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Valuing a Counseling Center

Valuing a Counseling Center

Unlike many other industries, the COVID-19 pandemic did not have a detrimental effect on the counseling center industry. Despite the economic downturn, this industry has seen growth in the past five years, according to IBIS World. This is because there is increasing demand for mental health treatment. Whether you are buying, growing, or selling a counseling center, it is important to understand the fair market value. In addition, it is important to know what factors drive the value of a counseling center. 

There are many factors a business appraiser considers when valuing a counseling center. As a business appraiser, Peak Business Valuation works with many individuals who are buying or selling a counseling center. The first step in doing so is obtaining a business valuation. As part of a valuation engagement, we discuss some of the key factors a business appraiser uses when valuing a counseling center. Keep in mind the below factors are only a guide. For more specific information about the value of a counseling center you are looking to buy, grow, or sell, schedule a free consultation with Peak Business Valuation, business appraiser. 

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Market Multiples for a Counseling Center

Below are average valuation multiples for a counseling center. A valuation expert uses multiples when determining the value of a counseling center.

  •       SDE Multiple Average Range: 1.94x – 3.14x
  •       EBITDA Multiple Average Range: 3.37x – 5.40x  
  •       Revenue Multiple Average Range: 0.40x – 0.69x
**Disclaimer: These multiples are for educational purposes only. As such, the information provided does not constitute valuation advice. These multiples do not represent the valuation opinion of Peak Business Valuation or its valuation professionals. Instead, seek the guidance and advice of a qualified business valuation professional about any matter in this article.

How is a counseling center most often valued?

A valuation expert uses a variety of business valuation approaches to determine the value of a counseling center. Often cash flow multiples – SDE and EBITDA multiples are most applicable. However, the valuation expert uses their knowledge and expertise to determine what methods and multiples are applicable to your counseling business.

By knowing what your counseling center is worth, you can begin to take steps to increase the value of your counseling center. This is helpful whether you are expanding your counseling center, buying a new counseling center, or maximizing the value of your counseling center before selling. Here are a few ideas to help increase the value of a counseling center. If you are searching for a more extensive valuation, schedule a free consultation with Peak Business Valuation, business appraiser.

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Key Success Factors

Peak Business Valuation, business appraiser, values counseling centers on a regular basis. Below are several success factors or key value drivers that can help distinguish your counseling center. They will also help increase the value of a counseling center. For more ideas see Value Drivers for a Counseling Center.

Economy

The first success factor for counseling centers is the economy. Economic downturns affect every industry differently. For the counseling industry, economic hardship increases the demand for mental health counseling. Depression and anxiety increase with the stress of economic downturns. This increases the demand for mental health treatment. The COVID-19 pandemic is one example of this. Many counseling centers made the switch to telehealth appointments and were able to continue making a profit.

Yet, disposable income influences how much clients can and are willing to pay for mental health treatment. Low income during economic hardship decreases the ability of clients to pay for services.

Over the past 5 years, both divorce and marriage rates have been declining. The demand for marriage counselors is decreasing, while the demand for other counseling services is increasing. Consider the trends in the economic environment to better understand how your counseling center can remain competitive.

Peak Business Valuation analyzes the current economic environment when valuing a counseling center. They also analyze how your counseling center compares to its competitors. 

Payment Options and Insurance

Next, payment options and insurance influence the value of a counseling center. Clients use different payment methods for mental health services. Insurances are expanding to cover mental health more fully. Medicaid and Medicare are starting to cover mental health services as well. 

Many patients are opting out of health insurance enrollment. As a counseling center, it is important to offer out-of-pocket options to expand your customer base. The cost of services and availability of those services to different groups of people affects the value of a counseling center. When choosing payment options, it is important to consider multiple avenues for the benefit of clients.

Payment options and insurance options reflect in your financial statements. When valuing a counseling center, a business appraiser, such as Peak Business Valuation, analyzes financial statements and your payment mix. For more information, reach out by scheduling a free consultation.

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Specialization

Last, specialization is a success factor for counseling centers. There are many therapeutic techniques and areas of expertise. It is important to stand out from competitors by being an expert in certain areas. This can include couples therapy, child therapy, or psychological disorders, among others. Finding a niche is important, especially for small or independent counseling businesses.

There are many ways a counseling center can advertise its niche. This may include events, podcasts, blog posts, books, group sessions, or online courses. Peak Business Valuation compares a counseling center to its competition when performing a business valuation. Specialization helps a counseling center to stand out and perform better financially.

Summary

When a business appraiser is valuing a counseling center they consider these factors and more. An understanding of the value of a counseling center is important whether you are looking to buy, sell, or grow a counseling center. A business valuation can help you understand the fair market value of a counseling center. Additionally, it identifies opportunities to maximize the value of a counseling center.

As a business appraiser, Peak Business Valuation values counseling centers across the country. Reach out with any questions you have about the value of a counseling center. To schedule your free consultation, click the link below. We look forward to hearing from you!

 

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