15 Ways To Increase The Value Of Your Practice In 2 to 5 Years

First off this post isn’t for everyone. It will mainly be useful to you if you’re looking to sell your business in 2 to 5 years.

It can also be something to think about if you’re just “toying” with the idea of selling your private practice.

However if you’ve never planned to sell and never want to sell, then it might be a waste of your time.

BUT… with that said, if you want to find out what can make your business more valuable, what other buyers are looking for AND what the market values in a private practice…then read on.

If you’ve been looking to sell your business then you might already know it can be a daunting process.

There’s so much information, legal terms and concepts that are just plain confusing.
Things you’ve never needed to know as a private practice owner.

Yet, you need to clear this confusion up, as it’s stuff that business brokers need to know.

While you may be in the process of automating your business so that you can step back and sell, there are other factors that can make your business sell more.

Other things you may need to improve before you start calling up brokers.

I got in touch with Paul Welk, an attorney over at Tucker and Arnesberg, on what private practice owners should start looking at if they want to exit.

He shared with me the following 15 selling points:

If you start taking care of these 15 selling points, then you can sell your private practice for a lot more money when you’re looking to exit:

1. EBIDTA

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First thing to look at is your EBIDTA. This stands for Earnings Before Interest, Taxes, Depreciation and Amortization.

It’s really a fancy way for accountants to describe your profitability. How much profit does your practice make a year?

There’s a lot of technical information out there on EBIDTA, and there’s no way to do the topic justice in this article.

Your first priority if you’re looking to sell is to look at your EBIDTA. But once you find this out, what next? Do you immediately call a broker and start arranging to sell?

Wait. There’s a lot more that goes into what a buyer and a broker looks for. You need to consider other factors.

2. Multiple.

The very next thing to think about is a multiple.

The concept of a multiple is simple, you can think of it like this:

Value of Business = EBIDTA (annual profit) x Multiple.

This multiple varies across industries. However in private practice it’s determined by the size of your business.

A smaller practice with an EBIDTA of $100,000 a year, may have a multiple of 3.

But for a larger practice with an EBIDTA of $1 million? The multiple may be much higher.

It’s something to consider, and something to learn about in your market when considering to sell your business.

3. Willingness To Remain

The next thing that can affect the price of your business is your willingness to remain.

If you as an owner just wants to sell and leave, then this reduces the value of your business.

Especially if you’re doing a lot of patient care. This is because you have intrinsic value to the business.

So if you’re doing the bulk of patient care and you aren’t willing to remain, then you’re going to have difficulty justifying the value of your business.

4. Number of Locations.

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Another factor to think about is how many locations does your business have.

Obviously the more locations you have, the more value you have. This is because your business is diversified across different regions and different demographics.

A private practice with 10 locations is going to sell higher than a private practice with 3 locations.

5. Desirability of Location

This is self explanatory. The more desirable the location of your practice, the more valuable it will be.

6. Diversity of Referral Sources

pasted image 0 (3) This is huge.

This is something we talk a lot about here at Breakthrough PT Marketing.

If you rely upon one orthopedic surgeon for referrals, then it isn’t good for the value of your business.

If however physicians only make up a quarter of your referrals, and you have over 200 referral sources, then your business is of much more value to a buyer.

7. Accounts Receivable and Aging

This is really about billing.

If you have a lot of money owed to you, and it’s old, let’s say it was due 120 days ago, then this will harm the value of your practice.

If however you are paid promptly and any money due is less than 30 days, then this will improve the value of your business.

8. Owner Reputation

This is self explanatory. The higher your reputation, the more valuable your business.

9. Staff.

pasted image 0 (4) If you have a high staff turnover, and you’re hiring a new PT every 2 months, then it’s going to harm your value.

Put yourself into the shoes of the buyer. Which would you rather have? A high turnover staff, or a stable staff who are good at their job, have integrity and are reliable?

If they have to come in and train everybody because you just hired a round of new grads, then it’s going to cost them, and means they’ll buy your practice at a lower price.

10. Non-Competes.

Now I have to say, I’m very much against non-competes. So I was surprised when I heard about this.

However these may be valuable to the buyer, so it may be something to consider.

11. Years in Business

This is again self explanatory. The longer you’ve been in business, the more of a track record you have, and the more valuable your business will be.

12. Profitability and Trending.

If your business is growing, or crashing this will obviously affect the value of your business.

13. Payer Mix.

If you are relying on one type of insurance company as the bulk of your payments, this will harm your business.

For example in my area in the past the bulk of our payers came from Geisinger.

Now let’s say hypothetically 75% of my payer mix is from Geisinger and they change their terms and cap each visit at $58, this will dramatically harm the value of my business.

If however you have a diversified payer mix, then this will put the buyers fears at ease, and raise the value of your business.

14. Growth Opportunity

This is again obvious. If your practice is in an area which has the opportunity to grow, maybe by building other clinics, or by capturing more of the market, then this will be a consideration in valuing your business.

15. EMR Platform

The last thing to consider is whether your business has invested in an Electronic Medical Records (EMR) software platform. If you haven’t, and the buyer has to come in and invest in implementing an EMR platform, and training the staff, then it will affect the value of your business.

Also if you have a different EMR from the buyer (if they own practices themselves) then this, again, might harm the value of the business. The transition will cost the owner time and money.

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As you can see, a lot of these factors are really about putting yourself in the buyer's shoes. If you can minimise the amount of time and money they have to spend on your business once they buy it, then the more valuable your business will be.

I’m going to build out a whole module over this topic, but I wanted you to have this information now, so you could start taking action.

Here’s the thing: I’m not a broker. In fact I never ever thought about my practice as a “business”.

Our clinics are our babies. They are a result of our blood, sweat and tears. We’re emotionally attached, and we rarely think about them as an asset.

As a business that can be sold.

I used to think this way for a long time, until I stumbled upon a book.

A book which changed my life.

It changed the way I viewed my practice, and business in general.

It’s a book which may change your mindset.

If you’re interested, I’ll send you over a copy. Free with no strings attached.

Just send me an email at chad@breakthroughptmarketing.com with the subject line “2 to 5 year book” and I’ll know what your talking about.

To your Private Practice Success,

-Chad

PS- Really exciting news for you! I am about to launch my new book:

“Killer Marketing Secrets for Private Practice PTs. How to Thrive in the New Healthcare Economy: POPTS, Hospital Systems, Insurance Companies and Direct Access”

Direct Access Marketing Killer Secrets Book by Chad Madden

Super excited about this…

My team and I put a lot of work into the book…to help other Private Practice Owners…

Here I want to give you a glimpse of what I cover in the book…

And how you can claim a copy for yourself…if you’re a Private Practice Owner (no POPTS or Hospital PTs).

We took all of the tools and systems I’ve used in my Private Practice…and pared it down to only the most effective ones…

We then looked at what other owners have done with these systems after going through the Killer Marketing Training…and organized this in a way that others have shown to be the most successful…

Here’s how Killer Marketing Secrets is laid out:

Phase I: Fix Your Funnel.
Here we take a look at the most vital systems to have in place BEFORE you go out and start marketing your practice.

Phase II: Your Patient List
We’ve already covered this to be the #1 Single Biggest Asset Private Practice PTs Ignore…here’s how to get the low hanging fruit in your marketing efforts.

Phase III: Referral Sources
There’s a new game in town regarding how Private Practice PTs are successfully marketing to physicians…”We need referrals” is out…Here we cover the new game including the BIG Secret to getting New Patients from Hospital Systems and POPTS Physicians.

Phase IV: Workshops
It’s a craze…because it’s been successful for so many Private Practice PTs. This is the most successful way I’ve ever seen…to attract Direct Access patients from the general public. Perfect for both the new start-up and the established Private Practice. “37 Direct Access Patients in 1 Hour” is covered here.

PLUS some super new insights on how we’re magnetically attracting new patients with social media and email.

How can you claim your copy of Killer Marketing Secrets?

Click Here to Join the the Direct Access Marketing Course Now

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