Selling your Outpatient Physical Therapy practice is one of the most significant decisions you will make. In Texas, the current market presents a strong opportunity, but capitalizing on it requires careful preparation and a clear understanding of the process. This guide provides insights into market trends, valuation, and key considerations to help you navigate your transition, whether you are planning for a sale in three years or three months.
Not sure if selling is right for you? Our advisors can help you understand your options without any pressure.
A Favorable Market for Texas PT Practices
The market for physical therapy in Texas is strong and growing. This is not just a feeling; it is backed by clear data. We are in a seller’s market, driven by high demand for quality, established practices.
State-Level Growth
Texas is a hotspot for physical therapy. The state projects a 28% growth in employment for physical therapists by 2030. With over 18,000 licensed PTs already active, this indicates a booming demand for services that outpaces the supply of new clinics. For an existing practice owner, this means your established patient base, referral network, and operational history are valuable assets that buyers are actively seeking.
National Trends
This local strength is supported by a national industry forecast to reach nearly $73 billion by 2029. This growth attracts sophisticated buyers, from regional health systems to private equity groups, who are looking to enter or expand in thriving markets like Texas. They are not just buying a job; they are investing in a platform for future growth.
Key Considerations Before a Sale
A strong market is a great starting point, but a successful sale depends on having your house in order. Buyers will look deep into your operations, and being prepared on these fronts is critical. Thinking about these issues early is the first step toward a smooth and profitable transition.
-
Navigating Texas Regulations. Your practice must show clear compliance with the Texas PT Practice Act. Buyers will check if you are correctly handling referral requirements for treatment plans longer than 20 sessions and have meticulous documentation as required by the Texas Administrative Code. Any compliance gaps can become major roadblocks during a sale.
-
Proving Financial Health. Buyers want predictable cash flow. This means your financial records need to be clean and easy to understand. We find that many owners don’t realize how much value is hidden in their books. We help you look beyond just revenue to show your true profitability, considering factors like your payer mix, billing efficiency, and controllabe expenses.
-
Protecting Your Team. Your dedicated staff is a huge part of your practice’s value. A common fear for owners is what will happen to their team after a sale. Planning for this involves finding a buyer who shares your cultural values and structuring a transition that ensures continuity for both your staff and patients.
Your legacy and staff deserve protection during the transition to new ownership.
Understanding Current Market Activity
The physical therapy industry is currently in a phase of active consolidation. Independent practices are being acquired by larger, well-capitalized groups looking for strategic growth. For you, this means there is likely more than one potential buyer for your practice.
Who Is Buying?
The buyers we see in the market today are typically strategic acquirers. These are often established physical therapy groups or private equity-backed platforms looking to expand their footprint in Texas. They have the capital and the operational expertise to grow a practice, and they are willing to pay a premium for a well-run clinic with an established reputation.
What Are They Looking For?
These buyers are attracted to the immediate, stable cash flow that an established practice provides. They are looking for clinics with a strong team, consistent referral sources, and opportunities for growth, such as adding new service lines or expanding to a new location. A practice that can demonstrate this potential becomes a highly attractive acquisition target.
The A-to-Z Sale Process
Many owners think selling a practice is as simple as finding a buyer and agreeing on a price. From our experience, this approach almost always leaves money on the table. A structured, confidential process is designed to protect your interests and create a competitive environment that drives the best possible outcome. The process involves several distinct stages.
| Stage | What It Means for You | Where Expert Guidance Helps |
|---|---|---|
| 1. Preparation | You gather your financials, clean up operations, and get a clear, defensible valuation. | We help normalize your EBITDA to show buyers the true profitability, not just what your tax return says. |
| 2. Marketing | We confidentially approach a curated list of qualified buyers who we know are a good fit. | This prevents your sale from becoming public knowledge and leverages our relationships to create competition. |
| 3. Due Diligence | The top potential buyers will thoroughly inspect your finances, operations, and compliance records. | We prepare you for this intense review, preventing surprises that can lower the price or kill the deal. |
| 4. Closing | You and the buyer finalize legal documents and complete the transfer of ownership. | We work alongside your legal counsel to navigate the complex terms and ensure a smooth transition. |
The due diligence process is where many practice sales encounter unexpected challenges.
How Your Practice Is Valued
One of the first questions every owner asks is, “What is my practice worth?” The answer is more complex than a simple rule of thumb, like a percentage of your annual revenue. Sophisticated buyers value your practice based on its true profitability and future potential.
What buyers really pay for is profit, specifically a metric called Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). We calculate this by taking your stated net income and adding back owner-specific personal expenses or an above-market salary. This shows the true earning power of the practice.
Your practice’s value is then typically determined by a simple formula: Adjusted EBITDA x a Valuation Multiple. While the EBITDA is based on your numbers, the multiple is determined by market factors, including:
- Practice Size and Profitability: Larger, more profitable practices are seen as less risky and command higher multiples.
- Reliance on the Owner: A practice that can run without your daily involvement is more valuable to a buyer.
- Payer Mix: A healthy mix of insurance payers demonstrates stable revenue streams.
- Growth Potential: A clear path to future growth, like an opportunity to add services, will increase your multiple.
Curious about what your practice might be worth in today’s market?
Planning for Life After the Sale
Finalizing the sale is a major milestone, but it is not the end of the journey. The decisions you make about the deal structure will affect your finances and your life for years to come. It is important to plan for these elements long before you get to the closing table.
-
Your Transition Role. Most buyers will want you to stay on for a period of time to ensure a smooth handover of relationships with patients, staff, and referral sources. This transition period is a key point of negotiation. We help you define a role and timeline that works for you.
-
A “Second Bite of the Apple.” Many deals now include an option for the seller to “roll over” a portion of their sale proceeds into equity in the new, larger company. This allows you to receive cash at closing while also positioning you to benefit financially from the future growth of the company you helped build.
-
Tax-Efficient Structures. How your sale is structured as an asset sale or an entity sale has significant tax implications. The difference can dramatically impact your net, take-home proceeds. Planning for the most tax-efficient structure from the very beginning is one of the most valuable parts of the advisory process.
The structure of your practice sale has major implications for your after-tax proceeds.
Frequently Asked Questions
What is the current market outlook for selling an Outpatient Physical Therapy practice in Texas?
The Texas market for outpatient physical therapy practices is strong and growing, characterized as a seller’s market with high demand for quality, established practices. Employment for physical therapists in Texas is projected to grow by 28% by 2030, indicating a booming demand that outpaces new clinic supply. This trend attracts sophisticated buyers including regional health systems and private equity groups seeking to invest in future growth platforms.
What key regulatory and compliance issues must be addressed before selling a physical therapy practice in Texas?
Sellers must ensure full compliance with the Texas PT Practice Act, particularly concerning referral requirements for treatment plans that exceed 20 sessions, and maintain meticulous documentation as required by the Texas Administrative Code. Any compliance gaps can significantly hinder the sale process, as buyers will thoroughly examine these areas.
How is the value of a Texas outpatient physical therapy practice determined?
Practice valuation is primarily based on Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which reflects the true profitability by adjusting for owner-specific expenses and salaries. The valuation formula is: Adjusted EBITDA multiplied by a valuation multiple, which depends on factors like practice size and profitability, degree of owner reliance, payer mix stability, and growth potential opportunities.
What are the typical stages involved in the sale process of a physical therapy practice?
The sale process includes four key stages: 1) Preparation – gathering financial records, cleaning operations, and obtaining a defensible valuation; 2) Marketing – confidentially approaching qualified buyers to create competition; 3) Due Diligence – thorough inspection of finances, operations, and compliance by buyers; 4) Closing – finalizing legal documents and ownership transfer, often with legal counsel support to ensure a smooth transition.
What considerations should a seller have for life after selling their physical therapy practice?
Sellers should plan their transition role, as buyers typically want the seller to stay temporarily to ensure smooth handover. Many deals allow sellers to “roll over” some proceeds into equity in the new company for future financial benefit. Additionally, choosing the most tax-efficient deal structure (asset sale vs entity sale) can greatly affect the seller’s net proceeds, making early planning essential.