profit for the trailing twelve months, plus the owner physician's salary and benefits, plus interest, depreciation and one-off costs, is the practice's seller's discretionary earnings, $180,000 on the hub's example. The particular question in a physician practice valuation is the owner's clinical production: if a buyer must hire a physician at market salary to produce it, that salary comes back out, and the Bureau of Labor Statistics' occupational wage data, linked below, is where a market salary for the specialty is read without guessing. The tool takes the add-backs as inputs so the earnings the multiple is applied to are the earnings the buyer will actually see.
The medical practice valuation calculator: earnings times your multiple
Value equals discretionary earnings times the multiple you enter, and the multiple is yours: at 2.5, $180,000 is $450,000; at 2.0, $360,000; at 3.0, $540,000. The hub publishes no multiple for any specialty, because a published multiple is an opinion the hub would be signing, and the practice's own facts, payer mix, referral base, lease and staff, are what move a buyer between those figures. The medical practice valuation calculator on this site shows the value at your multiple and at the multiples either side, and the report tool turns that into a range with a midpoint the practice can open a conversation with.
Supplies, equipment and receivables on their own lines
A practice sells with its supplies, its equipment and, depending on the deal, its receivables, and each is a line added at its agreed value rather than multiplied. On the hub's example, $36,000 of inventory sold alongside takes $450,000 to $486,000. Equipment is added at what the parties agree it is worth in place; receivables are usually kept by the seller or bought at a discount, and the deal says which. The IRS Form 8594, linked below, is the statement both sides file allocating the price across those classes when the sale closes, which is one more reason to have the lines separate before the negotiation starts.
How much is a home health agency worth: the same sum, a different add-back
A home health agency is valued the same way, discretionary earnings times a multiple, with the owner's administrative salary as the add-back and the licences, the payer contracts and the staff roster as the facts that move the multiple. On $180,000 of discretionary earnings at 2.5 the arithmetic is the same $450,000; what differs is that a home health agency carries little inventory and its value sits in contracts that transfer only if the payer agrees, which is the due-diligence question rather than the arithmetic. The practice valuation calculator on this site does the sum for either; the American Medical Association-style transition guidance for each specialty is where the particulars live, and the Small Business Administration's guide to selling a business, linked below, covers the sale itself.
Questions people ask about medical practice valuation
How is a medical practice valued?
Discretionary earnings, the profit plus the owner physician's salary and the one-off costs added back, times a multiple you enter, plus supplies, equipment and any receivables at their agreed values. $180,000 at 2.5 is $450,000 on the hub's example.
What about the owner's clinical salary?
It is added back to reach discretionary earnings, and if a buyer would have to hire a physician to produce it, a market salary for the specialty comes back out. The tool takes both as inputs.
Is a home health agency valued differently?
Same arithmetic, different facts: the owner's administrative salary is the add-back, there is little inventory, and the value sits in payer contracts and licences that transfer only with the payer's agreement.