Business Valuation for Buying a Physical Therapy Practice
Are you interested in owning a business in the medical field? If so, buying a physical therapy practice could be right for you. A business valuation for buying a physical therapy practice can help you navigate the buying process. In an industry of high regulations and extensive training, owning a business in the medical field can be complicated. A physical therapy practice valuation is essential to the success of a practice.
Peak Business Valuation, business appraiser, is happy to provide you with a valuation for buying a physical therapy practice. With a physical therapy practice valuation, you can make better business decisions and maximize the value of a physical therapy practice. Additionally, you can implement value drivers and identify risks in a physical therapy practice. Schedule your free consultation with Peak using the link below!
What is a Business Valuation for a Physical Therapy Practice?
A physical therapy practice valuation is an analysis of the fair market value of a practice. Business appraisers evaluate the fair market value using the financial documents of a physical therapy practice. This analysis is important for buyers looking to understand the worth of a physical therapy practice. See How to Value a Physical Therapy Clinic to learn more.
Physical Therapy Valuation Methods
Business appraisers use a combination of valuation methods to value a physical therapy practice. The most common valuation techniques for a physical therapy practice are the income approach and the market approach. The income approach values a practice according to its future income potential and current cash flows. The market approach values a practice in comparison to other similar practices in the industry. It utilizes valuation multiples for a physical therapy practice. The Asset Approach may also be applicable for valuing physical therapy equipment. See The Income Approach Made Simple and The Market Approach Made Simple to learn more about valuation methods.
Negotiating a Fair Purchase Price for a Physical Therapy Practice
Negotiating a purchase price is essential when buying a physical therapy practice. Failing to negotiate a purchase price can increase purchasing costs and decrease potential value. A valuation for buying a physical therapy practice provides you with the fair market value of a physical therapy practice. Using a physical therapy practice valuation also increases transparency between buyer and seller.
Peak Business Valuation, business appraiser, can provide you with the fair market value of a physical therapy practice. With a valuation for buying a physical therapy practice, you can negotiate a better purchase price. Doing this will save unnecessary costs, identify risks, and help maximize the purchase of a physical therapy practice. Schedule a free consultation with Peak to get started today!
Building a Strong Physical Therapy Practice Business Plan
After the purchase of a physical therapy practice, a good business plan will help you maximize the value of a practice. Effective business plans can be difficult to create, especially if you don’t understand the value of a practice. A physical therapy practice valuation will help you build a strong business plan that will maximize the value of a practice. Read Using a Business Valuation for a Business Plan to learn more.
Understanding Opportunities of a Physical Therapy Practice
Part of a valuation for buying a physical therapy practice is an analysis of the opportunities of a physical therapy practice. Understanding these opportunities, also called key value drivers, will help you maximize the value of a physical therapy practice. See Value Drivers for a Physical Therapy Practice to learn more. Some value drivers for a physical therapy practice are:
Varied Service Offerings:
Physical therapy practices can maximize value by treating a variety of conditions. Offering musculoskeletal, neurological, and other services attracts a wider range of patients.
Payor Mix:
When valuing a physical therapy practice, a business appraiser will assess the payor mix. Self-pay patients often have higher profit margins than insurance or Medicaid patients. Thus, clinics with a higher proportion of these tend to be more valuable.
Online/Virtual Presence:
Physical therapy offices can increase value by effectively using company websites and social media presence. Additionally, offering telehealth appointments is becoming popular to increase revenue.
Provider Partnerships:
Many physical therapists rely on hospital and provider referrals for their patient base. Having strong hospital partnerships increases recurring patients and drives value.
Reputation & Goodwill:
Many patients rely on a physical therapist’s reputation and goodwill when selecting a physical therapy office. To maintain their reputation, reliable brand names and a strong local presence can be used.
Identifying Risks of Buying a Physical Therapy Practice
Maximizing key value drivers is a great way to increase a practice’s value. Conversely, not accounting for risk can decrease a practice’s value. A physical therapy practice valuation also identifies the risks of a practice as part of the valuation. Some common risks of a physical therapy practice are:
- Ongoing Consolidation: Many larger healthcare systems are acquiring physical therapy offices, thus consolidating the market. This poses a threat to smaller offices that must compete with larger systems.
- Third-Party Payers: In some situations, physical therapy is frequently considered a discretionary expense and not covered by insurance companies. Additionally, changing insurance standards and medicare requirements make collecting payments difficult.
- Government Regulations: The medical field has become highly regulated in recent years. Complying with all government regulations can take time and effort and be costly if not followed exactly.
- High Costs: Physical therapy offices have a high-cost business model. Skilled labor and frequently high legal costs can cut into profits. When valuing a physical therapy practice, the business appraiser will analyze your costs compared to industry averages and competitors.
Securing Financing for Buying a Physical Therapy Practice
Buying a physical therapy practice can be expensive and prospective buyers frequently need external financing. Small business owners frequently turn to the Small Business Administration (SBA) for small business financing. The SBA provides favorable loan terms for small business owners. These loans include terms such as low interest rates, low required down payments, and flexible repayment options.
Peak Business Valuation works with over 90 SBA lenders nationwide. SBA lenders frequently require a professional SBA business valuation as part of an SBA loan. A valuation for buying a physical therapy practice can help in the loan process. Check out SBA Loans or SBA Financing for more information about SBA loans!
Obtaining a Physical Therapy Practice Valuation Report
One of the most essential elements of a physical therapy practice valuation is the valuation report. The valuation report is a summary of the valuation, including the value drivers and risks of a practice. You can use the valuation report before, during, and after the purchase process. Using the valuation report during negotiations and when building a business plan can help maximize the value of a physical therapy practice.
Conclusion
Buying a physical therapy practice can be a great way to capitalize on a strong healthcare industry. The rising population age and increasing excess income present an opportunity for profit for healthcare businesses. Buying a physical therapy practice is one way that you can profit from this strong industry. If you are looking to buy a practice, a valuation for buying a physical therapy practice is an important first step.
Peak Business Valuation is a professional business appraiser proficient at valuing physical therapy practices. Using a physical therapy practice valuation can help you maximize the value of a physical therapy practice. You can identify key value drivers and minimize risks in a physical therapy business. Additionally, you can use the valuation report to negotiate a purchase price and build a strong business plan. Schedule a free consultation with Peak below to get started.
