Determining a discount factor

Determining a discount factor

I'm getting divorced and I own one-third of a practice. My third of the appraised value was $1.5 million. If the courts award that to my ex-wife, I'll never sell for that amount. How do I come up with a reasonable discount factor?
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Oct 22, 2008
By dvm360.com staff

It's impossible to give a simple number for a discount in this complex situation, says Veterinary Economics Editorial Advisory Board member Dr. Karl Salzsieder, JD, of Salzsieder Consulting and Legal Services in Longview, Wash. The urgency of the situation, possible sale terms, and potential future success of the practice will affect the discount. But essentially, Dr. Salzsieder says, you're looking at two discounts: a minority share sale discount and an emergency sale or short notice sale discount.

Discounts range from 5 percent to 30 percent or more. "But practice valuations, like any other appraisal process, are works of art with some science thrown in," Dr. Salzsieder says. In order to have some science (or objectivity) figured into the discount, find an appraiser who can study the practice data used in the valuation process. The discount he or she arrives at will mostly depend on which methods and factors were used to determine the value in the first placeā€”and the appraiser's opinion of them.

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