The San Francisco market for physical therapy practices is active. Selling your practice here presents a significant financial opportunity, but the process is complex. This guide gives you a clear overview of the current market, valuation principles, and the steps involved in a successful sale. Proper planning is key to maximizing your practice’s value and achieving your personal goals. Making the right moves now can shape your entire transition.
Market Overview
The market for physical therapy in California is strong, and San Francisco is a particularly attractive area for buyers. National and state-level trends show a growing industry, which can position your practice for a premium valuation.
Here is what is driving the market:
- High Demand: The demand for physical therapists in California is projected to grow by 29% over the next decade. This creates a competitive environment where buyers are actively seeking established practices.
- National Growth: The U.S. physical therapy market is expected to grow steadily, expanding to over $61 billion by 2030. This long-term stability is very appealing to strategic buyers and private equity groups.
- Favorable Economics: California has the highest average salaries for physical therapists in the nation. This reflects the high value and revenue potential of practices located here, especially in a prime market like San Francisco.
These factors create a seller-friendly environment. Your practice’s specific location, patient base, and referral network in San Francisco will determine how you can best take advantage of these trends.
Key Considerations
When you decide to sell, potential buyers will look far beyond your revenue numbers. They are buying the future of your business. Your ability to tell a compelling story about that future is critical. Buyers in a sophisticated market like San Francisco will focus on the stability of your practice after you are gone.
They will want to know if your key staff will stay. They will analyze the strength and transferability of your referral relationships with local physicians. A buyer needs to feel confident that your patients will remain loyal through the transition. Preparing your practice involves more than cleaning up financial statements. It means strengthening these core assets to demonstrate lasting value. Thinking about these issues early is one of the best ways to prepare for a successful sale.
Market Activity
The market for physical therapy practices is not just growing, it is also consolidating. Understanding this trend is important for timing your exit.
The Consolidation Trend
Across the country, and right here in the Bay Area, larger strategic groups and private equity firms are actively acquiring successful local practices. For example, Alliance ATP, a major physical therapy provider, recently acquired SOL Physical Therapy + Performance Training, which has locations in San Francisco and Oakland. These buyers are looking for established practices with strong community reputations to expand their footprint. This trend can create significant opportunities for practice owners who are prepared to engage with sophisticated buyers.
The Importance of Private Data
You might see practices listed for sale online, but these public listings rarely tell the whole story. The most valuable transactions, especially in a competitive market like San Francisco, happen privately. The details of these sales, including the final price and deal structure, are not made public. This is why working with an advisor who has a proprietary database of transactions and relationships with active buyers is so important. It ensures you are negotiating based on what the market is truly paying, not just on public information.
The Sale Process
Selling your practice follows a structured path. While every deal is unique, the core stages are consistent. It starts with a comprehensive valuation to understand what your practice is worth. This becomes the foundation for your strategy. Next, your advisor will confidentially market the practice to a curated list of qualified buyers.
After you receive interest, you will select the best-fit candidates and move into negotiations. This is where you agree on the high-level terms of the deal. Following this is the due diligence phase. This is an intense period where the buyer verifies everything about your business, from financial records to operational procedures. Many deals encounter problems here if the practice is not properly prepared. Once due diligence is complete and a definitive purchase agreement is signed, the final step is closing the transaction and transitioning the practice to its new owner.
Valuation
Many owners think of their practice’s value as a simple multiple of revenue. In today’s market, sophisticated buyers use a more detailed approach. They value your practice based on a multiple of its Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (Adjusted EBITDA).
Adjusted EBITDA is your true cash flow. We calculate it by taking your net income and adding back owner-specific expenses, like a car lease or an above-market salary. This process often reveals that a practice is significantly more profitable than it appears on paper. The valuation multiple applied to that Adjusted EBITDA depends on several factors, not just your specialty.
| Practice Characteristic | Potential EBITDA Multiple |
|---|---|
| Solo practitioner, heavy owner involvement | Lower (e.g., 3.0x – 4.5x) |
| Multiple providers, some key person risk | Medium (e.g., 4.5x – 6.0x) |
| Associate-driven, low owner dependence, strong growth | Higher (e.g., 6.0x+) |
Getting an accurate valuation is the most important first step. It provides the data you need to decide if, when, and how to sell your practice.
Post-Sale Considerations
Your involvement does not always end the day the deal closes. Planning for what comes next is a critical part of the sale process itself. You will need a clear plan for transitioning patient medical records to the new owner, ensuring you comply with all California state laws. A smooth handover for your loyal staff and patients is also important for preserving the legacy you have built.
Many owners also structure a role for themselves after the sale. This can range from working clinically for a defined period to retaining a portion of the equity in the new, larger company. This “rollover equity” allows you to benefit from the future growth of the business you helped build. Designing these post-sale elements correctly ensures the transition meets not just your financial needs, but your personal and professional goals as well.
Frequently Asked Questions
What is the current market trend for selling a physical therapy practice in San Francisco, CA?
The market for physical therapy practices in San Francisco is active and strong, driven by high demand for physical therapists and national growth in the industry. This creates a seller-friendly environment with premium valuation opportunities.
How is the value of a physical therapy practice typically determined in San Francisco?
The value is generally based on a multiple of Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which reflects true cash flow by adding back owner-specific expenses. The multiple varies based on practice characteristics, ranging from 3.0x to over 6.0x.
What key factors do buyers consider beyond revenue when purchasing a physical therapy practice?
Buyers focus on the future stability of the practice, including whether key staff will stay, the strength and transferability of referral relationships, and patient loyalty through the transition. These core assets demonstrate lasting value beyond financial statements.
Why is working with an advisor important when selling a physical therapy practice in San Francisco?
Because many valuable transactions occur privately and key details are not publicly available, an advisor with a proprietary database and buyer relationships ensures negotiation based on true market conditions rather than public listings.
What post-sale considerations should a practice owner plan for after selling their physical therapy practice?
Owners should plan for smooth transition of patient medical records in compliance with California law, ensure staff and patient retention, and consider roles after the sale such as clinical work or retaining equity in the new company to benefit from future growth.