Audiology Valuation

One of the benefits of this profession is getting to learn about new businesses and new industries. It is ironic given my hearing loss that I had never been involved in a valuation or a sale audiology business. I was surprised how much I still learnt from this assignment.

This particular business had been trading for nearly 30 years, and had a history of mutual partnership buy-outs. I was engaged to assess the business for the same reason, as one of the current owners was retiring and was being bought out by a key staff member.

I had previously had an understanding that businesses in the medical profession can be valued on the basis of a number of patients or appointments. I was fortunate enough to have a few close personal friends whom have previously bought into medical practices and I was pleased to hear that they assessed the businesses on either a Return on Investment Model or Capitalisation of Earnings.

The lack of sales data of audiology businesses was the next hurdle. Not even the owners of this business knew of the last audiology clinic sold in Victoria. I concluded that the capitalisation rate would have to be determined by a risk assessment and experience.

In this end I gave this business quite a substantial value given its long history in the market and the stability of sales. The owners had also gone to great length to implement sound procedures and business plans to ensure ongoing success. Other key factors included, loyal staff, long lease terms and a positive outlook for the Audiology industry given Australia’s aging population.

As a result it appeared to me that this business would appeal to an investor outside the Audiology Industry, and thus was considered in my final assessment of market worth.

Whilst an Audiologist is a specific skill set that requires extensive training and experience, businesses in the audiology industry would still most likely be viewed by a potential buyer as an investment and should be assessed on a multiple or capitalisation of their return, not rules of thumb.