ValuAdder Business Valuation Blog

Are you planning on a valuation for a physical therapy practice? Physical therapy services are a large part of the health care industry. Currently, there are some 34,300 physical therapy clinics in the US classified under SIC 8049 and NAICS 62134 industry classification codes.

As a health care industry sector, these businesses generate over $24.5B in annual sales. There are just over 309,000 professional therapists and staff employed in this health care sector.

The average physical therapy clinic does about $715,000 in annual receipts and employs a staff of 9.

Professionally managed physical therapy centers with strong relationships with the referring doctors are desirable acquisition targets. The buyers are sometimes competitive clinics and, more often, investors looking to expand their holdings in the growing health care industry.

Clinic value established by market comparison

Selling prices of physical therapy clinics give you a strong indication of what it is likely worth. By observing what similar clinics sell for you can come up with valuation multiples for direct comparison to a physical therapy practice you want to value.

Here are the typical valuation multiples used to appraise physical therapy businesses:

  • Business sale price to annual revenues plus inventory.
  • Business sales price to SDCF
  • Sale price to EBITDA

Example: valuing a small physical therapy clinic

To see how other practice sales can shed light on your clinic value, let’s consider a typical clinic with $600,000 in annual sales receipts and inventory of $150,000.

We apply a set of valuation multiples based on revenues to calculate the clinic value as follows:

Multiple Multiple value Business value
Low 0.42 $402,060
High 0.94 $712,500
Average 0.64 $535,200
Median 0.63 $529,140
Average Business Value $544,725

The average of all the figures above is one way to report the physical practice value. You can also consider the range of values in the above calculation. In this case, our sample clinic value would value somewhere between $402,060 and $712,500.

This range reflects the market uncertainty such as the terms and conditions of the business sale, ease of access to acquisition capital, and specific objectives of the buyer and seller that may affect the ultimate business selling price.


stephenia Terry says:

I have a rural Physical Therapy clinic that I have owed since 2002. I am interested in finding out the value and may want to sell in the next year due to retirement. I know my salary, I know my income from rent and quarterly profit draws but is that a determination of its value. I have looked at the EBITDA. Not sure how that determines asking price for my company. I am buying the real estate and have a payment. Fixtures and equipment are functional but not new. Please advise on any way I may try to price this to potential buyers

Harry says:

You need to familiarize yourself with the basics of business valuation. A good place to start is this article on our website.

Then take a look at the different valuation methods you can use to value your clinic.

When you are ready, do your own business valuation to gain an insight into your clinic’s value. The next step would be to come up with a desirable business sale scenario, you can use the Deal Check calculation to account for all the important elements of a business sale.

You will note that both the selling price and terms make a difference. Once you have identified the terms, you can start the search for suitable business buyers who would be willing and able to buy your clinic.

Selling a private business is no walk in the park. Prepare to put in an effort and do your due diligence on business buyer prospects before signing on the dotted line.

Rodrigo Gil says:

I have a out patient orthopedic clinic in Colorado, My question is, that also due to retirement, I am looking for a buyer. What is the best way to find potential buyers and not scared the referring doctors from sending patients. Are there any firms that helps with this? any recommendations?

Harry says:

Yes, indeed, there are professionals that can help you manage your practice sale in confidence. I suggest that you retain a professional business broker bearing the CBI or Certified Business Intermediary accreditation. These experienced professionals are versed in managing all aspects of a private business sale.