As more nurse practitioners (NPs) open and grow their own practices, questions about practice valuation are becoming increasingly common. Whether you’re thinking about selling, bringing on a partner, or simply planning for the future, understanding how to value your NP practice is essential.

This guide walks you through the fundamentals of valuation, the unique factors that affect NP-owned practices, and practical steps to determine what your business is worth.

---

Why Valuation Matters

• Selling or Merging: When transitioning ownership, both buyer and seller need a fair, defensible value.
• Partnerships: If you’re bringing in another provider or investor, valuation ensures equity is divided fairly.
• Financing: Lenders may require a valuation to approve loans or lines of credit.
• Strategic Planning: Knowing your practice’s worth helps with goal setting, growth planning, and retirement readiness.

---

Three Core Approaches to Valuation

1. Income Approach

This method looks at the practice’s ability to generate future earnings.

• How it works: Normalize financial statements, calculate cash flow or EBITDA (earnings before interest, taxes, depreciation, and amortization), then apply a capitalization rate or discount rate.
• Best for: Profitable, stable practices with predictable revenue.

2. Market Approach

This compares your practice to similar practices that have recently sold.

• How it works: Apply revenue or EBITDA multiples from comparable transactions.
• Challenges: Data on NP-only practices can be limited, so comparisons may include small physician or urgent care practices.

3. Asset-Based Approach

This focuses on the value of tangible and intangible assets.

• Tangible: Medical equipment, furniture, leasehold improvements.
• Intangible: Patient lists, reputation, contracts, brand name.
• Best for: Start-ups, practices with low profitability, or buyers mainly interested in patient base and infrastructure.

---

Key Value Drivers for NP Practices

1. Revenue & Profitability
   • Consistent collections and strong margins increase value.
   • Payer mix matters—commercial insurance often reimburses higher than Medicaid or Medicare.
2. Patient Base
   • Active patient panel size and retention rates are critical.
   • Loyal patients = stable revenue.
3. Scope of Services
   • Broad services (e.g., primary care + urgent care + wellness) may command higher value.
4. Location & Market Demand
   • Practices in underserved or high-demand areas often sell at a premium.
5. Staffing & Operations
   • A well-trained team that can remain post-sale reduces transition risk.
6. Contracts & Referral Networks
   • Insurance credentialing and referral relationships add significant intangible value.
7. State Regulations
   • States with full practice authority for NPs make practices more attractive to buyers.

---

What Multiples Look Like in Practice

While every transaction is unique, small healthcare practices often fall within these ranges:

• Revenue multiples: 0.3x – 0.7x annual revenue
• EBITDA multiples: 2x – 4x EBITDA

Example:

• Annual revenue: $1,000,000
• EBITDA: $200,000
• Estimated value: $400,000 – $800,000 (based on 2x–4x EBITDA)

---

Steps to Value Your NP Practice

1. Gather Financials: At least 3 years of profit & loss statements, balance sheets, and tax returns.
2. Normalize Earnings: Adjust for one-time expenses and set owner’s salary at market rate.
3. Assess Assets: List tangible (equipment, furniture) and intangible (patient base, contracts) assets.
4. Choose Valuation Method(s): Apply income, market, and/or asset approaches.
5. Engage an Expert: A healthcare-focused CPA or valuation consultant can provide a professional, defensible report.

---

Final Thoughts

Valuing a nurse practitioner practice isn’t just about crunching numbers—it’s about understanding the unique blend of financial performance, patient relationships, regulatory environment, and market demand that make your business special.

Whether you’re preparing to sell, expand, or simply want to know where you stand, taking the time to understand your practice’s value is a powerful step toward long-term success.

Need Help? SUBMIT INQUIRY

Resource: Valuation Checklist for NP Practice Valuation