You have built something special. A practice that combines both speech and occupational therapy offers a level of patient care that standalone services cannot match. But when it comes time to consider a sale, you may find that this unique strength is also a source of complexity. Standard valuation methods often fail to capture the true worth of an integrated model.When you are looking to get a clear picture of your practice’s value, you need a sophisticated approach. This guide will walk you through the key components of a proper valuation, helping you understand how buyers will look at your business and what you can do to prepare.## The Foundation of Your Valuation: Adjusted EBITDAThe most important number in your practice’s valuation is its Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization, or Adjusted EBITDA. Think of this as the true cash-generating power of your practice. It shows a potential buyer what the business can produce under their ownership.We calculate this by starting with your net income and then “normalizing” it. This means we add back expenses that a new owner would not have.For example, you might pay yourself a salary well above the market rate or run personal expenses through the business. A buyer won’t have those costs. We also add back one-time expenses, like the cost of a major software upgrade or a non-recurring legal fee. These adjustments give a more accurate view of the practice’s ongoing profitability.If you want to get more familiar with these financial terms, we have created two helpful resources. EBITDA Explained for Physicians A Guide to EBITDA Normalization for Healthcare Practices## Determining Your Practice’s Valuation MultipleOnce you have your Adjusted EBITDA, the next step is to apply a valuation multiple to it. This multiple is a rating of your practice’s quality, stability, and growth potential. The higher the quality of your business, the higher the multiple a buyer will be willing to pay.For an integrated speech and occupational therapy practice, several factors heavily influence your multiple.| Factor | Lower Multiple | Higher Multiple || — | — | — || Clinical Integration| Services operate in separate silos. | Therapists use fully integrated care plans. || Provider Model| Relies entirely on the owner-practitioner. | Diverse, team-based care with multiple providers. || Referral Sources| Relies on one or two key sources. | Diverse and stable network of referrers. || Payer Mix| Dominated by high-risk or unstable payers. | Stable mix of in-network contracts and private pay. |A practice where therapists actively collaborate on patient care plans is fundamentally more valuable than one where services simply share an office space. Buyers look for this synergy because it leads to better patient outcomes and a stronger business.## What’s a Realistic Multiple? Benchmarks for Therapy PracticesSo, what kind of multiple can you expect? It varies based on practice size, efficiency, and the factors mentioned above.Generally, smaller therapy practices with an Adjusted EBITDA under $1 million might see multiples in the 3.0x to 5.0x range. Larger, more sophisticated practices can command multiples from 5.0x to 7.0x or higher, especially when attracting interest from private equity or strategic buyers.Let’s look at a hypothetical example. Your integrated practice generates $700,000 in Adjusted EBITDA. Because of your strong referral network and well-integrated team, you earn a 5.5x multiple.> $700,000 (Adjusted EBITDA) x 5.5 (Multiple) = $3,850,000 (Enterprise Value)This Enterprise Value represents the total value of your practice.For more information on how different medical specialties are valued, you can review our data. Valuation Multiples by Medical Specialty## From Valuation to Your Bottom Line: Calculating Net ProceedsThe Enterprise Value is the headline number, but it is not the amount that will be deposited into your bank account. To figure out your estimated net proceeds, you need to make a few subtractions.> Enterprise Value – Business Debt – Transaction Fees = Net ProceedsYou start with the Enterprise Value, then subtract any outstanding business loans or lines of credit. After that, you account for transaction-related costs, such as legal and advisory fees. The amount left over is your net proceeds from the sale. A buyer will also expect you to leave a normal amount of working capital in the business at closing.## Common Mistakes to Avoid in Your Practice ValuationWe often see practice owners make a few common missteps that can leave money on the table. Here are some of the most frequent ones. Not Normalizing Financials Correctly. We find that many sellers are hesitant to show a Profit & Loss statement; it’s a vulnerable experience. But failing to properly adjust for personal expenses or one-time costs can significantly understate your practice’s true profitability. Relying on Generic “Rules of Thumb.” You may hear about valuing a practice based on a percentage of annual revenue. This approach is too simple and almost always undervalues a healthy, growing practice like yours. Failing to Document Your Value. A buyer needs more than just your word. A well-prepared valuation report provides the proof they need to understand your practice’s strengths and justify the price. Ignoring the Value of Integration. The synergy between your speech and OT services is a powerful asset. You must be able to clearly explain and document how this integration benefits patients and the business.Properly preparing your financial information before a sale is one of the best ways to ensure a smooth process. A Guide to Financial Due Diligence for Healthcare Practices## Professional Guidance for a Complex SaleValuing an integrated speech and occupational therapy practice requires more than just a calculator. It requires an understanding of the specific factors that create long-term value in your niche. By focusing on Adjusted EBITDA, strengthening the factors that drive your multiple, and avoiding common mistakes, you can position your practice to achieve its full market value.Curious about what your practice might be worth in today’s market? We are always happy to help.Request a Complimentary Value Estimate →
Frequently Asked Questions
What is the most important financial metric to consider when valuing an integrated speech and occupational therapy practice?
The most important financial metric is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). It represents the true cash-generating power of your practice by showing its ongoing profitability after normalizing for expenses a new owner would not have.
How does the valuation multiple impact the value of an integrated therapy practice?
The valuation multiple is applied to the Adjusted EBITDA to determine the practice’s value. It reflects the quality, stability, and growth potential of the business. A higher quality practice with integrated care, diverse providers, stable referral sources, and a stable payer mix commands a higher multiple.
What factors influence the valuation multiple of an integrated speech and occupational therapy practice?
Key factors include clinical integration (fully integrated care plans vs. siloed services), provider model (team-based care vs. owner-reliant), diversity and stability of referral sources, and payer mix (stable contracts and private pay vs. high-risk payers). These factors impact the perceived value and multiple buyers are willing to pay.
What common mistakes should practice owners avoid when valuing their practices?
Common mistakes include not properly normalizing financial statements by excluding personal or one-time expenses, relying on simple revenue-based rules of thumb, failing to provide documented proof of value, and ignoring the added value from integration between speech and occupational therapy services.
How do you calculate the net proceeds from the sale of an integrated therapy practice?
To calculate net proceeds, start with the Enterprise Value (Adjusted EBITDA x Valuation Multiple), then subtract any outstanding business debts and transaction fees such as legal and advisory costs. The remaining amount is the expected net proceeds to the seller, after accounting for necessary working capital left in the business.