The market for pediatric physical therapy in Colorado is experiencing significant growth, creating a powerful window of opportunity for practice owners considering a sale. High demand from a range of buyers is driving strong valuations, but realizing your practice’s full potential requires careful preparation and strategic navigation. This guide provides a clear overview of the current landscape, from valuation drivers to key post-sale considerations, to help you make an informed decision.
Market Overview
If you are a pediatric physical therapy practice owner in Colorado, the current market dynamics are firmly in your favor. The demand for services is not just stable; it is expanding rapidly due to a combination of population growth, heightened awareness of developmental health, and favorable demographic trends. This isn’t a local phenomenon. It is supported by powerful national and global tailwinds, making well-run Colorado practices highly attractive targets for acquirers looking to enter or expand in a thriving market.
Here are a few data points that illustrate this growth:
1. High-Growth Sector: Demand for pediatric physical therapists is projected to grow by 17% nationally.
2. Expanding Industry: The global market for pediatric physiotherapy is expected to grow from $46.8 billion in 2023 to $88.4 billion by 2031.
3. Local Strength: Colorado’s overall physical therapy industry is on a path to become a billion-dollar market, ensuring a robust local ecosystem.
This level of growth means more potential buyers and increased competition for high-quality practices.
Key Considerations
A strong market gets buyers to the door. A well-run practice is what convinces them to pay a premium price. Sophisticated buyers look past top-line revenue and dig into the operational and regulatory health of your business. Before you begin the sale process, you should review these critical areas.
Operational Readiness
How efficient is your practice? Buyers will analyze your patient scheduling, billing and collections, and staffing models. A practice with smooth workflows and a skilled team that doesn’t depend entirely on the owner is seen as a much lower-risk investment. Since payroll is a PT clinic’s largest expense, demonstrating staff efficiency is crucial.
Compliance and Reputation
There are no shortcuts here. Buyers will conduct thorough due diligence on your HIPAA compliance protocols and data security. Any issues in this area can be a major red flag. Similarly, a strong reputation with referral sources and within the community is an intangible asset that adds significant value.
Market Activity
The growth in pediatric PT has attracted a diverse group of buyers to Colorado, each with different goals and valuation perspectives. We are seeing activity from local and regional physical therapy groups looking to expand their footprint, as well as private equity firms seeking to build larger platforms. This competition is healthy for sellers. While specific data is private, general physical therapy practices in Colorado have sold for anywhere from $100,000 to over $2,000,000, depending on size and profitability.
Understanding who you are selling to is as important as what you are selling.
| Buyer Type | What They Look For | What It Means for You |
|---|---|---|
| Strategic Buyer | A practice that fits their existing network and services. | Can be a great cultural fit. Often focused on operational synergy. |
| Private Equity | A strong “platform” to grow or a practice to add to one. | Often offer higher valuations and potential for a future role. |
| Individual PT | A turnkey practice with an established patient base. | The sale may be simpler, but the buyer may have less capital. |
Choosing the right buyer depends entirely on your personal and financial goals.
Sale Process
Selling your practice is a structured process, not a single event. While every deal is unique, the journey generally follows a clear path from preparation to transition. Having a map of the process can help you feel more in control and prepared for each stage.
- Preparation and Valuation. This is the foundational phase. We work with owners to analyze financials, normalize expenses, and determine a realistic and defensible valuation. This is also the time to organize key documents and address any operational or compliance issues.
- Confidential Marketing. Your practice is marketed discreetly to a curated list of qualified buyers. We protect your confidentiality so your staff, patients, and competitors remain unaware while we generate interest from the best-fit acquirers.
- Negotiation and Due Diligence. After initial offers (Letters of Intent) are received, we help you negotiate the best terms. The chosen buyer then begins a formal due diligence process, where they verify all financial, operational, and legal information. This is often the most intensive part of the sale.
- Closing and Transition. Once due diligence is complete, lawyers draft the final purchase agreements. After the deal is signed and funds are transferred, the final step is a smooth transition of ownership to protect your staff and legacy.
Valuation
One of the first questions any owner asks is,
What is my practice worth?
The answer is more nuanced than a simple multiple of your annual revenue. Sophisticated buyers value your practice based on its profitability and future cash flow, which is best measured by a metric called Adjusted EBITDA.
The Key Metric: Adjusted EBITDA
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a snapshot of a company’s operating profitability. We then “adjust” that number by adding back expenses that a new owner would not incur. This includes things like your personal auto lease, discretionary travel, or an above-market owner salary. Properly calculating Adjusted EBITDA is the most important step to revealing your practice s true earning power. Many owners are surprised to see how much higher this number is than their reported net income.
What Drives Your Multiple?
Once you have an Adjusted EBITDA, a multiple is applied to it. For smaller PT practices, this multiple often ranges from 3.0x to 6.0x, but this can change based on several factors. A practice with multiple therapists and low owner-dependency will get a higher multiple than a solo practice. A diverse mix of payers and strong operational systems also push your multiple higher.
Post-Sale Considerations
The day you close the sale is a huge milestone, but it is not the end of the journey. A successful transition is defined by what happens next. Planning for the post-sale period from the very beginning is the key to protecting your financial future and your legacy.
- Structuring the Deal for Tax Efficiency. How your sale is structured has massive implications for your after-tax proceeds. Decisions around an asset sale versus an entity sale, or the inclusion of an earnout, should be made with clear financial and tax advice. This planning can be the difference of hundreds of thousands of dollars in your pocket.
- Defining Your Future Role. Do you want to continue working in the practice, or are you ready for a clean break? The right buyer and deal structure will depend on your answer. This should be a point of negotiation, ensuring your post-sale commitment aligns with your personal goals.
- Protecting Your Team and Legacy. For many owners, ensuring their staff is taken care of is a top priority. Communicating the transition plan and finding a buyer with a compatible culture are critical steps in preserving the practice you worked so hard to build.
Your transition strategy should be as unique as your practice. Getting it right requires a partner who understands your personal goals as well as the market.
Frequently Asked Questions
What is the current market outlook for selling a pediatric physical therapy practice in Colorado?
The market in Colorado is highly favorable for sellers due to significant growth driven by population increases, awareness of developmental health, and demographic trends. Demand for pediatric physical therapy is growing rapidly, making practices attractive to a range of buyers, including local groups and private equity firms.
What are the key factors that influence the valuation of a pediatric physical therapy practice?
Valuation is primarily based on the practice’s Adjusted EBITDA, which accounts for operating profitability after adding back non-recurring or owner-specific expenses. Factors that drive higher multiples include having multiple therapists, low owner dependency, a diverse payer mix, and strong operational systems.
Who are the typical buyers of pediatric physical therapy practices in Colorado, and what do they look for?
Buyers include strategic buyers (therapy groups expanding networks), private equity firms (seeking growth platforms), and individual physical therapists (looking for turnkey practices). Each type has different priorities, such as operational synergy, potential for future roles, or simplicity of the transaction.
What steps should an owner take to prepare their practice for sale?
Preparation should focus on operational readiness—efficient patient scheduling, billing, staffing models—and ensuring compliance with HIPAA and data security standards. Organizing financials, addressing operational or compliance issues, and establishing a strong community reputation also help attract premium offers.
What should owners consider post-sale to ensure a smooth transition?
Owners should plan for tax-efficient deal structuring, decide on their future role with the practice, and prioritize protecting their staff and legacy by communicating transition plans and finding culturally compatible buyers. Proper planning during the sale process can safeguard financial outcomes and preserve the practice’s value.