Issues for Physicians

The valuation of the professional practice — such as that of a lawyer, physician, or professional engineer — is one of the most time-consuming and potentially expensive tasks in a divorce case. This valuation can be complex and expensive, but it is critical in a divorce.

Factors Affecting Valuation

The spouse who is in a professional practice will often complain about “double dipping,” in the sense that the same earnings which are used to calculate spousal and child support are used to find a value for the practice. The professional may also argue that the methodology used to prove a value is flawed because a willing buyer for a practice might not even exist.

To further complicate matters, if a professional is part of a partnership, it may raise concerns about an inequitable valuation.

There are a myriad of ways to attempt to establish the value of a professional practice. And there are almost as many ways to establish the “goodwill” of the practice. Some of those factors may include:

1. Price sensitivity, or how cost conscious the clients of the practice are
   
2. Professional reputation and skill, which emphasizes the practice’s goodwill over its tangible assets
   
3. Strength of referral network, or how many of the practice’s clients refer their friends and family to the practice
   
4. High intangible asset base, which can account for the most valuable assets the practice has (even more so than tangible assets)
   
5. Licenses and protected market, which can affect the practice’s competition and number of potential clients
   
6. Client relationships and practice sale, or how easily the clients can continue using the service after the practice is sold
   
7. The practice’s life expectancy and value, which is particularly important since many professional practices have shorter lifespans than other businesses