How Buyers Value a Physical Therapy Practice

Every physical therapy owner who starts thinking about a sale asks the same question first: what is my practice actually worth? The honest answer is that it depends on several variables that interact in ways that make a simple formula unreliable. Understanding what buyers actually look at — and what drives their offers up or down — will make you a significantly more informed seller.

The Metric Buyers Start With: Adjusted EBITDA

Sophisticated buyers — private equity firms, strategic consolidators, and large regional platforms — don't value your practice based on revenue or what your equipment cost. They value it based on Adjusted EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, normalized to reflect the true ongoing earnings of the business under new ownership.

This means starting with your net income and adding back owner-specific expenses that a new owner would not incur: above-market owner salary, personal vehicle expenses, one-time legal fees, de novo startup costs, and other personal items run through the practice. This "addback" analysis is one of the most consequential steps in the sale process — every dollar of legitimate addback that survives due diligence increases your enterprise value proportionally.

Every practice is different, and Mihama does not publish generic multiple ranges. What the market will pay for your specific practice depends on a combination of factors that only become clear when qualified buyers are competing against each other. What we can tell you is what moves valuations — and by how much.

The Single Biggest Driver: Owner Dependency

Of all the variables that affect what buyers will pay, owner dependency is the one most within your control — and the one most likely to hurt you. If you personally treat a significant portion of your clinic's patients, buyers will apply a meaningful discount because they are acquiring a business, not a job. A practice whose revenue depends on one individual is not a transferable asset in the way a buyer needs it to be.

The goal before going to market is to demonstrate that the business operates independently of you. The more your practice can function — and grow — without your direct clinical involvement, the more confident a buyer will be in the stability of what they're acquiring, and the more they will pay for it. This is one of the most concrete, controllable levers available to a seller preparing for a transaction.

Payer Mix

Practices heavily concentrated in a single payer — whether Medicare, a dominant commercial insurer, or workers' compensation — carry more reimbursement risk in buyers' eyes. A diverse mix of commercial insurance, Medicare, workers' compensation, and some cash-pay reduces the exposure to any single payer's rate changes or policy shifts, and buyers price that stability into their offers.

Referral Source Diversification

A practice that generates the majority of its patients from a single orthopedic surgeon is a single relationship away from a significant revenue problem. Buyers look for diversified referral networks: multiple physician relationships, direct access patient volume, employer contracts, and digital patient acquisition. Concentrated referral dependency is a risk factor that will be identified in due diligence and reflected in offer terms.

Geographic Position

Practices in markets where a given buyer does not yet have a presence command premium offers from that buyer — your practice is not just a cash flow stream but a geographic foothold. This is one of the strongest arguments for running a competitive auction with multiple buyers rather than negotiating with a single party: different buyers assign very different strategic value to the same practice depending on their existing footprint. You don't know which buyer values your location most until they are all at the table simultaneously.

Management Team Depth

Practices with a clinic director or lead therapist who can continue running operations after closing are significantly more attractive than those where the owner is the de facto operations manager. Building that layer of leadership — even 12 to 18 months before a sale — has an outsized impact on buyer confidence and the terms they are willing to offer.

Why the Same Practice Gets Very Different Offers

It is common in a well-run competitive auction for the same practice to receive offers that vary substantially — not because the practice changed, but because different buyers have different strategic motivations. A buyer trying to build density in your market will pay more than one who is running a generic acquisition screen. A PE firm at the early stage of a regional roll-up will pay more than one already saturated in your geography.

This is the core argument for a structured process: you cannot know what your practice is worth to the full universe of buyers until they are competing against each other. A one-off negotiation with a single buyer always leaves that information — and often significant value — on the table.