What is my practice worth?

Maintainable earnings are what the business should keep producing year after year under ordinary conditions. They are not the profit in your accounts. Reported profit is adjusted through normalisation, which removes one-off items, resets related-party rent and wages to what an unrelated party would charge, and, most importantly in healthcare, charges the owner's own clinical work at what a replacement would cost. In an owner-operated practice that last adjustment is usually the largest single number in the analysis, and it is the one owners are most often surprised by. See what is maintainable earnings.

The capitalisation rate is the return a buyer requires for the risk of those earnings continuing. It is not published, because it is not a property of a sector: it is a conclusion about one business, built from how much earning capacity survives the owner's departure, how durable the funding behind it is, how secure the premises and approvals are, how concentrated the patients, participants or clients are, and how much of the operation runs on documented systems rather than on one person's memory. A higher rate means a lower value. See healthcare business valuation methods.

Two further steps turn that into a number an owner can use. The result is an enterprise value, the value of the operating business to all of its funders. Equity value, what the owners' interest is worth, deducts interest-bearing debt, adds surplus assets and adjusts for surplus or deficient working capital. And the valuation date fixes the facts, because a conclusion reached on one date does not carry forward to another.

Because a multiple is an output of the analysis, not an input to it. It is the inverse of the capitalisation rate, so quoting one before the risk assessment is done is quoting the conclusion before doing the work.

The mechanical problem is worse than the conceptual one. Any published figure only means something alongside the earnings measure it was derived from: one struck before interest, tax, depreciation and amortisation is not interchangeable with one struck before interest and tax, and neither can be applied to after-tax profit. Almost every owner who picks up a rule of thumb applies it to the profit in an unadjusted profit and loss statement, which in an owner-operated healthcare business still includes their own uncharged clinical work. The result is wrong in a predictable direction, by an amount large enough to lose a negotiation or fail on review by the other side's accountant.

Others publish those figures because a number is more quotable than an explanation. A wrong number quoted confidently is worse than no number at all, and what you need is to know exactly what the answer depends on in your sector.

If you need a supportable figure rather than an orientation, the practical step is a valuation. HPNA charges a fixed fee, published in full, set by the purpose of the valuation and the annual revenue of the business being valued, and agreed in writing before any work starts. The fee never depends on the conclusion reached, and HPNA takes no commission from any party to a transaction, which is what allows a report to be relied on by a buyer, a court or the Australian Taxation Office.

If you are earlier than that, the insights library covers the methods, the value drivers and the sector detail, and how it works sets out the process and the information a valuation requires.