E835 | So...What's My Cash-Based Clinic Worth?

What’s Your Cash Practice Actually Worth? (And How to Track It)

Most PTs never think about their clinic as an asset. They’re so focused on patient care and revenue that they forget: this business you're building can actually be sold one day. And depending on how you structure it, it might be worth more than you think.

In this episode, Danny breaks down how to assign real value to your cash-based physical therapy clinic—and why this matters for your long-term wealth.

Step 1: Know Your ODI (Owner’s Discretionary Income)

This is the metric most buyers care about. It includes:

• What you pay yourself

• Any business expenses that double as personal (health insurance, phone, etc.)

• Profit left in the business

Example: Pay yourself $80K, run $10K of personal expenses through the biz, and clear $10K in profit? Your ODI is $100K.

Step 2: Apply a Conservative Multiple

Clinics with $700K–$1.5M in annual revenue are currently selling for 3x–5x ODI.

That $100K ODI? It could mean your clinic is worth $300K–$500K.

Want to stay conservative? Use a 3x multiplier and track your value monthly.

Step 3: Build a Business That Doesn’t Rely on You

The more your clinic depends on you to do everything (especially seeing patients), the less valuable it is.

Buyers want systems, not heroes.

“You can’t sell your job. But you can sell your business.”

Step 4: Know What Buyers Want

Today’s buyers—whether other clinicians, private equity, or strategic groups—are looking for:

• Direct-to-consumer models

• Pricing control (i.e., cash-pay vs. insurance dependence)

• Recurring services and memberships

• Strong margins and marketing systems

All of these = less risk for them and more value for you.

Final Thought: Start Tracking Now

Even if you're not planning to sell anytime soon, you should know what your business is worth. Why?

Because it keeps you motivated. It helps you make smarter decisions. And it builds real wealth.

Your clinic is more than a job—it’s an asset. Treat it like one.

Want help navigating these phases?
Visit physicaltherapybiz.com or book a free strategy call to talk through your goals with someone who’s helped over 1,000 practices do the same.

Do you enjoy the podcast?  If so, leave us a 5-star review on iTunes and tell a friend to do the same!

Ready to elevate your practice? Book a call at the link below with one of our expert consultants today and start your journey to delivering unparalleled physical therapy.

Podcast Transcript

Danny: [00:00:00] Okay, let's talk about what your clinic is actually worth. I'm Danny Matta. I'm the founder of PT Biz and in the last, gosh, 11 years I've started my own clinic. I've sold that clinic, I've helped over a thousand clinicians start, grow and scale and even some sell their own clinics as well. Um, mostly cash practices, but some hybrid practices.

And recently. Uh, I've had the opportunity to be a part of and, uh, help with the sale process of a few clinics. Um, these are cash based clinics and, uh, I think it's important to share with you, uh, where the marketplace is at and, and, and, and a little bit more information about what your business might actually be worth.

So what I wanna do is share, um, the current kind of numbers and ways to look at your business as. An asset because [00:01:00] some advice that I got when I first started my clinic was to literally stop investing in anything besides myself and my clinic, which, which for me was actually a really hard thing to do. I had been, you know, diligently saving, uh, for retirement, right?

Like, which is a long way away. Um. Since the time that I was 18 years old, and, uh, a little bit of an anomaly. Most people are not doing that, so, but for me it was, even if it was a small amount, I was, I was putting money away every single month. That was a really hard thing to do and I didn't quite understand it.

And the advice though, I think is spot on, and I would give the same advice to anybody else. That has their own business, especially in early stage of your business. You don't want to take money from your business when you can put it back in your business and grow that business because that's an asset.

It's a huge asset that you have control over that's gonna grow much faster than almost anything else you can do with that money. It's gonna compound faster. Uh, but it's hard to see that versus putting money into a, you know, an investing account or whatever it might be, where you can actually see, [00:02:00] oh, I have this much money in there now my Roth IRA, or my 401k looks like this.

So what can you do? Well. You can take the, uh, the metrics that I'm gonna go over and give yourself like a pseudo valuation of your business. This is by no means a business evaluation that's formal, just so you know, but it gives you an idea of kind of where you're at and where your business is trending so that you might feel better about the fact that you're not saving money anywhere else.

In these early stages, you're focusing on building your business back up. So. Looking at sales of, of, of practices. These are individual practices by the way, that range between, uh, on the low end, about $700,000 in gross revenue to anywhere between that and about a million and a half. These are the size of these practices.

And what we're seeing is, uh, multiples or like the, the amount that you would multiply, uh, the, the, the valuation or the, the metric of the business that we're gonna use to track this, uh, to get the actual value of the business. So let's talk about these things [00:03:00] that you're gonna want track and, and what these multiples are.

So number one, there's something called owner's discretionary income, or they call it seller's, discre discretionary income. I prefer to track this. Every, every month myself, uh, in any business that I have, as well as in practices that we work with. This is a metric that we use to try to simplify what people are actually making in their business.

'cause it kind of confusing, right? Because you may have things that you're paying for in your business that are also like. Things you would've paid for personally, whether that be healthcare or your phone, things like that. Um, so when you look at what you pay yourself, that's essentially your owner's discretionary income, and you would add in whatever profit you also have in that business as well.

So let's say that you. Paid yourself $80,000. You had $10,000 in sort of discretionary, uh, purchases that you had during the month or during the year, and another $10,000 in profit. That means you had a hundred thousand dollars in seller's discretionary income or owner's discretionary income. This is all [00:04:00] pre-tax, by the way, because you're obviously only gonna get taxed on something that you make a profit on.

So let's say it's a hundred thousand dollars of owner's discretionary income. That's what we take the multiple to. So the multiple is what a business is willing to pay you for this income stream, essentially, uh, to own it. And that can vary vastly based on industry and size of business, how long it's been around, uh, many, many, many factors, um, that go into that.

As of right now, we're seeing anywhere between three. And five x times your owner's discretionary income is the range that we're seeing businesses sell at, that are individual practices in the size that I just mentioned. Um, and it has, it has to do also with your profitability, right? So your owner's discretionary income, uh, that's a hundred thousand dollars.

Let's say if you have a hundred thousand dollars of owner's discretionary income and the business is making $500,000, that means you're at 20%. If you have a $1 million clinic, [00:05:00] top line revenue, and you're making a hundred thousand dollars of owner discretionary income, that means that you're at 10%.

That's not going to be as valuable to a clinic as a clinic that has higher revenue percentages. Unless you're the one doing all the work. So to throw a bucket of cold water on this, if you're the one doing everything, if you are incredibly involved in fulfillment of the business in particular, you're seeing a ton of patients, your business is gonna be worth less than somebody that's not doing a lot of that and not really as involved in the business, but maybe is doing like higher level things, um, because.

As someone can buy that and you're not, uh, they're not as dependent on you actually like leveraging your relationships, seeing patients, uh, there's not as much risk, right? So the less active you are in the business, the more it's typically going to be worth as well. So let's just say you're wanting to use this metric, this information to start tracking what your own business is worth.

Well, here's what you can do. You can take your owner's discretionary income, add that up again. [00:06:00] It's what you paid yourself. It's the. Uh, things that you're paying for that are, would probably pay for personally if you didn't have a business to run those through. And then whatever profit you have, this is all pre-tax, right?

So in our scenario, let's say it's a hundred thousand dollars, well, you would take that and I would be conservative with that because no one wants to overestimate what they think their business is worth and find out that it's worth less than that and just multiply it by three. And that's a good place for you to start.

So let's say you're a couple years into business and you're at that a hundred thousand dollars mark of owner's discretionary income. Well. Technically your business is worth $300,000, uh, if you were to sell it, right? So now instead of you, um, you know, looking at a investing account, or you're pulling up your, you know, whatever Vanguard account, and, and seeing what your actual like investments are, now you can say, well.

My private company asset is worth $300,000. And you can start to track that, you know, over the years and start to see what that asset is growing into versus not really knowing. And I think this is the challenge for a lot of [00:07:00] us is like we have these businesses and we don't really know how to assign value to those.

It's not as easy as a, a publicly traded company. Um, so we don't really know, but it's a huge part of your net worth. I'm telling you, it's, for many of you, it's probably the biggest part of your net worth. So, you know, you should track that. You should. Be aware of it and you should know that there's value that you're building there.

Because look, starting a business is hard. Running a business is hard. Growing a business is hard. It's like, I get it. You know? It's challenging. You run into shit that you have to deal with. You have super highs and super lows, and it, in some ways, it does help offset some of that. If you know, Hey, all my work is actually.

Is compounding into something of meaningful value to yourself and your family. And if you are fortunate enough and you work on the right things and you build your business in the right way, you can absolutely sell any type of practice, whether it's insurance-based, hybrid, cash-based, based, [00:08:00] there's a market for it.

And this is one big change that I've seen over the last decade, by the way, um, you know, when I started my clinic. I had a, a mentor that I very much respect. I, and he's incredibly smart business owner in the physical therapy space, uh, that, that had physical therapy clinics that were insurance based. And I remember when I started my, my, uh, cash based clinic, you know, he told me he was like.

Just know, like you're basically creating a job for yourself. This is not something that's going to like, have enterprise value and you're gonna be able to sell it. And I was okay with that because I wanted to treat people a certain way. Right? I, I was teaching a lot, so I was traveling a lot. I wanted to work with people one-on-one.

I wanted to focus on, you know, the more performance side of things that I was very interested in. And so I was fine with that. I'll take a lifestyle business versus going and working in somebody's high volume clinic. Well, the. The, obviously it's not the case 'cause I, I sold my clinic. We've helped a number of people sell their clinics, like these are cash-based [00:09:00] clinics.

Um, it's, it's happening. I'm sure there's transactions that are happening that I don't even know about, uh, in the country. And I've had a handful of conversations with private equity firms and investment bankers that are, that are actually purchasing these businesses. And the fact that. Uh, you're less dependent on insurance is actually a pro a significant positive for them.

Be because you control your own pricing. You know, you're, you have more direct to consumer marketing channels. Uh, you're not as dependent on a hospital system or a physician to refer people to you. If that turns off, that's a big risk. There's actually a lot of benefits that end up going that direction, which ironically, when I started my business, uh, nobody thought existed.

And, um, and they do now. So the, the. The profession. This, this, this part of the profession has evolved. It's grown, which is really cool to see. Um, and you as a business owner, you now have a chance to, to grow a business in a, uh, in, in a field that is becoming more. Popular to people that might wanna buy businesses, whether those are individual investors, which we've helped, uh, with, [00:10:00] with transactions like that.

It's a, maybe it's a outside investor, maybe it's a clinician that wants to buy it and run it. Uh, maybe it's a private equity firm. Maybe it's a str, a strategic acquisition from a bigger, uh, clinic. There's lots of scenarios, but what I'm, what I'm telling you is your business is gonna be worth something.

Uh, either, either it's worth something right now, if it's big enough and you're, you're able to, you know, have enough work that other people are doing, you're not doing everything yourself. Or if you're in that stage and you're growing it, it could very well be worth a lot of money one day. And this is how you sort of assign some value to it so you can sort of see that grow over time and keep you motivated because it is really hard.

It's like really hard to stay motivated in your business. And you hear people like myself or other people might say like, yeah, these, you can exit these businesses. You can sell these businesses and you may never wanna sell it. To be totally fair. You may have no interest in it whatsoever, but you might one day.

And for a lot of people, uh, they don't have any sort of like exit strategy. They don't know what they're gonna do. They're not really building a business in a way that somebody would even wanna buy it. And you [00:11:00] can't sell your job, right? Like if you work somewhere in a clinic, you, you, you can't just sell your job to somebody else.

Whenever you leave. You just leave and then they fill your job. But if you own your own business, you could sell your business for a lot of money and. N Now all of a sudden, you know, this idea of retirement and people worried about if, if they've saved enough, and then they, and the stress around that, like in the most part, like that disappears because you have this windfall of money that you've earned in this private company that you've built just as if you are investing in a, in a public company.

And now you have a way to track it and to stay motivated with the work that you have to do. But net net, here's the bottom line. These businesses are more sellable than ever. Uh, I. Assume, and obviously nobody knows what things will look like over the next five to 10 years, but if I had to guess and I had to like make a educated guess on what I think is gonna happen over the next five to 10 years, I think these types of businesses become even more attractive to investors because again, of the reliance.

Uh, the lack of reliance on insurance, [00:12:00] the growth that we're seeing in these, the, the elevated profit margins as well. By the way, like just being able to control your pricing allows you to have better profit margins, uh, in these businesses. The recurring streams of services that these businesses can have, where you can, you know, don't have to worry about getting a ton of people in every single month and then discharging them.

We actually have. More lifetime value in recurring services, which is way more valuable than a sort of get 'em in and, and churn patients in and out sort of model, which is traditionally, you know, what PT has done. And investors are looking at these, you know, so I think you're in a good spot to build a business like this.

It's cool to be in a field that's, that's growing and becoming more accepted and valuable, uh, to the marketplace. You know? So it's proof of concept and it's, it's, uh, uh, it, it's, it's driving in a direction that, you know, obviously has more, um, more change that's gonna happen, but I think in a very positive way.

So overall, I think you're in a great spot. I'm obviously very happy with, [00:13:00] uh, where the. The profession is trending for the people that we work with, uh, for the profession as a whole, for the people that we get a chance to work with. And now you have an opportunity to really assign a little bit of value to your own clinic so that you can, you know, see what that's worth.

'cause it is worth something. And if you track it, you know it, it's great to see that and keep you motivated for the work you're doing. 'cause it is a hard thing to do, start, run, and grow a business. So I hope this helps you. Uh, and as always, thank you so much for listening and watching if you're watching the YouTube channel, and I'll catch you next week.