Guide to Selling a Orthopedic & Post-Surgical Rehab Practice in Michigan

The market for Orthopedic & Post-Surgical Rehab practices in Michigan is active. Growth in physical therapy and increased investor interest create significant opportunities for owners considering a sale. However, realizing your practice’s full value requires careful preparation and a deep understanding of the process. This guide provides a straightforward look at the key factors you need to consider, from market conditions and valuation to navigating the final steps of your transition.

Market Overview

If you own an Orthopedic & Post-Surgical Rehab practice in Michigan, you are in a strong position. The current market is supported by powerful national trends that make your specialty attractive to a range of buyers.

National Demand is Rising

The demand for physical therapy is not just stable; it’s growing significantly. The market is projected to expand by nearly 40% over the next decade. This growth is driven by an aging population and the recognized importance of post-surgical rehab for patient recovery.

A Healthy Workforce

This demand is supported by a growing workforce. The employment of physical therapists is expected to increase by 14% through 2033, much faster than the average for other occupations. For a potential buyer, this signals a sustainable and staffable business model.

New Buyers Are Entering the Market

Perhaps the biggest shift is the increased interest from private equity firms. Since 2012, PE investors have been actively acquiring physician practices. They see the stability and growth potential in specialties like yours, creating a competitive environment that can drive up practice values for well-prepared sellers.

Three Key Considerations for Michigan Sellers

A strong market is a great starting point, but success lies in the details. For practice owners in Michigan, a few local factors are particularly important to address before a sale.

1. Navigating State Regulations. Michigan’s Public Health Code has specific rules for physical therapy practices, including how patient data is handled. Buyers will perform due diligence to ensure you are fully compliant. Having your legal and operational house in order is not just good practice. It’s a critical step to avoid issues during a sale.

2. Securing Your Referral Base. Many rehab practices depend on relationships with orthopedic surgeons. With a reported 50% turnover rate for surgeons in their first few years, a practice built on just one or two referral sources is a risk to a buyer. We help owners demonstrate a diverse and stable patient acquisition strategy that gives buyers confidence.

3. Demonstrating Profitability. With rising healthcare costs, showing that your practice is run efficiently is key. Buyers look closely at your profit margins. An average net profit margin for orthopedic groups is around 45%. Knowing how you stack up and demonstrating control over your expenses will have a direct impact on your valuation.

Market Activity: Who Is Buying Practices Like Yours?

The anemic interest in your practice from sophisticated buyers has increased. It27s no longer just about selling to a local hospital or a competing practice. Private equity groups have become major players, and each buyer type has a different vision. Understanding their goals is key to finding the right fit for your legacy and your finances. How we’ve helped our clients in the past:

Finding the right partner isn’t about just taking the first offer. It’s about running a process that creates options, allowing you to choose the buyer whose goals align best with yours. This is how you protect your staff and maximize your return.

The Four Main Stages of the Sale Process

Selling a practice is a marathon, not a sprint. From the day you decide to sell to the day you close the deal, the process can often take a year or more. That’s why we believe that the best time to start preparing is two to three years before you plan to exit. Buyers pay for what is proven, not for potential. Starting early gives you time to get your practice ready to command a premium valuation. Here are the main stages.

1. Preparation. This is where the most important work happens. It involves a deep review of your financials, operations, and legal compliance. We work with owners to clean up their books, address any operational weaknesses, and prepare the documents that buyers will scrutinize during due diligence.

2. Valuation and Marketing. Once prepared, a comprehensive valuation is performed. This goes beyond a simple formula. Then, we create a confidential marketing plan to approach a curated list of qualified buyers without your staff or competitors knowing you are exploring a sale.

3. Negotiation and Due Diligence. After initial offers (Letters of Intent) are received, we help you negotiate the best terms. This leads to the due diligence phase, where the buyer verifies everything about your practice. This is where deals most often fall apart, which is why our preparation in stage one is so important.

4. Closing and Transition. The final stage involves the legal contracts, closing the transaction, and planning for a smooth transition of ownership for you, your staff, and your patients.

What Is Your Practice Really Worth?

Many practice owners look at their net income and assume that’s the basis for their valuation. The truth is that sophisticated buyers look at your practice’s value through a different lens. A proper valuation is the foundation of a successful exit strategy.

Beyond the Profit and Loss Statement

Buyers start with a metric called Adjusted EBITDA. This stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. We calculate this by taking your net income and adding back certain expenses, like your vehicle, excess owner salary, or other one-time costs. This gives a truer picture of the practice’s profitability for a new owner. Most owners are surprised to learn their Adjusted EBITDA is significantly higher than their net income.

The Power of the Multiple

This Adjusted EBITDA figure is then multiplied by a number2–the “multiple”2–to determine your practice’s enterprise value. This multiple is not arbitrary. It is influenced by several factors:
* Scale: Larger practices with higher EBITDA generally receive higher multiples.
* Provider Mix: A practice that doesn’t rely solely on the owner is less risky and more valuable.
* Growth: A track record of steady growth will command a premium.

For a well-run rehab practice, these multiples can be substantial, but getting an accurate assessment requires a deep analysis of market data and your practice’s specific story.

Planning for Life After the Sale

The work isn’t over once the sale documents are signed. A successful transaction includes a plan for what comes next, both for the practice and for you personally. Thinking about these things early in the process ensures your goals are built into the deal structure from the start. Here are three key areas we help owners plan for.

1. Your Transition Role. Most deals require the selling owner to stay on for a period of time, typically one to three years, to ensure a smooth transition. It’s important to negotiate the terms of this role upfront. Will you still have clinical duties? What will your schedule look like? Defining this clearly prevents future misunderstandings.

2. Protecting Your Team and Legacy. You have likely spent years building a dedicated team and a strong reputation in your community. The right buyer will recognize this as an asset. We help you find a partner who values your culture and is committed to retaining your staff, ensuring your legacy continues.

3. Managing Your Financial Outcome. The structure of your sale has major tax implications. How the deal is classified (e.g., asset vs. equity sale) and how payments are timed can significantly change your net proceeds. Planning for the most tax-efficient structure can make a huge difference in your final take-home amount.