You have built a successful sports medicine and performance therapy practice, a business now in high demand with investors. When you start thinking about your future and the possibility of a sale, the first question is always, “What is my practice worth?”
A proper valuation is more than a simple calculation. It requires a deep look at your practice’s financial quality, operational strengths, and specific market position. Getting this right is the foundation for a successful exit. We help owners like you understand the true value of their life’s work and find the right partner for its next chapter.
The Foundation of Your Valuation; Calculating Adjusted EBITDA
The first number any serious buyer will examine is your Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Think of it as your practice’s true, normalized profitability. Your standard profit and loss statement doesn’t show the full picture because it often includes expenses that a new owner would not incur.
The process of finding your Adjusted EBITDA is called normalization. For example, you might pay yourself a salary above the market rate or run a personal car lease through the business. These are legitimate business expenses for you, but they are not operational costs a buyer will inherit.
To calculate Adjusted EBITDA, we add these “owner-specific” expenses back to your stated profit. This gives a potential buyer a clear view of the cash flow they can expect from the practice. Getting this calculation right is the most important first step in the valuation process.
- You can learn more about this core metric in our guide to EBITDA for physicians.
- For a detailed look at the process, see our article on EBITDA normalization in healthcare.
Ready to see your numbers? Request a complimentary value estimate to understand your practice’s starting financial baseline.
What’s Your Multiple? Key Value Drivers for Sports Medicine Practices
Your Adjusted EBITDA is just one half of the valuation formula. The other half is the multiple, a number that reflects your practice’s quality, growth potential, and risk profile. The market for high-quality therapy practices is strong, with recent data showing top-tier practices commanding multiples around 12.8x EBITDA.
Your multiple is not a fixed industry standard. It is determined by several factors unique to your practice. A buyer will assess these drivers to decide how much they are willing to pay for each dollar of your earnings.
| Value Driver | Impact on Your Multiple |
|---|---|
| Practice Scale & Size | Larger practices with higher EBITDA generally receive higher multiples. |
| Owner Dependence | A practice that runs smoothly without your daily involvement is less risky and more valuable to a buyer. |
| Payer Mix | Over-reliance on a single insurance carrier or government payers can be seen as a risk, potentially lowering the multiple. |
| Referral Source Diversity | A broad and stable base of referral sources is a significant strength. |
| Cash-Pay Services | A strong component of cash-based performance or wellness services demonstrates market appeal and reduces insurance risk. |
| Clinical Team & Culture | A stable, credentialed team of providers who are likely to stay after a transition adds immense value. |
Understanding how your practice stacks up across these drivers is key to justifying a premium valuation. For a broader view, you can explore our analysis of valuation multiples across medical specialties.
From Theory to Reality; Calculating Your Net Proceeds
An offer for your practice, known as the Enterprise Value (Adjusted EBITDA x Multiple), is not the amount that will be wired to your bank account. To understand your net proceeds, you must account for a few key deductions.
The calculation is straightforward.
- Start with the Enterprise Value (the headline offer).
- Subtract any practice-related debt that the buyer will not be assuming.
- Subtract any transaction-related costs, such as professional M&A advisory fees.
- The result is your estimated net proceeds before taxes.
This simple math helps you move from the theoretical value to a realistic expectation of your financial outcome.
Structuring the Deal; Earnouts, Rollovers, and Your Second Bite
You may hear terms like “earnouts” or “equity rollovers” and think they are just unnecessary complications. In reality, modern deal structures are strategic tools that can help you achieve your financial goals.
An earnout can bridge a valuation gap. If you are confident about future growth that isn’t yet reflected in your financials, an earnout allows you to get paid for that growth as it happens after the sale.
An equity rollover is an opportunity to roll a portion of your sale proceeds into the new, combined company. This allows you to benefit from the resources and growth of your new partner, giving you what many call a “second bite of the apple” when the larger entity is sold years later.
These structures add sophistication to a deal. When used correctly, they can significantly increase your total financial return. You can read more in our overview of private equity deal structures in healthcare.
Avoidable Errors; Common Mistakes in Sports Medicine Valuations
Practice owners often make a few common mistakes that can reduce their final sale price. Being aware of these can help you prepare effectively.
- Ignoring Intangible Assets. Your brand, community reputation, and referral network are incredibly valuable. Do not let a buyer dismiss these as “goodwill” without assigning them real value. They are the engine of your future earnings.
- Poor Financial Housekeeping. We often find that owners are hesitant to present their financials. It can be a very vulnerable experience. Cleaning up your books and knowing your numbers cold before you go to market builds buyer confidence and prevents negative surprises during due diligence.
- Overlooking Compliance Risks. Buyers will perform a thorough review of your billing and documentation practices. Uncovering compliance issues late in the process can derail a deal or lead to a significant price reduction.
A Partner for Your Practice’s Future
Valuing your sports medicine and performance therapy practice is a sophisticated process. Your final outcome depends on accurate financial presentation, strategic positioning, and skilled negotiation. You have spent years building your practice. Working with an expert partner ensures you realize its full value when you decide it’s time for your next step.
Let’s talk about your goals. SovDoc offers a confidential, no-obligation discussion to help you understand your options and prepare for a successful future. Book a Confidential Strategy Session.
Frequently Asked Questions
What is the first step in valuing a sports medicine and performance therapy practice?
The first step in valuing your practice is calculating the Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This figure represents your practice’s true, normalized profitability by adding back owner-specific expenses that a new owner would not incur.
What factors influence the multiple used in valuing a sports medicine practice?
The multiple reflects your practice’s quality, growth potential, and risk profile. Key value drivers affecting the multiple include practice scale and size, owner dependence, payer mix, referral source diversity, cash-pay services, and the clinical team and culture. Larger practices with less owner dependence and diverse referral sources generally have higher multiples.
How do you calculate the net proceeds from the sale of a sports medicine practice?
To calculate net proceeds, start with the Enterprise Value (Adjusted EBITDA multiplied by the multiple), then subtract any practice-related debt the buyer won’t assume and transaction-related costs like M&A advisory fees. The result is the estimated net proceeds before taxes.
What are earnouts and equity rollovers in the context of selling a sports medicine practice?
Earnouts allow sellers to receive additional payments based on future growth after the sale, bridging valuation gaps. Equity rollovers let sellers reinvest a portion of their sale proceeds into the new combined company, providing an opportunity to benefit from the future growth and eventual sale of the larger entity.
What common mistakes should practice owners avoid when valuing their sports medicine practice?
Owners should avoid ignoring intangible assets like brand and referral networks, which are valuable but often undervalued. They must maintain clean and accurate financial records before going to market to build buyer confidence and avoid due diligence issues. Additionally, compliance risks in billing and documentation should be addressed early to prevent deal derailment or price reductions.