How To Value A Physical Therapy Practice – The U.S. physical therapy industry consists of more than 132,000 practicing physical therapists. This industry includes professionals who provide medically prescribed rehabilitation for patients with pain and injuries through outpatient services. Overall, the industry has a total annual revenue in the range of $48 billion. Below is a quick summary of what physical therapy practice reps look like.
Be sure to also check out our post on valuing a physical therapy practice. To better understand how to value a physical therapy practice, schedule a free consultation with Peak Business Valuation, Business Appraiser Utah.
- 1 How To Value A Physical Therapy Practice
- 2 Boost Your Clinic’s Value With A Physical Therapy Value Proposition
How To Value A Physical Therapy Practice
**Disclaimer: These multipliers are for educational purposes only. As such, the information provided is not diagnostic advice and should not be acted upon. These multiples do not represent the valuation opinion of Peak Business Valuation or any of its valuation professionals. Instead, you should seek guidance and advice from a qualified business valuation professional on the issues discussed in this article.
Physical Therapy Statistics, Facts & Demographics
According to our data, physical therapy practices are sold at an average of 0.52-0.77 times earnings. The term multiple is a valuation metric that refers to the expected value of a business. It is calculated by multiplying the company’s revenue or sales volume by a valuation multiple.
For example, if a physical therapy practice generates $950,000 in revenue and trades at a multiple of 0.54, the company’s value is approximately $513,000.
The revenue multiplier is not typically used to value a physical therapy practice. Physiotherapy methods are different from combination. As such, collections are especially important in how customers pay through insurance, Medicare, cash, etc. Other factors that can affect income multiples include government regulation, labor skills, the market, and prices. To learn more about Value Drivers, book a free consultation today! and review the Physical Therapy Practice Values Guide.
The average SDE multiplier for physical therapy practices ranged from 2.06 to 2.95 times. Apply this multiple to the SDE to obtain the implied value of the physical therapy practice. The calculation is as follows:
Physical Therapy Clinic
For example, if the seller of a physical therapy practice has revenue of $700,000 and has an estimate of 2.54 times the sales price, the value of the physical therapy practice is approximately $1,778,000.
Seller discretion is a common cash flow multiplier used for small business transactions. SDE is calculated by starting with your company’s EBITDA and adding back potential expenses that the new owner would otherwise not incur. These costs may include owner’s compensation and manager’s salary. In addition, other expenses such as car and one-off expenses or incidentals such as legal fees and counselling. See Seller Discretionary Revenue for more information.
This approach is often used as a valuation method for small businesses with less than $3 million in sales.
The average EBITDA multiple for physical therapy practices over the past five years is between 3.12 and 4.45 times. Below is the EBITDA multiple calculation.
How Much Does Physical Therapy Cost?
For example, a physical therapy practice has EBITDA of $1,500,000 and an EBITDA multiple of 3.4 times. Using the metrics above, the estimated value of a physical therapy practice is $5,100,000.
The EBITDA multiple is a valuation ratio that measures a company’s return on investment (ROI). This multiplier is preferred because it is normalized for differences in capital structure, taxation and fixed assets. Normalized ratios allow comparison with similar companies. Normalization is the process of removing non-recurring costs or revenues from financial metrics such as EBITDA, EBIT or revenues. Once revenues are normalized, the resulting number represents the future revenue potential that a buyer would expect from the business.
When looking at a physical therapy practice multiplier, keep in mind that there are many unique factors that affect a business. The evaluator determines which methods and repetitions to use in evaluating physical therapy practice. We would be happy to discuss with you more about the factors that may affect the value of a physical therapy practice.
Peak Business Valuation, a business appraiser, enjoys working with small business owners to help maximize the value of a physical therapy practice. We focus on providing valuable information to help you grow, sell or buy a physical therapy practice. We have provided business rates for physical therapy practices across the country. Questions are always welcome. Contact us today to schedule a free consultation! Carolyn Young is a business writer who focuses on business concepts and business building. He has over 25 years of experience in business roles and has written several business textbooks.
Boost Your Clinic’s Value With A Physical Therapy Value Proposition
David has been writing and teaching about business, finance and globalization for over a quarter of a century, starting at a small New York consulting firm in the 1990s.
As Baby Boomers enter their golden years, the need for physical therapy has increased, causing the market to expand by a third over the past decade. If you’re a physical therapist, you can start your own clinic to improve the quality of life for patients, tap into a $40 billion market, and make the best living following your passion.
But they don’t teach a lot of business skills in physical therapy school, so you have to learn how to cut through the red tape and become an entrepreneur. Fortunately, this step-by-step guide covers everything you need to know to start and run a successful physical therapy clinic.
Do you want to register your company? A Limited Liability Company (LLC) is the best legal structure for a new business because it is quick and easy.
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There are pros and cons to starting a physical therapy business that you should consider before deciding if it’s right for you.
Start-up costs for a physical therapy clinic range from $12,000 to $30,000. The rent and furnishing of the clinic premises is the primary cost. If you have limited funds, you can cut costs by starting as a mobile and virtual physical therapist, visiting your clients and offering online therapy to build your reputation. This will save you $5,000-$10,000 in startup costs, but you will only be able to carry a limited number of devices into your patients’ homes.
Either way, you need to get malpractice insurance. If you are not a physical therapist, you can find information about becoming one through the American Physical Therapy Association.
To practice as a physical therapist in the United States, you must obtain a physical therapy degree from the Accreditation Commission on Physical Therapy Education in a physical therapy education program accredited by the Commission on Physical Therapy Education and pass a state licensing exam. Programs typically last three years and most require a bachelor’s degree.
How Much Do Physical Therapists Make?
The average price for a one-hour physical therapy session is $100. If you’re starting a small solo clinic, your profit margin after rent and overhead should be around 50%.
In the first year or two, you could have 25 sessions a week bringing in $130,000 a year. This would mean a profit of $65,000, assuming a 50% margin. As your business grows, your clinic can offer up to 80 sessions per week. At this stage, you hire staff, including other physical therapists, reducing your profit margin to about 20%. With an annual income of $416,000, you make a profit of about $84,000.
If you’re still not sure if this business idea is the right choice for you, here are some related business opportunities to help set you on your way to business success.
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How Is Pelvic Floor Physical Therapy Done: What To Expect
Now that you know what is involved in starting a physical therapy clinic, it is a good idea to refine your concept to prepare to enter the competitive market.
Market research will set you up for success, even if you’re already sure you have a great product or service. Conducting market research is important because it helps you better understand your customers, your competitors, and your business landscape.
Research physical therapy clinics in your area to evaluate their services, price points, and customer reviews. You are looking for a market gap to fill. For example, your local market may lack a sports medicine clinic, a sports training clinic, or an electrical stimulation therapy clinic.
You might consider targeting a specific market by including a specific aspect of your industry, such as treating shoulder or knee pain or yoga and meditation therapy.
Why Being A Clinical Specialist Is Worth The Investment
The average price for a one-hour physical therapy session is $100. After rent and overheads, you should aim for a profit margin of around 50% as a sole trader.
Once you know your costs, you can use this step-by-step profit margin calculator to determine your markup and final price points. Keep in mind that the prices used in marketing should be changed if the market approves.
Your target market is broad. You should expand your marketing to include sites like TikTok, Instagram, and Facebook. You should also try to work with private practice doctors to get a referral. You can connect with them on LinkedIn or find them.
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