From brief experience at business brokerage during my college days, I know that certain industry have certain way they evaluate businesses. For example, Coffee/convenience stores were typically sold dollar for dollar meaning the asking price of these businesses were the same as the average total revenue of that business. How do you evaluate a physical therapy business? what should be the asking price for clinics that have $200,000 of gross revenue annually? any help appreciated. thanks.
Joined: February 7, 2007
Not the same as evaluating conv. stores. In the store a bag of chips costs the same for every customer. In healthcare reimbursement is different for every patient depending on their insurance. You need to know a lot mor than gross revenue to value a business (healthcare)
I agree its not the same as evaluating convenience stores since reimbursements are different from different insurance companies but clinic is grossing $200k in revenues and patient mix is 50/50 medicare/private HMOs. It is one PT and one PTA and one secretary clinic so pretty small scale but don't know how to evaluate the place further.
General rule of thumb backed up by industry standards and companies doing this as their business. Net Income (Not Net Revenue) for past 12 months - any long term debt x multiplier of 3 to 5. Net Income for clinic ABCD is $100,000, there is $20,000 in outstanding debt for total of $80,000 x 4 multiplier = $320,000. There is no valuation for "blue sky" or what potential might be there.