Leveraging Growth Opportunities to Double Your Practice Valuation - Breakthrough

Leveraging Growth Opportunities to Double Your Practice Valuation

Breakthrough - How to Double Your Practice Valuation

Introduction

Increasing your practice valuation presents its own set of unique challenges. Often, practice owners find themselves buried in a pile of work and are not sure where to begin. 

The market is unpredictable and the healthcare system is not set up in your favor. However, equipped with the right insights and systems, it’s possible to not only navigate the turbulent waves but achieve exponential growth. 

Today, I want to share how I doubled the value of my practice within just two years.

Understanding the Value of Your Practice

We recently hosted a webinar where we discussed how to increase practice value. On the webinar, we shared our free practice value calculator. This simple tool can guide you in conducting an assessment of your practice’s value. Understanding your practice’s valuation is crucial for long-term planning, attracting investors, and mapping out succession or exit strategies.

 

Numerous factors can affect a practice’s value, and practice owners need to familiarize themselves with the pitfalls to avoid when planning to sell or transition. These include unrealistic expectations about the value of the practice, ignoring the buyer’s perspective, and underestimating the value of systems.

Practice Valuation Calculator

Maximizing Your Practice Valuation

To maximize the value of your practice, focus on the three key areas:

1. Your EBITDA 

Practice valuation is performed based on the earnings before interest, taxes, depreciation, and amortization (EBITDA) times a multiple. It’s no longer based on the number of annual revenues.

2. Size of Your Practice

A practice’s size holds a reciprocal relationship with its value – the larger the size, the higher the valuation, and vice versa. This valuation gradient exists because acquirers seek stability and potential for future revenue and earnings.

3. Growth Opportunities and Rate

These two parameters have a high value to acquirers because growth potential is one of the key elements they consider when investing – this aspect is often overlooked.

To consider the calculations for the multiple valuations, we can use this example: if your EBITDA is 300K a year, you could expect a three to four multiple. However, it is crucial to remember that these are approximates, and actual numbers may vary. 

Calculate your practice value here. 

How to Increase the Value of Your Practice

Three ways to increase a practice’s value include increasing your number of patients, improving the average revenue per patient, and increasing reactivations or the number of times a client returns for services. 

Beyond these, focusing on the development and efficiency of three core systems —marketing, personnel, and finance — can provide a solid foundation for growth.

Acquiring an investor’s secret sauce is key to understanding how the market perceives value. Ultimately, the two primary aspects to focus on are improving your EBITDA and the multiple. Exhibiting a consistent growth rate, particularly one around 20% per year, can significantly enhance the attractiveness of your practice to potential investors or acquirers.

Conclusion

Whether you are planning to transition out soon or years down the line, understanding these factors can lead to a more profitable exit. Moreover, it can provide a roadmap to strategically increase the value steeply over a shorter period.

If you’d like one-to-one guidance on how you can better position your practice for growth, schedule a complimentary growth assessment here.

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