How To Open Your Own Physical Therapy Practice – The US physical therapy industry has over 132,000 practicing physical therapists. This industry includes professionals who provide prescription rehabilitation on an outpatient basis to patients suffering from pain and injury. Overall, the industry has a combined annual revenue of about $48 billion. Below is a quick overview of what most physical therapy procedures look like.
Be sure to also check out our post on Physical Therapy Practice Evaluation. To better understand exercise valuation, schedule your free consultation with Peak Business Valuation, a Utah business analyst.
How To Open Your Own Physical Therapy Practice
**Disclaimer: These numbers are provided for educational purposes only. As such, the information provided does not constitute valuation advice and should not be treated as such. These multiples do not represent the valuation opinions of Peak Business Valuation or any of its professional valuations. Instead, you should seek the guidance and advice of a competent business appraiser regarding any matter covered in this article.
Physical Therapy & Rehabilitation Clinics
According to our data, physical therapy practices sell for an average of 0.52x – 0.77x revenue. The term leverage is a measurement number that refers to the value of a business. It is calculated by raising the amount of money or selling the business you do at a higher valuation.
For example, if the exercise makes $950,000 in revenue and trades at a 0.54x multiple, then the value of the business is approximately $553,000.
Usually not much money is used to evaluate the process(es) of physical therapy. Physical therapy procedures vary depending on the collection. As such, collection is more important, i.e. how customers pay through insurance, Medicare, fees, etc. Other factors that can affect the quantity of money include government policy, labor skills, the market, and prices. For more information on value drivers, schedule your free consultation today! And read Values Drivers for a Physiotherapy Practice.
The average SDE frequency of exercise therapy falls between 2.06x – 2.95x. Apply this amount to the SDE to obtain the exercise therapy value. The calculation is as follows:
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For example, if a physical therapy practice has revenue of $700,000 and is assumed to be trading at a multiple of 2.54x, then the value of the physical therapy practice is $1,778,000.
Seller’s discretion is a common cash flow for most small business transactions. SDE is calculated by starting with your company’s EBITDA and adding in the return on investment that the new owner may not have made. These costs may include the owner’s fee and the manager’s salary. In addition, other expenses such as cars and non-returnable goods, or activities such as legal fees and consultations. For more information, see Seller Discretionary Earnings.
This method is primarily used as a valuation method for small businesses with sales of less than $3 million.
The average EBITDA multiple for physical therapy practices over the past five years ranges between 3.12x – 4.45x. Below is the gross EBITDA calculation.
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For example, Exercise Therapy has an EBITDA of $1,500,000 and an EBITDA multiple of 3.4x. Using the above measurements, the value of exercise therapy is $5,100,000.
EBITDA is a quantitative measure that measures a company’s return on investment (ROI). This quantity is chosen after being normalized for differences in the nature of income, taxes and fixed assets. Normalized ratios allow comparison with other similar businesses. Normalization is the process of removing non-recurring costs or expenses from financial measures such as EBITDA, EBIT or profits. When profits are normalized, the resulting number represents the amount of revenue the customer expects from the business.
When looking at many physical therapy practices, keep in mind that there are many different factors that affect the business. A professional evaluator will determine which methods and methods to use when evaluating physical therapy procedures. We want to talk to you more about the things that can affect the value of exercise.
Peak Business Valuation, a business appraiser, enjoys working with small business owners to help maximize the value of the exercise. We focus on providing valuable information to help you grow, sell or buy training. We have delivered business value to physical therapy practices across the country. Questions are always welcome. Please schedule your free consultation today!1 White Paper Starting Your Physical Therapy Clinic By Jerry Henderson, PT Do More Research Clinical Software Shopping List Every potential physical therapy clinic owner has his or her own reason for starting a clinic. Many like the freedom and independence that comes with owning a clinic. Others enjoy the challenge of running a busy clinic. Yes, there is always a chance to get a good cash prize. It’s easy to imagine yourself as a clinic owner. It’s hard to make a dream come true. This guide will show you how to create success in your clinic from scratch. Research the potential success of your clinic before investing in it. The biggest mistake you can make is to run with an idea without doing the necessary research. There are four C’s you should know before opening your clinic. They are: customers, competition, compensation and revenue. 1) Customers It is important to know how many potential customers are in your area. By sizing up your market, you’ll have a good idea of whether you’ll be able to fill your appointment book. This is especially important in rural areas, or if you have a particular focus in your clinic. You should be able to answer these questions: How many people live in your area? How many will seek the help you offer? You should also research shipping locations. This is easy to consider if you are already trained in the area where you want to open your clinic. You should know: How many doctors in your area refer patients to your specialty? How far would a referral center recommend their patients travel to receive the care you will provide? Also, ask yourself if you’re the type of person who feels comfortable reaching out to referral sources you don’t know. Where to find customer information: The Internet is a great source of customer information. Demographic websites like infousa.com and the United States census site, census.gov, provide you with valuable data about your community. Your local library may also have access to demographic information with more specific information, such as family age and income.
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2 2) Competition Living in a crowded environment can be an advantage for new physical therapy practices. However, you will find even more competition in urban areas. Keeping up with the competition is an important part of your prospecting process. Need to know: How many physical therapy clinics are there in your area? Do you practice an underrepresented skill? Another problem associated with physical therapists is insurance panels. It is easier to find and keep patients if you are part of their insurance plans. In an effort to keep costs down, insurance companies limit the number of doctors they allow to practice. Your ability to successfully join insurance panels is directly related to the amount of competition in your area. Don’t get heartbroken by investing in a clinic only to find you can’t find your local insurance panel. Need to Know: What are the steps to becoming the provider of choice for payers in your area? How hard will it be to be the desired giver? Are insurance boards already full for your expertise? Where to find this information: Networking with other physical therapists in your area is important. If you are not yet a member of the Private Practice Section (PPS) of the American Physical Therapy Association, now is a good time to do so. Membership allows you to attend local chapter meetings. The PPS APTA Member Mentor Program connects you with experienced independent practitioners nationwide. 3) Payment rates vary across the country. Your expectations should be based on the actual salary you will earn as the owner of your clinic. You should know: How much should you expect to be paid for the visit? How much will you have to write due to denials, and lack of compensation and patient compensation? Where to find this information: Athena Health’s PayerView provides a comprehensive overview of major payers nationwide. Also, you can request information from the payers you want to pay. Yes, friends and mentors in the physical therapy industry are great resources. 4) Costs The number one question every practitioner has is how much will this cost? I have talked to doctors who only spent $100,000 and $500,000 to open a clinic. Real estate
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