How is a professional practice valued differently from a trading company?

Professional practices (law firms, dental practices, GP surgeries, accountancy firms) are valued primarily on recurring fee income or patient/client lists. Key issues are: how much goodwill is personal (and therefore lost on sale) vs transferable; the enforceability and value of restrictive covenants; and sector-specific regulatory constraints on ownership.

What multiples are used for professional practice valuations?

Multiples vary significantly by profession: dental practices typically sell at 0.7–1.2× annual fee income; accountancy practices at 0.75–1.5× recurring fees; law firms are more complex given WIP, client concentration, and regulatory constraints. Expert witnesses benchmark against comparable transaction data and published sector surveys.

Professional Practice Business Valuation Expert Witness UK

Professional practices are valued primarily on recurring fee income or patient and client lists, not generic EBITDA multiples. The critical litigation issue is personal versus transferable goodwill - value attributable to an individual partner may not survive a sale and may be excluded in divorce or dissolution.

Restrictive covenant enforceability and value feature heavily in partnership retirement and dissolution disputes. Regulatory constraints on ownership (SRA, GDC, ICAEW) affect marketability and the pool of potential purchasers.

Experts benchmark against sector transaction data: dental practices often trade at 0.7–1.2× annual fee income; accountancy practices at 0.75–1.5× recurring fees; law firms require detailed WIP and client concentration analysis.

Indicative UK sector valuation benchmarks (litigation reference)
Sector / asset	Typical multiple / basis	Notes
Dental practice	0.7×–1.2× annual fee income	NHS/private mix, lease, and personal goodwill
Accountancy practice	0.75×–1.5× recurring fees	Client concentration and WIP affect multiple
Law firm	Case-specific / earnings-based	WIP, regulatory constraints; often no simple multiple

Indicative ranges from published transaction surveys and expert witness practice; case-specific evidence required for court.

Common questions

How is a professional practice valued differently from a trading company?: Professional practices (law firms, dental practices, GP surgeries, accountancy firms) are valued primarily on recurring fee income or patient/client lists. Key issues are: how much goodwill is personal (and therefore lost on sale) vs transferable; the enforceability and value of restrictive covenants; and sector-specific regulatory constraints on ownership.
What multiples are used for professional practice valuations?: Multiples vary significantly by profession: dental practices typically sell at 0.7–1.2× annual fee income; accountancy practices at 0.75–1.5× recurring fees; law firms are more complex given WIP, client concentration, and regulatory constraints. Expert witnesses benchmark against comparable transaction data and published sector surveys.

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