There is a fair amount of sales data available for physical therapy centers in the United States. This lets us know the precise amount yours is worth through a deep dive into the specific of your company. In this review, we discuss how to determine the value of your physical therapy center. Moreover, we discuss how to sell a physical therapy center with our four-stage process.
About The Physical Therapy Industry
Physical therapy centers administer medically prescribed physical therapy treatment, for patients who have endured injuries, disease, or weakness in muscles, joints, nerves, tendons, and bones (Business Reference Guide). They may also offer preventive services to help patients remain in good health.
There are certain challenges that owners must be aware of as it pertains to selling their physical therapy center. Of course, the buyer must have a physical therapy license and the ability to obtain insurance. This eliminates the potential to sell to investors, particularly those who do not have a PT license. It is also more difficult for buyers to find financing within this industry. For this reason, seller financing and/or a much larger significant down payment may be required.
The good news is the physical therapy industry, according to WebPT is expected to grow by 20% or more from 2020 to 2030. This is due to an aging population and a desire to decrease dependency upon pharmaceutical medications to treat muscle, joint, and bone disease and discomfort. It is also an attractive business model where the owner has the opportunity to help people feel better daily and decrease their dependency upon medications; most PT professionals enter the industry for the purpose of helping others. The most recent industry numbers and projections are:
- There are approximately 150,500 advertising agencies in the U.S.
- There was a 3.2% annual growth for the advertising industry from 2018 to 2023
- The advertising industry generates $46.0 billion in annual revenue
- The annual profit for the advertising industry is $4.6 billion
- Experts predict a sizable increase in annual growth (2.5%) from 2023 to 2028
How to Value a Physical Therapy Center
A market approach is the best way to determine the value of your physical therapy center. This professional valuation method determines your fair market value, meaning the amount a fair and reasonable buyer is willing to pay for your center. Notably, it applies your EBITDA, SDE, and net sales to the following rule of thumb data:
- Advertising agencies sold between 1.67 and 2.90 times the Seller’s Discretionary Earnings (SDE)
- Advertising agencies sold between 3.50 and 4.31 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Advertising agencies sold between 0.48 and 0.98 times the annual net sales
Non-financial considerations should also be a factor in the market value of your physical therapy center. For instance if you have excellent growth potential, meaning you have only tapped into a portion of the market that you have available to you, then buyers are willing to pay more. Other non-financial considerations include your geographic location, the quality of your workforce and services, reputation, and reason for selling.
How to Sell a Physical Therapy Center
Organization and structure are of the utmost importance when you sell your physical therapy center. There are numerous steps and each is filled with unique complexities. Your business broker should follow a similar process as the below when they help you sell your physical therapy center:
- Plan your exit strategy
- Find a buyer
- Due diligence
- Closing and transition
Plan Your Exit Strategy
A business valuation (see above) allows you to determine the worth of your physical therapy center. If you are satisfied with your value, then it may be best to proceed with the sale as quickly as possible. In other cases, such as if you want to improve your value before you seek a buyer, it may be best to wait. Once you decide to move forward with the sale, you should plan your exit strategy goals. In doing so, you want to answer the question of “Why am I selling?”
Find a Buyer
There are several stages to finding a qualified buyer who has made a fair offer that you would like to accept. These stages are as follows:
- The initial offers – You may receive a dozen or more offers from potential buyers for your company. Some offers may be well below what you would accept and others may be from unqualified buyers who may not be able to fulfill their commitment. Ultimately, your business broker should help you shorten your list after initial offers arrive, so you are not wasting precious time during negotiations
- Counter offers (negotiations) – Your business broker should understand how to negotiate with professionalism and in an effective manner. Negotiations are often an emotional time for buyers and sellers, so the broker should know how to monitor this stage well.
- The accepted offer – Ultimately, you will accept an offer with a buyer that has made a generous offer of fair market value and is willing to meet your non-financial goals (i.e. keep your current physical therapists and other team members on staff).
- The letter of intent (LOI) – Lastly, the buyer you choose will secure their intent to purchase with a signed LOI, which sets in motion the due diligence stage (see below).
Due diligence is the period in time after the buyer’s offer is accepted and before closing. During this stage, the buyer has the opportunity to review all of the company’s information to verify that they would like to proceed with the purchase. Notably, due diligence includes a detailed review of all company documents, a walk-through of the physical therapy center (along with monitoring daily operations), and meetings with the seller (and others who need to be notified of the sale prior to closing).
In some cases, clients need to be notified as well to ensure they will remain with the center after ownership change. For example, if your physical therapy center receives a large percentage of its profit from a professional football team, then the seller may want assurance that the football team will remain once they take over.
Closing and Transition
You will close the sale as soon as all due diligence tasks are completed. You and the buyer will both attend closing, along with your respective attorneys (if applicable). In some cases, an escrow agent and/or a member of the buyer’s financial institution (lender) may attend as well. During closing, you both will review and sign the purchase agreement, and the buyer will transfer the payment. Afterwards, you will begin transferring the ownership to the buyer. Training may be involved for up to a year after the sale as well, depending on the terms you negotiated with the buyer.
Sigma Mergers and Acquisitions Can Help You Sell Your Physical Therapy Center
Here at Sigma Mergers and Acquisitions, we believe there is no one better to help you sell your physical therapy center. We have helped sell 600+ businesses and have 20+ years of experience. Contact us today if you would like to learn more and get started with a free, no-obligation business valuation.