A clear and efficient valuation process

The five steps

From first conversation to final report

1. 1

   Step 1: Initial discussion

   We establish the business being valued, the purpose of the valuation and the appropriate valuation date.

   The first conversation settles four things that shape everything after it: the subject, the purpose, the basis of value and the valuation date. The subject may be the business as a going concern, meaning its goodwill, plant and equipment and, where the business carries inventory such as a pharmacy dispensary and front of shop, its trading stock. It may instead be shares in a company, units in a trust or a partnership interest. Those are different questions. Enterprise value is the value of the business operations before borrowings; equity value is what the owners' interest is worth once interest-bearing debt is deducted and surplus assets, meaning assets the business does not need in order to trade, are added back. A parcel of shares raises a further question: an interest that cannot control the practice may be worth less per share than the same proportion of the whole, and one that carries control may be worth more. Whether a control premium or a minority discount is appropriate depends on the purpose, the shareholders or partnership agreement and the facts, not on a standard adjustment.

   The basis of value is the definition of value being applied. Many healthcare engagements are prepared on a market value basis: the price that would be negotiated between a willing but not anxious buyer and a willing but not anxious seller, each fully informed and dealing at arm's length. The Australian Taxation Office's guide Market valuation for tax purposes, current at February 2025, records that the High Court in Spencer v Commonwealth of Australia [1907] HCA 82 identified the principles for determining that ordinary meaning, and that the Commissioner considers the International Valuation Standards Council definition of market value to be consistent with the judicial definition. Other bases exist. A shareholders, unitholders or partnership agreement may already specify one, such as fair value, or set a mechanism for appointing the valuer, and where it does the agreement typically governs the exercise rather than the valuer's preference. That is why we ask for the agreement before anything else, and why your lawyer's reading of it matters.

   The purpose decides who the report is written for and what it has to cover. A valuation for a physiotherapist buying into a practice, one for a family law property settlement and one supporting a restructure can start from the same accounts and end in different reports, so we ask at the outset who will read the conclusion and whether anyone else will be given it. See reasons for a valuation.

   The valuation date is a fixed day, and value is assessed on what was known, or could reasonably be foreseen, at that date. In healthcare that date does real work. Fee schedules move: MBS Online states that it is updated as changes to the Medicare Benefits Schedule occur. Funding arrangements are commonly reset from the start of a financial year, a principal may have given notice, or a lease may be inside its final option.

   We also check whether anything about the sector constrains the transaction itself. State and territory pharmacy legislation limits who may hold a proprietary interest in a pharmacy business. In Victoria, for example, section 5 of the Pharmacy Regulation Act 2010 provides that a person must not own or have a proprietary interest in a pharmacy business unless they are a registered pharmacist, a company whose directors and shareholders are all registered pharmacists, or one of a small number of other permitted holders such as a former friendly society company. The other states and territories have their own ownership rules, so the pool of possible buyers is not an open one. The NDIS Quality and Safeguards Commission states that an NDIS registration is linked to a single ABN and is not transferable to a different one, so a purchaser who acquires the business under a new ABN has to apply for registration rather than inherit it. The Commission also states that, for changes of ownership occurring from 1 July 2026, the buyer must notify it as soon as possible and, where the business delivers high-risk or complex supports, must start an audit no later than three months after the change. Those are transaction facts before they are valuation facts, and they belong in the first conversation.

   You provide

   • A short description of the business, its sites and the services it delivers
   • The ownership structure: the entities involved, who holds what, and any trust or partnership deed
   • The reason the valuation is required and any date you have to work to
   • The name of your accountant, lawyer or adviser and whether we may deal with them directly
   • Any shareholders, partnership or buy-sell agreement that already sets a valuation method

   We do

   • Confirm whether the subject is the business itself or an interest in the entity that owns it
   • Establish whether a controlling or a non-controlling interest is being valued
   • Check that we hold no interest or relationship that would compromise independence
   • Identify the basis of value and the valuation date that suit the stated purpose
   • Flag sector rules that affect the transaction, such as ownership restrictions or registration conditions
   • Set out the subject, purpose, scope, information required and fee in writing before any work begins
2. 2

   Step 2: Information collection

   You receive a focused information request covering the financial and operational material required.

   You receive one list, written for your sector rather than a generic checklist. It draws on three places: the accounting file, the practice management or dispensing system, and the registration and funding records. Giving us the accounting file itself, as a backup or read-only access, is faster than exporting reports one at a time and lets us test the figures rather than accept a summary of them.

   The operational exports are the part a generalist often skips. From a medical practice we ask for billings by practitioner and by item number, occasions of service, new against returning patients, appointment utilisation and the split between bulk billed and privately billed services. From a pharmacy we ask for script counts separated into PBS and private, dispensary and front of shop sales, and professional services claimed. From an NDIS provider we ask for billable hours and claims by support item, participant numbers, and the mix of agency-managed, plan-managed and self-managed funding. Dental and allied health practices export the equivalent: room or chair hours, practitioner productivity and health fund claiming. A veterinary practice exports consultations and procedures by veterinarian, average transaction value and the split between clinical fees and retail. An aged care or community care provider exports service hours, occupancy and client numbers by funding program.

   Registration and funding records matter because they carry conditions that travel with the practitioner rather than the business. The Ahpra Register of practitioners publishes each practitioner's registration type together with any conditions, undertakings and their principal place of practice. Medicare provider numbers, contact details and banking details are managed in Health Professional Online Services (HPOS), reached through a Provider Digital Access (PRODA) account, and a practice manages its Practice Incentives Program and Workforce Incentive Program Practice Stream details and confirmation statements in the same place. Practice Incentives Program payments, at the time of writing seven incentives across three payment streams, administered by Services Australia on behalf of the Department of Health, Disability and Ageing, are worth separating from fee income because they follow a different cycle. An NDIS provider's Certificate of Registration lists the registration groups it may deliver and any extra conditions attached. We do not need patient or participant records: aggregated and de-identified reports are enough. See what information is needed for a business valuation.

   You provide

   • Financial statements and tax returns for the last three to five financial years
   • Management accounts to the valuation date, plus the accounting file or read-only access to it
   • Practice management, dispensing or claiming exports covering billings, activity and practitioner productivity
   • Payroll records, employment contracts and any practitioner service or contractor agreements
   • The lease, equipment finance documents and a plant and equipment listing
   • Registration, approval and funding documents for the business and its practitioners

   We do

   • Send one information request written for your sector, not a generic checklist
   • Explain what each item is used for, so nothing is collected without a reason
   • Accept exports in whatever format your system produces
   • Follow up gaps in writing and record anything that cannot be provided
   • Keep the material confidential and work from de-identified operational data
3. 3

   Step 3: Analysis and valuation

   We analyse maintainable earnings, business risks, healthcare-sector factors and relevant valuation methodologies.

   Analysis starts with normalisation: adjusting the reported profit so that it shows what the business actually earns, independently of how the current owner chooses to run it. The recurring healthcare adjustments are a commercial rate of remuneration for the clinical and management hours the owner practitioner actually works, substituted for whatever they choose to draw; related party rent where the owner or a related entity also holds the premises; wages paid to family members who do not work in the business on those terms; one-off items; and incentive payments received on a different cycle from the activity that earned them. The result is future maintainable earnings, the profit the business can be expected to sustain, usually expressed as EBITDA (earnings before interest, tax, depreciation and amortisation) or EBIT (earnings before interest and tax). See what is maintainable earnings.

   We then examine what makes those earnings more or less certain. Revenue is split by funding source, because a business that depends on one government program carries a different risk from one with mixed private and funded income. The usual categories are Medicare benefits, patient out of pocket fees, private health insurance, Department of Veterans' Affairs and workers compensation claiming, NDIS payments and practice incentive payments. Concentration is measured on both sides: how much revenue runs through the busiest practitioner, the largest participant or the main referrer. Workforce is assessed on the terms practitioners are engaged, since contractor arrangements in medical and allied health practices raise payroll tax questions that a purchaser will price. Then comes goodwill, the value of the business above its identifiable net assets: how much is transferable, or commercial, goodwill that stays with the business, and how much is personal goodwill that leaves with the practitioner. Key-person risk, the risk that earnings depend on one individual, is priced rather than assumed away. See how practitioner dependence affects business value.

   The method follows the business and the purpose. Capitalisation of future maintainable earnings applies a multiple, a factor reflecting this business's risk and growth prospects, to those earnings; the multiple is the inverse of a capitalisation rate, and it is reasoned from the characteristics of the business rather than lifted from a rule of thumb. Capitalising EBIT or EBITDA produces an enterprise value, so interest-bearing debt is deducted and surplus assets added back to reach the equity value of the shares or units. Discounted cash flow, which projects the cash the business is expected to generate and discounts it back to the valuation date, suits a business whose future is expected to differ from its past, such as a practice part way through fitting out new rooms. A net asset approach, valuing identifiable assets less liabilities, is used where earnings do not support goodwill or where the assets themselves carry most of the value, as they can in a diagnostic or residential aged care business. A market approach draws on evidence of comparable transactions, which for privately held healthcare businesses is usually limited. Reported prices often bundle items that are not comparable, such as stock, property, restraint payments and amounts contingent on the seller continuing to practise, so the evidence has to be adjusted and weighed rather than simply applied.

   A going concern conclusion also assumes the business changes hands with a normal level of working capital, meaning the debtors, stock and creditors it needs in order to trade. That carries different weight by sector: a pharmacy holds substantial dispensary and front of shop stock, while an allied health practice may hold almost none. Where the position at the valuation date is not a normal one, the difference is dealt with openly rather than left sitting inside the earnings. The Australian Taxation Office's guide Market valuation for tax purposes, current at February 2025, recommends that a secondary or cross-check methodology be applied where possible, and expects the report to explain why the chosen methodology is the most suitable.

   You provide

   • Answers to written queries on unusual movements, one-off items and related-party dealings
   • A short call with you, your practice manager or your bookkeeper where the accounts need explaining
   • Practitioner service agreements, referral arrangements and supplier or banner group agreements
   • Details of anything known at the valuation date that the accounts do not yet show

   We do

   • Normalise the reported results and document every adjustment made
   • Assess future maintainable earnings on a basis that fits the stated purpose
   • Analyse revenue by funding source, practitioner and service type
   • Assess the working capital the business needs in order to trade at the valuation date
   • Measure practitioner, patient, participant and referrer concentration
   • Select the methods that suit the business and cross-check where the evidence allows
   • Separate transferable goodwill from personal goodwill and price key-person risk
4. 4

   Step 4: Draft findings

   We provide the draft valuation and clarify any factual questions before finalisation.

   The draft exists so the facts can be tested before the conclusion is fixed. It sets out the information relied on, the adjustments made, the methods applied, the assumptions and the limitations, and it reads as the final report will read. You are asked to review it for factual accuracy: a lease option read incorrectly, a practitioner counted in the wrong category, an adjustment that double counts locum cover.

   A draft is not a negotiation. A comment that corrects a fact, or supplies a document we did not have, is considered, and the analysis is redone if it changes the answer. A comment asking for a different conclusion without new evidence does not change it. Where a correction moves the value we say so, and the final report records what changed. That discipline is what makes the report worth anything to the person on the other side of the table.

   Where the valuation is for a family law matter or a dispute between owners, whether the draft goes to both parties' lawyers at the same time or only to the party who instructed us is fixed in the scope, not decided at the draft stage. See family law valuations and shareholder dispute valuations.

   You provide

   • Factual corrections, with the document or report that supports each one
   • Any information that was still outstanding when the draft was prepared
   • Confirmation that the assumptions recorded in the draft reflect the position at the valuation date
   • Your questions about anything in the draft that is not clear

   We do

   • Issue the draft with the assumptions, limitations and information relied on stated in full
   • Answer questions about how the conclusion was reached
   • Rework the analysis where a correction or a new document changes it
   • Say plainly when a change moves the value and when it does not
   • Record what changed between the draft and the final report
5. 5

   Step 5: Final report

   You receive a clear, independent valuation report suitable for its stated purpose.

   The final report is written for the purpose agreed at step one and for the people named in it. It states the subject, the purpose, the valuation date, the basis of value, the information relied on, the adjustments and methods applied, the risks and value drivers that mattered, the conclusion, and the assumptions and limitations attached to it.

   A report is tied to its purpose and its date, and it concludes on value rather than price. Value is an assessment made on stated assumptions and a hypothetical arm's length transaction; price is what one actual negotiation produces, and it can be moved by synergies available to a particular buyer, urgency, deal structure and the relative position of the parties. A report prepared to support a partner buying into a practice is not automatically suited to a bank, the Australian Taxation Office or a family law settlement, because each of those readers needs different disclosure. If the purpose changes, we would rather agree a new scope than have a report used for a question it does not answer.

   We keep the working papers behind the conclusion. That matters most in tax matters: the Australian Taxation Office's guide states that, if it reviews a market valuation, the onus of providing a replicable and defensible valuation remains with the taxpayer even when a professional is engaged, so the report and the records behind it need to let someone else follow the reasoning. Your accountant can confirm what your particular matter requires. See tax and restructure valuations.

   You provide

   • Confirmation of the party the report is to be addressed to
   • Instructions if a copy is to go to your accountant, lawyer or financier
   • The delivery format you prefer

   We do

   • Issue the final report addressed to the named party for the stated purpose and valuation date
   • State the basis of value, the assumptions and every limitation on the work
   • Explain the conclusion in language you and your advisers can follow
   • Remain available for questions about the report
   • Retain the working papers that support the conclusion