Not at all. Even though the assets are not the kind you can see and touch, intangibles such as strong customer relationships, resources and specially trained employees are very valuable. A practice s client base, people and goodwill make up the majority of the business s value. A firm s client base, for example, must be valued carefully since it represents the firm's potential future profits. The greater the stability and longevity of the client base, the lower the risk and the higher its value.
Employees also increase a professional practice s value.
Specially trained employees such as dental technicians are an important asset that must be considered. In a buyout, the cost savings of acquiring a talented staff compared to recruiting and training these people may be substantial. Location, position in the market, fee schedules and referral sources are other intangible assets that increase a professional practice s revenue stream. A valuator needs to seek out these hidden assets and determine how they affect the practice s value. A professional practice may have substantial value in intangible or other assets not recorded on the balance sheet, particularly in a practice that uses the cash method of accounting.