There is no perfect formula for growing and expanding your PT business, but as with most other industries, the way to learn is to look at those who have been there and succeeded. Jeff Ostrowski, PT is an owner/partner of 35 clinics across SE Pennsylvania, starting from a single clinic 30+ years ago. Over the years he has taken on partners, added more clinics, expanded existing clinics, and merged and purchased other clinics. He has experienced almost all the possibilities for a growing and expanding practice. Nathan Shields brings him on the podcast to discuss some of the most frequently asked questions about PT business expansion, such as "when is the best time to add another location", "when is the best time to add another PT", "when should I consider adding more square footage", etc. Jeff has been through enough over the years that he knows what has worked for his growing company. Listen in as shares his insights on the podcast.


Listen to the podcast here:

When To Grow & Expand With Jeff Ostrowski, PT

I'm excited to bring on Jeff Ostrowski. He is the Owner and Partner in Excel Physical Therapy in Southeastern Pennsylvania. They have 35 clinics and continue to grow. We'll get to his story, but I want to bring him on about some important topics in regard to growth and expansion that a lot of new owners and even long-time owners have questions about. He has been around the block a few times. First of all, Jeff, thanks for coming on. I appreciate it.

You're welcome, Nathan. It’s good to be on the show. I enjoy your show. It's good and helpful. I'm glad to contribute.

Thanks for being a part of it and for taking the time. We haven't met each other that much. We talked on the phone a couple of times, but you've got a lot of wealth of knowledge and wisdom. I know you are a big part of the P2P group and PPS in getting that established. First of all, thank you for your efforts in doing that. That's huge to establish that kind of networking and network. It's a great resource for the physical therapist. Thanks for doing that.

You're welcome. It's a wonderful resource for private practice owners. If you have readers that are PPS members and they're not in the Peer2Peer Network group, they ought to join that too. I've been involved in PPS for a long-time. I was on the board of directors for seven years and the editor of IMPACT Magazine for three years. I served on a whole bunch of different committees and task forces. Like you said, I've been around PPS long-time and this Peer2Peer Network thing is one of the most valuable things that I've seen come along. I want to do a little endorsement for everybody who's reading. I certainly can make myself available to your readers to talk more about it if they have questions about PPS or Peer2Peer afterward.

Tell us a little bit about you. You've been in the industry for some time. You've been an owner for a while as well. Tell us a little bit about your professional story and what got you to where you are with such a large company.

I started the practice back in 1990. I've been a practice owner for many years. I've started by myself. I brought on one of my best friends and business partner within a few months of opening that up. We grew that up and then we merged with another company in our area back in 2011. That was a great experience. It was an awesome company that we merged with. We've had good success. We probably doubled the size of the company since we've merged. I've gained a bunch of great friends in those partners from the other business that we merged with as a result. We took what was good about our company and their company, put those things together with a lot of humility and no pride of authorship.

I took the best of both worlds, put them together and created something special in our industry and that's where we are. It might be of interest to your audience that I’m semi-retired many years ago. We hired on a management team, CEO, CFO, some regional directors and some other management talent to run the day-to-day operations of the company. My partners and I were able to step out of day-to-day operations and move into a retirement mode. We still work. We're on the board of directors and we handle special projects in the company and do stay very involved and very aware of what's going on, but we have a good leadership team in there so we're off doing other things now. It's pretty neat.

Congratulations on getting to that point. Through your experience as an owner, you've seen all the stages, it seems like. You've not only brought on the next PT, which was your friend, but you also opened up another clinic. At some point, I'm sure you had some leadership team that you guys worked with either before or after you merged with the other company. It seems like you've gone through essentially all the steps of building a corporation so you can go back and give us some good advice.

There are two things we can talk about there when it comes to growth, what's known as the same store growth. That's how do you grow a clinic from 1 to 2 to 3 therapists and so on and then there's the growth through a new clinic, startups, de novo clinics. There's a lot of different nomenclature for that out there. There's the growth through mergers and acquisitions, but I think our success has been in the first two, in the same store growth and then opening up new clinics. There are lots of similarities between the two.

PT Business Expansion: When it gets really busy, patients don't get as much attention from the therapists. It can be profitable for the owner, but frustrating for the client.

Let's start from the beginning. For a lot of physical therapists, whether they're new or have been around a while, if that initial step of going from one PT, which usually is the owner, to bring on that next physical therapist, bringing on that added expense then, “How am I going to keep them busy? What am I going to do? How am I going to offload patients? How am I going to rent myself back up? How do I handle all that?” What would be your advice for that initial step to bring on that other physical therapist?

I'm reflecting on the days when I was the only PT and the practice was growing. It was extremely exhilarating at that time because patients were coming in and I was like, “I can't believe people are coming in here and I'm having so much fun. I'm enjoying this.” Although we weren't very good, we are getting paid back then. It was a great time to grow. It does take a certain trust or jumping off the cliff to bring on the next PT because I fully understand the mentality of, “I'm the owner. It's my name and reputation at stake here. I don't know if I can find someone to do it the same way that I want it done.”

A lot of times the owner is very overwhelmed with day-to-day. They're seeing tons of patients and then they also have to run the business and they don't necessarily have time to invest in training new staff, a new PT. Even hiring seems pretty daunting sometimes because you have to interview and it's a very competitive market to hire therapists in the last several years. It's tough. You got boxed into a corner and the way out of that is a couple of things. Number one is in this day and age, the schools, at least in Southeastern Pennsylvania near Philadelphia, are putting out much more qualified therapists now than they have since I can remember. The PTs that are coming out of school are ready to work. There's been an improvement and advancement in the profession as far as that goes.

You still have to train them. You’re still going to manage them, monitor their performance and their statistics, but it's much easier than it was many years ago, in my opinion. You have to be capitalized too. You have to have some money in the bank because when you bring that new therapist on, it's going to put you underwater financially for a while until you can get their schedule filled up with patients. They're self-sustaining in terms of their contribution to the revenue of the business or the clinic. You've got to be ready for that. Meaning, you have to have some cash reserve. You have to have very carefully mapped out financial plans and budgets so that you know what you're up against and what your cash position is going to look like as you bring this person on and you ramp that up.

That probably gets in the way of a lot of people early on. It certainly did for me. I didn't understand the idea of capitalization as much as I do now. You've got to have that. A mistake that's often made, if I look back at my history, I can see it very clearly is when times are good and your schedule and therapist’s schedule is filled, you can be very profitable in that area. If you watch closely, you will start to see signs of stress on your business. When everybody's schedule is filled up, you'll start to see your charges per visit go down. You'll start to see the time that patients wait to get an appointment starts to increase. You'll start to see that patients don't schedule as frequently as they did on a per week basis.

You also start to see that your quality measures and there are many of those. There are outcomes measures, Net Promoter Score and patient satisfaction. You'll start to see those things slip a little bit because when it gets busy, patients don't get as much attention from your therapist. They don't like it as much when it's busy and although the owner right in that zone can be very profitable, that is short-lived, because what happens is all the hard work that they have done starts to fall apart. During that same period of time, they probably slow down their marketing a little bit because everybody is busy and you don't have time for it and that falls off. You then get on this up and down roller coaster phenomenon and you never break through to that next therapist in your clinic.

That’s one of the reasons why I push some of my clients to consider bringing on that physical therapist because they, as the owner, need the time to manage those things. Our natural tendency is, “I am productive when I'm seeing patients.” That changes when you have an ownership hat and a lot of those holes in the bucket start forming as you take your eyes off of the business. One of the things I try to stress is to make sure that you know your financials. Talk to your CPA or bookkeeper often so you know exactly what hit that PT will make on your business.

The amount of time that you spend in your policy, procedures and training gives you a huge return that doesn't show up monetarily. Click To Tweet

You can get certainty on what the environment's going to look like, but also have a little bit of faith knowing that this is another investment. When you started your business, there's no guarantee that your business was going to succeed. There's no guarantee this other physical therapist is going to succeed. When you do bring that physical therapist and it gives you time to work on the business market and be carefully managing all those statistics that you're talking about, then things can go much more successfully. You can grow successfully as well without slipping in all those areas that you mentioned.

You said that well. I'll add to that is as the owner who can't get to that next level of managing the business because they're so busy, they're overwhelmed and they're underwater. They start to not like it. The owner gets tired, burned out, jaded and cynical. That early enthusiasm that you had when you first opened your doors quickly, you get beaten up. That starts to go away after a while and you get embittered. That has cascade throughout your company. It's you, as the leader of the business are showing up for work every day with a negative outlook and a bad attitude and, “This is horrible.”

It's hard to attract and retain good staff when you have that kind of mentality. When you go home to your family and you're all salty about how bad your day was, maybe you feel like kicking the dog. If you had one, it will be hiding under the bed when you walk in from a day's work, but it's definitely not fun to live that way either. I can tell you this from experience and a lot of your readers probably have lived through this too. That's a very important part of all this. We want this practice and business to enhance our lives and not detract from it.

The stress of hiring that first PT and this is my theory that I've built up over the past couple of months. You're going from one PT yourself to two PTs. That's a 100% increase. The stresses could be about the same, at least financially. Maybe that's not a 100% increase in your expenses, but it's a significant change in your expenses. Going from 2 to 3 PTs, that's a 50% increase and it's not as hard to bring on that third person. It doesn't hit the expense account as much. As you add more physical therapists, the expense ratios are a little bit different, but in doing each of those steps, as long as you keep your eyes on the business and train your therapists appropriately, recognizing that you need to step back in your treatment availability and time spent. You can do that successfully and each subsequent hire can be a little bit easier to tolerate both in terms of money and energy. Do you find that to be true?

That's exactly right. You spread out the overhead of the business over more revenue-generating PTs. Each one has less of an impact on your bottom line if you will. As you're doing that too, you're developing systems, whether they're marketing systems or operational systems, hiring and training systems, so that each time you bring someone on, not only is it easier financially to bring them on, but you have systems in place that makes it easier to get them onboard and productive as quickly as possible. Those are key things. Those investment and building training systems, especially building, hiring systems, having a marketing program that runs on autopilot so that you're not running around with your hair on fire all the time with those other things.

That's one thing that my company had been very successful at. My partners are amazing. We've spent a lot of time putting those programs together. My one partner, Todd, could be one of the smartest hard-working guys I've ever met in my life and probably is. He uses this ecology, “Your business is an ecology,” and everything works together and contributes to the health of the whole organization. It's not one thing, it's a lot of everything and they all need to work in alignment. That sounds like a lot of big words and it sounds easy to do. It's not. It takes time and effort to build all those things, but those investments pay off extraordinarily well once you get them in place.

That's what a lot of young owners or newer owners don't recognize is the amount of time that you can spend in your policy and procedures and time spent on training materials is a huge return that doesn't show up monetarily. It is multiple times more productive than treating that patient. It is a grind to put some of that stuff together, but for the sake of the business and for your mental health, it's a huge step in the right direction. It makes things easier.

It's another reason why an owner who wants to grow can't be gobbling up all their time treating patients because these things that we discussed, it all takes a lot of time to put together. If you're 40 or 50 hours a week in the clinic, you're not going to have time or the energy to do this other stuff.

PTO 116 | PT Business Expansion
PT Business Expansion: Train your therapists appropriately, recognizing that you need to step back and focus on management someday.

In terms of stepping, not just into adding another physical therapist, what advice would you give to owners in terms of considering moving up to a significantly larger space or finding another location? Is there a formula that you've used in the past, in your company or yourself to say, “We're performing at such and such rate? Now is a good time to expand, get a significantly larger space or a new space altogether.” How would you address those situations?

Let's talk first about the larger space. There are some metrics out there that people use in terms of a square foot per full-time equivalent and they're all over the place. Those metrics depend a lot on what's the payer mix, net payment average per visit in your market and stuff like that. That's going to be very individually based, but it's the same mentality that I described before when you bring on a new PT. If you're going to get to the point when you walk into it, first of all, it's going to look and feel very busy. There's a buzz in the air.

You might have patients waiting for pieces of equipment. You might have patients waiting longer in the waiting room because there's not enough space for everybody in the building who is who's coming in. You will also see that manifest in your statistics and the same thing is going to happen. You're going to see the visits per referral are going to start to go down because people don't like being in this busy space. This happens a lot. The therapist also feels very busy and they feel bad about that for patients. I've hired thousands of PTs over the years and we want to go to work and have success. We want to be able to take good care of people.

Most of us went to PT school with this vision that, “I want to help people. I love this profession. I love what I do. I make a difference and it feels good. When I go home at night, I might be tired because it was a long day, but I feel I lay down at night and put my head on my pillow feeling like, ‘I did good work.’” That feeling is what we want to capture here and preserve and fight to preserve. If you try to cram a lot of patients into a small space and the schedule is busy, the PTs don't feel like they can have success. They start to not feel good about going to work after a while. They get burned out and they don't do their best work. It's nothing conscientious that they do. It's just a natural erosion of their enthusiasm.

It shows in the statistics.

It absolutely does. The patients come in 1 or 2 less visits than they would before. Their cancellation rates go up. The friend and family and past patient referrals that you were getting before might start to go down because people aren't as happy with the care as they once were. You might have more turnover amongst your therapy staff. Watching those statistics in the same way, it'll point you to the same exact thing like, “We're bursting at the seams here. It's time to take on some new space.” That's a tough decision because most of the time, you're going to be signing leases that are about five years on average. You've got to map out your growth for five years to make sure you don't run out of space in a year.

Again, you've got to have good financial planning, good budgets, good advice and a good understanding of what your growth rates are going to be so that you know that if I have three therapists now, several years from now, I'm going to have 6 or 7 in this clinic. I need maybe not 2,500 square feet, but 5,000. It's like you described before when you hired that new therapist on. You're going to have a little suppression in your cashflow in the beginning until that therapist builds up. It’s the same thing with taking a new space. You're going to have to budget it in there, “We have more space than I need for a while here until we grow into it.” That's how we always looked at it in terms of taking on new space.

It's very much about feel, but a lot of the feelings do translate into the statistics. Patient compliance goes down a little bit, therapists aren't pushing the patients to come 2 and 3 times a week. They're okay if the patient only comes once a week. They're not seeing the results. Whatever your measure is, whether it's your square footage or your efficiency, the number of appointments that are filled on a PT schedule on average. If you're running about 80% to 90% clip on a routine basis or regular basis, then that's a good time. If you continue to work hard at that pace, people are going to get burned out.

With the right people on board, growth comes easily and becomes inevitable. Click To Tweet

It's a good time to consider either a larger space or if you are looking at another geographical location nearby, that's a good time to do it because you don't want to do that when you're running it 60%. Even though you might have these great ideas, “There's this perfect location over here that I want to open up.” You don't want to extend yourself and open up that new location or get that greater space because it's a great opportunity if you're not maximizing the efficiency of what you currently have.

That's going to put you financially underwater. It's tough to resist those temptations. You've got to optimize your current setting before you go expanding into new locations. There are a couple of things that are important. You need a referral base there. You need to know that there's going to be some patients that are willing to come in and maybe some physicians that are willing to refer. I think the most important part of a new clinic is the leadership of that clinic. Who is going to go in and run that clinic? That goes back to your hiring, training processes and leadership development. Because I think you could take a perfect location with an average leader and you'll have an average result and conversely, you could take in an average market location, put a strong dynamic leader in there and you'll have a fantastic result. The leadership development piece of this is absolutely critical.

That builds off of a comment that Steve Anderson made in the previous show. It’s exactly what you said. Even in the Northwest where he was, they found when they open up clinics, it wasn't the location so much that they were looking for as much as who. First is who then the where or the what. Once they established, “This person has been with us many years. We vetted. They're a high producer and they have the desire. We've worked them through the leadership management program that we have or whatever that might be. Now, that we have the person let's go look for the location.” Whereas some people might say, “I've got the perfect location. I need to find somebody to fill it.” That's not the way to go.

That's great wisdom by Steve. He's had great success. I couldn't say it any better. It's the person first, the location second.

Did you ever purchase clinics even in a young stage where you might've had 2 or 3 clinics and then you’re looking at possibly purchasing another?

Yeah, I have. I've purchased two other businesses in my career.

Tell us a little bit about that. Looking back on your experience, what advice would you give owners nowadays? Honestly, I've got a couple of owners who even at their current size one, maybe two clinics talking with or being approached by people locally in the community who are looking to get out. What advice would you give yourself in that scenario when you're considering possibly purchasing something at a young stage?

This is a financial discussion. You have to map this purchase out financially. How are you going to pay for it? How much are you going to pay for it? How are you going to pay for it? Can you afford it? The difficulty that most acquisitions run into or acquirers run into is the integration of the business that they bought into their business. In my experience, it's much harder than I thought. It takes longer and it's more expensive to integrate. You've got to put all that and factor that all into your financial planning. You may find when you do it that it's more advantageous to go and open up new clinics and hire new therapists than it is to buy other businesses.

PT Business Expansion: When you hire a new therapist or open a new clinic, you're going to have a little suppression in your cashflow in the beginning until that investment builds up.

We've learned some hard lessons in the acquisition area. We’ve made 1 or 2 mistakes with some acquisitions, not accounting for the integration costs. There’s also this cultural piece of it. You run your practice one way and this runs a little bit differently. How do you put those two together without alienating the people and having to start over again with hiring new people and all the rest of it? Tread very carefully here. It's very sexy to go out and buy businesses and it's a way that some of the big companies in our industry are growing dramatically through acquisitions, but the difference is they have capital partners. Meaning they have a lot of cash to use.

They have teams of people that integrate businesses and they have a lot of experience doing it. How a business is going to fit and how that's all going to work much more than smaller practices do? I don't want to discourage people from doing it because it's done and I know people that have done it successfully. The smaller you are, the more pressure it's going to put on your organization financially and culturally. You got to go take it carefully. Don’t fall in love with the idea of it without falling in love with the financial side of it first.

I talked to a friend about that because he was considering the purchase of a clinic. I said, “There are simply pros and cons to it.” When you're looking at purchasing a clinic, you're buying a book of business that is running. It probably has referral relationships, has contracts and has a team that's already working. You want to be tight with a good CPA that knows about mergers and acquisitions. How to read financials and teach you about it as well.

The cons are the things that you may not consider when you're talking to a CPA and that is, “Is it a cultural fit? Are you value-aligned? How's the team going to take it if I manage them differently? Are the benefits going to be the same? Are they going to lose if I purchase them because my benefit package is different than theirs?” There are many things that you might not be looking at right off the top, where maybe the pro of opening up your own clinic instead of purchasing one might be a better way if you simply have the right people. It's going to cost less, but you don't have the immediate revenue flow that an established clinic might have. If you have the right people, you will stand that and you can be very successful.”

We know this is a people business and this happened to me. I've had patients call saying, “I want to see Joe.” “Joe's not here anymore, but you could see Mary. She's a good therapist. We have her.” “I like Joe. I want to find Joe. He was my guy. He's my therapist.” It's a people business. Patients tend to follow their therapists. If you're buying a business where the owners or the staff, for whatever reason, decide not to stay with the new business, you're going to regret the fact that some of those patients are going to go away. That's something you've got to factor into it too. There's going to be some loss of patients there because it's a people business.

That brings up another thing. To go back in terms of stages and where owners are at with ownership, how do you deal with stepping out of treatment care and telling patients who liked what you did, especially when you're the owner and your partner that you were no longer treating? How did you make that transition and highlight your staff? You wouldn't tell them, “I've got a great staff and I've trained. I'm still on site.” You want to almost allay their fears, especially when the referring physicians are saying, “I want you to go see Jeff.” In my case, they almost didn't remember the name of my clinic. They said, “I want you to go see Nathan.” They knew that I had other physical therapists on staff, but that's how they knew of my clinic because I had that relationship. How did you successfully make that transition out and tell those patients that wanted to see you?

That was a tough one. I remember that I was very nervous about that. I know a lot of owners are because you feel like you have an owner mentality and you're probably a good therapist, number one. Number two, you have this owner mentality where you take good care of people and you relate well to people and all the rest of it. To get out from under that is difficult. You're going to have some loss during that period of time. There's going to be some patients who are upset by that, but I found it was very few. In the beginning, I would have to talk to every single one of them and say, “I picked this person that you're going to see. I trained them. They do it exactly like I do. In fact, in some cases, they're better than me for A, B and C reasons. However, I will be watching and monitoring. I'm always here for you when you need me.”

Once you’ve build a reputation for your business and your practice, it will see you through even in times of transition. Click To Tweet

The vast majority of patients were willing to take that leap of faith and trust with me if it was explained that way. The physicians were the same thing. I remember those days with the prescription. They don’t say, “Go to Excel, go see Jeff.” It was the same conversation. I had to go to each one of them and explain, “I am getting busier. I am growing. I can't see all these patients. Can you allow you some of your patients to see new therapists that I bring on?” Most of the physicians were fine with that. They understand completely because they're in practices that are growing too and they understand how that works. Sometimes, they would want to meet the therapist and then that was cool.

It was a great marketing opportunity. Eventually, the prescriptions or referrals, they didn't say see Jeff anymore. They said, “See the other therapist.” That was a great day for me. I was very proud when that happened. There's nothing better as a PT that when you develop your own reputation, were physicians and patients identify you as a therapist and it's an awesome feeling. It's something to cultivate in your staff and that creates great culture and great momentum. It enhances your reputation as a business and practice when that word spreads that way.

There is a lot of anxiety and fear in making that handoff, but I think a lot of it honestly is pride because you have results. You've built something up and that could be the one thing that’s stopping you from making that jump is thinking, “Everyone's coming to see me.” There's a little bit of a pride element to that because it is what you've established for maybe over a few years.

Not a lot of good things happen when you're too prideful. I've learned that lesson. It is trust. You have to trust other people. Some of the trust can be built by picking the right people and training them properly and your trust level goes up and you do that.

I never tell that to people that I'm talking to that you've got to get over your pride. It's more about laying their fears. There might be people that will stop seeing you, but that means that they have to go to another place and establish a new relationship. I don't know if a lot of patients are willing to do that if they're that upset, but there is that possibility that there's going to be a few. I say, “Brainstorm and work with your front desk,” because they have to believe the story that they're telling patients that call them and say, “I want to see Nathan.” We need to figure out a story so that they are completely confident and believe the story that they're telling the patients, otherwise, it's not going to carry very well.

You build a reputation. If you lose a therapist or you bring on a new therapist, the reputation of your practice, if it's cultivated, nurtured and worked on all the time, it will carry you through those transitional periods. That goes back to where we started this conversation about having the systems in place, investing in training, accountability and management and how do you fix a PT who's off the reservation with one of their statistics and get them back on the reservation. How do you pick the right people with the right values that align with your practice? That's the ecology that my buddy Todd always talks about.

With you, as an owner, I'm assuming you went into it without a lot of business experience. How did you learn the statistics, numbers, measurements, how to develop policy and procedures and hold people accountable?

I had a little bit of a knack for it because I had that analytical brain from a statistical perspective, but along the way, I've had some mentors. I have a friend that is like a brother to me. A guy that I grew up with who got a practice up in North Jersey. He started his practice right around the same time I did. We helped each other. I learned a lot from him. That was one thing that helped me. I have a couple of consultants along the way. I moved into a new neighborhood many years ago and I got to be real good friends with one of my neighbors and he had an engineering business, but then he went into financial consulting.

He was the first guy that set me up on the whole P&L statements and balance sheet and taught me how to read and look at all those things. That was Brian and he changed my life at that point because that was when I finally though a light bulb went off about how to run a business. A couple of other PTs that I've had along the way. Kim and Michelle come to mind. People that were good with organization, administration and details. Edward was another one, a sharp guy. When we merged with the company I mentioned earlier, they had a lot of intellectual property in terms of systems and financial statements that took us to a new level.

Not knowing your story that much in-depth, I assumed that there was a point at which you came across someone who could teach you the ropes and you could get some training. My mantra with the show is if you want to expand, grow, get the freedom and profits that you want, you have to step out and meaning step out of training, you have to reach out and find some coach. Executive coach or consultant to teach you how to run a business and you have to network and work with other people who might be in similar situations, even if they're not in physical therapy. I assumed that it was probably part of your formula as well.

Our industry has a huge array of very talented consultants out there. There’s plentiful advice out there that you have to pay for. In many cases, it's worth it. It certainly was to me over the years to pay for that advice. It's your tuition. You can learn it the hard way. We're smart people. We can learn it, but why not take advantage of what's already out there? Even in PPS back to the private practice section, there's a wealth of resources in there. There are all training and different tools for marketing, finance, operations and so forth that weren't available many years ago. We have come a long way. I want to give some more accolades to PPS. The taskforce, work and tools that they put out during the COVID-19 crisis and pandemic was an amazing work that the board did during that period of time. That stuff is all still available. If there are people out there who are still working through recovery, which most of us are, I'm going to point out PPS and say there’s a lot of good tools there for you to use.

Looking back on what we've covered and we've covered a wide expansive of growth avenues, is there anything you want to go back and add to, or anything you want to add here towards the end of the program?

When you're busy in a clinic, that's a point where you're probably making good profits because you're busy and everybody's loaded up with visits. That could be a very attractive place for an owner to try to live because the profit margins are high. However, that's going to come with consequences that things are going to start to break. It is inevitable. When you're super busy, things are going to break. Watch those statistics, everybody. If you're starting to see those pressure points start to break down, that's a sign that you need to hire on new therapists or expand your clinic because you're going to start to come down the other side of that and your profitability is going to start to erode and you're going to spend a lot of money to build it back up again. Keep that kind of growth curve going smoothly up into the right and not herky-jerky rollercoaster-ish. That's the key to success.

Take that as your cue to take the next step and then take that step in faith, knowing that what you've done so far has been successful, continue to add to it. Thanks so much for your time. It was great talking to you in sharing your wisdom, your knowledge and your great help. I appreciate your work with PPS and Peer2Peer. If people wanted to get in touch with you or reach out to you individually, are you willing to share your contact information?

The best way to reach me was with my email. I'm happy to answer emails and if I don't know the answer to it, I know a lot of people out there. I can put you in touch with them. They would probably do know the answers. My email is

I recommend people reach out if they have questions. You're available and you've got plenty of experience in the space. I appreciate your time. Thanks for coming on.

Thanks for having me. You are doing a great job. I love what you're doing, love this profession and there's so much opportunity out there for us if we work together and we share our knowledge. There's a wealth of opportunity out there. We're doing great work. We have value. Let’s grow this pie as big as we can and we can all get a big bite of it. Good luck, everybody.

Thanks, Jeff. 

Important Links:

About Jeff Ostrowski, PT

Professional: B.S. in Biology Juniata College, Huntingdon, PA 1984. Graduate of the Thomas Jefferson University Physical Therapy program, 1986. Founder of Excel Physical Therapy, 1990. Partner in E&A Therapy, 2011-present. Licensed Physical Therapist in Pennsylvania 1986-present.

Volunteer: Board of Directors of the Private Practice Section (PPS) of the American Physical Therapy Association (APTA) 2011-2017; Treasurer PPS 2017-2018; Managing Editor of the PPS APTA member magazine Impact 2008-2011. Past President (2011-2014) of the Southeastern District of the Pennsylvania Chapter of the APTA 2011 -2014; Board of Directors of the Pennsylvania Chapter of the American Physical Therapy Association 2011-2014; past member of the PPTA Finance Committee 2014-2017; PPTA Legislative Ambassador Key Contact; APTA PAC Ambassador in Pennsylvania; APTA and PPS Legislative Key Contact.

Personal: Lives in Glen Mills, PA, a suburb of Philadelphia; married with two children, ages 23 and 21; Enjoys sports, fitness, cycling, golf, drawing and reading.

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PTO 62 | Selling Your PT Business


Paul Martin has been dealing with mergers and acquisitions in physical therapy since the turn of the century, so he knows the market. However, things are different now than they were even five to eight years ago. Today, Paul shares what you need to know if you're looking to sell in this environment, and what you should know about the current industry even if you're not thinking of selling. As an independent owner, you should recognize what's going on in your local PT space - who is getting acquired, what acquiring companies are looking for, and where they might be going next. These are things that will keep you abreast of the industry and where you fit so you can make sound decisions. Even if you’re not looking to sell, consider some of the things discussed here so you are maximizing the value of your practice and be ready to sell at any given time. You're going to exit someday, so be prepared.


Listen to the podcast here:

Looking To Sell? Five Things To Know About The Current M&A Market with Paul Martin, PT

On this episode, I get to talk to industry veteran, Paul Martin of Martin Healthcare Advisors. He has been around since the early ‘90s. He has been advising physical therapy companies since 2000 with Martin Healthcare Advisors. He's helped over thousands of clinics both grow and merge and be acquired or acquire in the physical therapy space. He's been around the block a number of times and now, he has five things he wants us to know about the current M&A market. Those five things are important to know because things are different now than they were several years ago. There are significantly more players, more acquirers in the market space and some of them coming in within 2018number of private equity groups on top of the ones that are privately held and large, but also those are their publicly held. 

Things are different. It's not all about EBITDA anymore. There's a lot to do with what's your growth strategy? What are your cultures like? How do you fit in their footprints because some of these are regional players and not national players? Do you add something to the space that they're trying to get into or increase a footprint or provide a niche service? Are you on a growth trajectory? All of these things are what they're looking for and provide greater value to them. There are things that you need to know in order to provide more value for them as well as provide more value for yourself. I'll continually beat the drum ever since I did the interview with John Dearing last year as part of the podcast about how to set yourself up to sell. Doing some of those things to improve the value of your clinic to sell are the same things that improve the value, the profitability and the power to improve your clinic currently. Doing some of those things improves the stability and freedom that you get to enjoy. 

These are things that are somewhat simple, fundamental, but also take some effort and if focused on increases the value of your clinic. Things such as making sure your legal paperwork is in order to make sure your financials are in order and easily accessible and easily readable. Know your statistics, especially your cardinal’s statistics. Make sure you're on a growth trajectory year over year. Do you have a leadership team in place so that you're not the sole decision-maker and not the sole influencer in the company so that if and when you do leave, things will continue to run well and continue to grow? 

What is your culture like? Do you have mission statement and values? Those things are important because if you're looking to sell, you want to make sure you sell to someone who has that same value system in place. It makes things so much easier when you do and it allows for greater growth even after the acquisition. There are a number of things to consider. Paul goes over the five most important things to understand in the current market. I’ll continually beat the drum on making sure that you have your company set up for sale at any time. It increases the value of your company and increases the power that you have independently. Let’s get to the interview and see what Paul has to share. 


I’ve got Paul Martin of Martin Healthcare Advisors on with me for the interview. Paul has been around the block a number of times and is doing some great work now for the profession. First of all, Paul thanks for coming on. 

Thanks for having me, Nathan. 

If you don't mind, you've got a wealth of experience based on your time in the profession. Would you mind going back and sharing your story first of all and tell us about your professional path and what got you to where you are now? 

I am a physical therapist by background and I started a company a few months out of school back in 1989 that was called Physical Therapy and Sports Services. I and two partners grew that company. It started driving growth in 1993 when we had three clinics and from 93 to 96. We really accelerated that growth and we grew to 21 clinic locations. Subsequently, we sold that company to NovaCare in 1996. I spent three years with NovaCare and it was a great experience. I felt I got somewhat of a degree in corporate rehab. I learned a lot from the folks at NovaCare. I left NovaCare in 1999 and started this company, which is a company that provides growth and development consulting in the industry as well as merger and acquisition representation of companies that want to go into the market. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: Remaining independent means you have to be consistently looking at good, solid growth opportunities within the market.


Who's your ideal client at this time? Who are you targeting? You might be helping those guys toward the end of their ownership phase. When you talked about growth and consulting, who are you targeting there? 

We work with companies of all sizesanywhere from a single location company. As we look at our client base, there seems to be a look in the eye of our customers of wanting to learn more about the business of physical therapy, wanting to grow their practices and seeing that in their markets that in order to remain independent, it's necessary for them to continue their growth. 

What are you seeing there when you say in order for it to be necessary to be independent? You’re recognizing that in order to stay independent, you need to have a larger footprint or you need to be at a certain size compared to the hospital networks or the physician-known physical therapy clinics and whatnot. 

Most markets, the large national companies in just about every market in the United States are coming into those markets, acquiring the larger practices are putting a lot of capital into growth with new clinics, new startup clinics. We really advocate if you want to remain independent, you need to be consistently looking at good solid growth opportunities within those markets. 

You’re not only helping people who are growing in that respect and trying to either open de novo or acquire other clinics, but you're also focused on helping those who are trying to exit their practices as well. That’s a little bit about what we're going to get into now, right? 

Absolutely. We have a whole division of our company that takes some advantage of this current market or have looked at it as a strategy to transition their company to a larger business in many different shapes and sizes. 

What are you seeing as far as the market? It seems like there was a pretty hot run there for the last five years. Do you see us on the downhill side of that or do you see it continuing in the expansion of mergers and acquisitions? 

Based on the capital markets, based on the continued ability for private equity to be able to borrow at very low interest rates, but as you look at our economy, etc., we do believe that this market may have hit its peak and every time we get there, we're seeing new private equity groups coming into the market. This is a very long haul for a market to stay as aggressive as fertile as this market has been in the rehab industry. How long will it continue? It’s very difficult to say, but for right now, there are great opportunities. 

Definitely and I think I learned that from one of my episodes last year from John DearingMaybe I'm going out on a limb, but some of it might depend on simply those interest rates as long as money is easy to borrow. Mergers and acquisitions might be prettyI wouldn't say hot thing, but it's been active. 

While the interest rates are definitely a driver, the other driver is private equity seeing this business as the rehab business as a good business that they see it as a fairly simple business. They look at it. They don't see that our reimbursement over the last ten years or so has seen that much change. I'm not saying it hasn't seen any change, but that much change. There haven't been any major changes to our market with any type of regulatory issues that have come up. The public companies, US PT, as well as Select Medical have fared very well in the public eyesIt brings attention to our industry and the private equity sector seems to be very much of a copycat industry. When one private equity group has success, it's not long after that another private equity group is going to follow that group trying to do the same strategy. We've seen that happen over and over again to the point where there are literally eighteen bonafide private equity groups backing fairly large rehabilitation companies in our current market. It's up from six or eight along with the public companies. It’s really moving fast. 

The private equity sector is a copycat industry. Click To Tweet

With so much private equity coming into the marketplace, how are things different? Maybe that leads into a little bit more of our topic. How is the market different for the physical therapists who are looking to sell now compared to several years ago? 

It leads exactly into what we wanted to talk about which you’re exactly right. It’s what we've come up with which are the five things you’ve got to know about the new rehab M&A market. It seems like we have a new market really on an annual basis. There are so many changes that the market continues to go through this evolution. The first thing you’ve got to know is that we're no longer in a market where you can simply sell when you and your business are ready. Historicallyit was back in the days of three or four acquires in the country, business owners would get their business in good shape. They would be ready personally and they would go out to one, maybe two or three of those companies and you could get a decent deal. You could sell your company on your terms at your timeframe. It’s no longer like that. With 25 plus companies, you’ve got eighteen private equity-backed companies. You have two publicly traded companies and at least five other fairly large scale private companies that are all vying for market share within these markets. They're all at such different stages that the market will dictate when you're able to get a good deal for your company, not simply your evolution. That's one of the things that has changed about this current market. 

Are you saying that if you're an independent clinic owner at this day and age, should you be ready to sell at any time? What would you recommend my readers do if their practice owners, especially if they're later on in their ownership and they're looking to phase out maybe in the next five to ten years? What would your recommendations be? 

It’s really important to, on a very routine basis, every few months or so to pop your head up and survey the market around you to seewho are the companies that have made acquisitions in your market? The companies that already made those acquisitions, what is their activity? Who is around your market that may be looking and would be the next likely kind of suspect to be coming into your market? To understand based on those companies and their evolution within the private equity investment of those companies the best time when you have what they need? You're going to get the best deal when you match what they need with something that you can bring. 

How does an independent practitioner, working in quite a bit treating patients or working on their business, where would they go to find those kinds of resources that would tell them who are the active players in my market and who's coming into the market? Because they'll acquire businesses but not necessarily change the names at times so it might hard for them to find that out? 

It’s important that you find someone that lives in this industry and understands, especially the larger companies they believe and somebody has told them that you need to use and find a large investment banking firm, may be out of New York City in order to properly sell your company. The problem is that those companies don't know who the buyers are in this market. These are all privately held companies. Even those backed by private equity are still privately held companies. They're not making public announcements, they're not being vocal as to where they're going next and what they're going to be doing next. You’ve got to find somebody who lives and breathes in this market and understands who they are. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: It’s vital that you find someone to guide you who deeply understands the industry.


It's someone like you or maybe a local broker that's in this industry or people like that. It'd be hard I'd imagine as an independent guy to find out all that information. I can see where it's important. In my experience, my partner and I, had three or four offers over the course of a number of years that came to us from different directions. There are plenty of friends that I have that have clinics that have never been approached whatsoever. It seems like it's hit and miss as to who you know or not, what you know and that kind of stuff. It's important to be connected with guys like you that can guide you a little bit. 

We believe it's a big value. 

How should an owner establish or set up their practice to get maximum value? Maybe that leads into the next part a lot of times they'll talk about EBITDA and whatnot and how that drives the value of a clinic, profits, gross revenues or growth in general. What are some of the things that we should be looking out for to maximize our value? 

As we've outlined, I think the second thing that you need to know about this market is that the deal value drivers have changed. What I mean by that is in the past it was, everybody used and get five multiple. That's what everybody should be able to get and everything was about EBITDA. I'm not downplaying that EBITDA is not important. It still is important, but the biggest driver that we're seeing in this market is the competition for your business. Wcoined your EBITDA plus who wants to be in your market now? Who needs to grow in your market, who needs a platform in your market now, who's out there that would be the best fit? That's where you get what we would describe as the best deal. 

You're talking about maybe being aware of where the companies have a footprint in your geographical area and see if maybe you fit well into that footprint or you provide a niche service that could benefit a player in the area. 

Awell as being able to provide that potentially in some very unique ways to a number of those companies where you have a number of companies looking to get into your market for different reasons. You have attributes that may look solid and may look attractive to a number of companies then it's the competition for your company all in what we would call a synchronized competition all done confidentially. That's the process that gets and drives what we see as the best deals in the market.  

If you don’t mind, I'm going to use a personal example. When we sold our clinics and formed Empower PT, it provided a nice footprint for the private equity firm in the Phoenix Metropolitan Area. If you were a business looking to possibly sell in maybe Tucson or Northern Arizona or maybe even Southern California, that's where you might be a value add to a company that's looking to acquire businesses. 

Maybe an in-state business that's looking to go to a market that you serve in-state or potentially if you're large enoughother companies looking to come into a state and compete, you may be able to provide something unique to each of those companies based on their needs. 

A lot of people talk about establishing yourself and with your experience working with growth and consulting in M&A, how long does it take for them to get their business into a good position to get the maximum value out of their clinics? I'm of the opinion that it takes almost a year, maybe two years to ship things up to put yourself out in the market. What's your experience in that? 

The biggest driver that we're seeing in today's market is the competition for your business. Click To Tweet

Our experiences that depending upon where the business is in terms of its metricsin terms of whether it has a compliance program, in terms of where the EBITDA is and in terms of its ability to grow. As long as all of the things within the company are ready in this current market to do it right and to go out to multiple companies, the process that seems to be most effective is put everyone on the same starting line at the same time and drive a process that requires them to stay within a timeframe. You're going to quickly eliminate those who aren't interested or may have their focus on something else at that point in time and then driving that. We've seen it in a range of four to six months, which is much better for the business for much better, for the business owner than going through a process of working with this company for a couple of months, seeing what you can get then walking away from them possibly and go into another one. We see a lot of this franticness of, I’ve got to talk to everybody,” and by the time you go through all that, it's a year later and what have you accomplished? When the business is ready, what seems to be most effective is to put everybody in the same starting line at the same time. 

If I have a friend who has two and going on to three clinics and he's looking to sell in about five to seven years but he doesn't have policies and procedures in place. He doesn't have an employee handbook. He's been working full-time most of the time and now starting to pull out of treating full-time. How long would it take a guy like that to get ready to even go on the market? 

We see a lot of companies like that, as being a practice owner. When you get to that, it's no man's land. That two to three clinics to maybe five to seven clinics and have you set up the management structure, have you set up the systems and the processes for the company to continue on profitably? To do all of that and to set all of that up again, depending upon the stage of the business owner. A lot of motivation to want to focus on and work on their businessthat could be a one to two-year process to get all the things in order to be a business that has the strong ability to grow. 

What are acquiring companies looking for? You talked about something that maybe adds to the value of the company, whether it's in the geographical space or whatnot trying to enter a certain market. What are some other things they're looking for when they're looking to acquire companies? 

Different from our previous timeframes and previous markets, the third thing you must know about the new M&A rehab market is that right now it's very attractive to a buyer if you are what we term as growing through the deal. What we mean by that is historically it was all right, I'm going to pull back and try to do everything I can to maximize my EBITDA. Maybe pare down a little bit and certainly not do any new startup clinics and not start anything that would require any investment. Don't make any changes and just pull back. 

In this current market that will not make you attractive to the acquirers in this market because they want companies that can grow. They want companies that have shown the ability to grow. There are a number of different ways in order to look at some of those attributes and look at some of the expense you may have incurred to start a new clinic or an investment that you've made. Ways to structure that within deal companies that have shown the ability to grow and appear to an acquirer as we are growing our company and we are managing our company as though we're never going to sell it. That's attractive in this market. 

That can be tough because when you're growing like that, it can take a significant amount of cash to open up a new clinic or to acquire a clinic and then that's going to negatively impact your financials, which the acquiring companies are going to be looking at. At least through my experience, they can understand that cash is currently going towards opening a new clinic, but it should look at as a positive when it comes to the acquisition. 

It needs to be a balance and that balance needs to make good business and strategy sense. If you're throwing every bit of capital you have and at a new startup clinic and the startup clinic takes twelve months to go positive cashflow, those are not good business decisions. You need to continue to have balance between growth and margins and you're correct, the acquirers understand that growth takes the capitalThere's going to be added expense on your P&L because of that. There are usually many ways to adjust that as well as look at the structure to reward someone for the fact that they're growing. We say this all the time, we need to be the train that's leaving the station and who's going to jump on. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: It's important to identify your culture for your company to continue to thrive.


They’re going to look at your EBITDA still, but they're also looking for growth. They're looking for what kind of value you can add to their marketplace. Are there are some other things that they're looking for when they're assessing your companies? 

Companies that are able to drive for their markets at or above the benchmark level of cash per visit are very attractive to a buyer because it means that you're managing efficiently and your staff is productive. That's real attractive versus them looking at this and saying, “We're going to have to teach that staff how to bill correctly and how to charge for everything they're doing.” These companies are moving at such a rapid pace that they're not looking for turnarounds. Many times a business owner will say, “Won’t the acquirer see that has great upside opportunity for them?” They will, but you may never get to the finish line of the deal. They’re in a neighborhood and you’re a broken-down house that needs all the fixes and there are three shiny new houses in your same neighborhood and you don't want to be left behind. 

They’re not necessarily at this stage looking for something that they can fix up and they're going to have to take some time and invest money and effort into. They want to acquire something that adds to the bottom line and move on to get the next acquisition. 

We’ve coined it as speed dating. They are moving quickly and they aren't going to spend a lot of time on a deal that looks like a turnaround they’re going to focus their efforts on, because there are a lot of companies that have put their hands up that are in the pipelines of these acquires. 

Where do other things come into play, especially as a clinic owner? How important is it for the independent clinic owner to have a mission, purpose and values all established and maybe having a particular culture of some kind? Do acquiring companies look at that? 

It’s important and we see it as even more important for the seller. In the current market, many of the companies are offering a structure of a partnership. If I'm going to go out and find the right partner as you just described, culture is important. It's important to identify with what is your culture and what's the culture then that you're looking for your company to continue to thrive and not every acquirer brings that. They don't all have the same cultures. They all have different and unique cultures. When we look at and talk to companies that are looking to potentially sell their business, we say, “You may not want to hear this, but it's not all about the price. Culture is first and foremost as what we see in this market that becomes most important to a seller. They're going to be in there for a long time and they're going to be working along with the acquiring company for a number of years. It’s important, especially if they're going to be in a partnership and they have equity and they can benefit from growing that business. 

From personal experience, there was an opportunity for us to interview seven to eight different acquiring companies as we were on the market. I'm talking about this second hand because my partner was on a lot of these interviews while I was up here in Alaska. He said it was obvious as they sat at the table that things just didn't align. It didn't feel right. It seemed their focus was someplace else, whereas our focus was over here. I think the initial take is that they're all the same. These are all the same companies that are trying to get into the physical therapy market. They probably have the same values, where that's not the case at all. They have completely different values, different objectives and different mission statements so as the seller, it's highly important that you have all that established and that you know what your ideal acquirer looks like. You should probably have a good idea of who you're going to marry before you marry them that leads to a happier relationship down the road. 

There is no question, your perception of that as you were going through this is dead on. We do this a lot so we see it over and over again. When you can sit for three days, the owners of the business and we together met with seven different companies all within a matter of three days and asking a lot of the very same questions to each of them. You're exactly right. They came out with at least four of those companies. There's no way they said that those companies would meet what they were looking for in terms of culture. The other three have different attributes and that's where we start looking at what we see ithe next element that drives the best deal, which is structure. This is number four things that you got to know about this market, which is there are so many different structures in the market now. There have been five private equity groups that have gotten into this market within the last nine months. They all can come in and keep doing the same thing as their competitors. They have to bring something different and unique. 

What we're seeing is they're bringing some unique structures on how the equity in the future will be paid to the seller and where that equity is placed. Structure is right behind culture we say this, “You name the price, I'll name the structure and I'm going to win every time.” In this market, that's true. We line it up in a matrix and look at simply price. Many times when you look at the real value of everything that's going into the deal, it flip-flops in terms of where you're getting the greatest value based on the structure. 

The people who are selling need to know that there are different ways that they can get paid out. Is that what you're saying? That the structure of the deal could be no cash? It could be a percentage now and a percentage later? What are the expectations of your job after the fact? Is that what you're talking about when you talk about structure? 

Yes. There was partnership structureUS PT was on the forefront of the partnership structure and they've utilized a partnership structure certainly with their acquisitions as well. That partnership structure has been sliced and diced in multiple different ways from newer companies, the new private equity that has come in, in order for those companies to try and stand out. A big piece of it is not that you're not getting a good portion of what you're receiving for your business upfront, but how can we structure that back end to make it attractive and to make it secure? That’s where it can be fortunately and unfortunately. Fortunately for folks like us and unfortunately for sellers in the industry, it has become very complicated. What’s always a good structure for the acquirer may not be the best structure for the seller and it's that work on the backside of thatTypically, it's with the equity and where the equity is and how you get it out. That is important in this market. 

What’s the fifth thing we must know? 

We call the fifth thing of market separation. What we mean by that is in this current marketyou have multiple acquires and they're all at different stages of their growth. They're all seeking markets regionally based on the evolution of their growth. For example, a company that has been backed by either new private equity or our first round of private equity. Once they get their structure in place, they're going to be looking to grow. At year three, four, they may be looking to wind down somewhat in order to prepare for the next private equity investment. Companies that become what we call recapped, a new private equity group comes in and takes out a smaller private equity group. All of a sudden, you have a geographical need in which as opposed to staying somewhat regionally, we see those companies and we call it leapfrogging. 

A company that's primarily New Jersey, New York, all of a sudden they're doing an acquisition in Illinois, Michigan and Louisiana. This is what we call market separation which we no longer have one big market with just a couple acquirers. There are segments of markets across the United States and they're all different based on who the acquirers that are looking to get in and what stage in their evolution are they in and it changes. With these new private equity groups, a lot of them are West Coast-based. I think you're going to see a lot of platform acquisitions on the West Coast. We were a part of one of those. We’re seeing some East Coast acquirers and it's slowed down now gearing back up with some higher-level management, etc. They're going to look to jump back into the acquisition game. It causes what we call this market separation which is, it's so interesting and cool when you can look at it from the United States view. If you're in a market, you're in Pennsylvania, to see all of that, it is difficult. It has made it somewhat complicated. 

There must be balance between growth and margins to make good business. Click To Tweet

As a seller, the important takeaway is to recognize where these acquirers are coming from. Do they have a national footprint or are they a more regional player? At what stage are they in? Are they three years into this acquiring phase or are they brand new? Is that what you're saying? 

Exactly, and are they looking for platforms? Are they looking for add-on acquisitions? Are they looking for niche practices within certain markets? You coined it pretty much dead on. 

There are lot of takeaways. Those are valuable information especially if they're considering to sell anytime soon. If they want to get an idea of what the market looks like, it's important to have all these factors in mind. Are there any recommendations that you make to a guy whos like, “I'm not in the market to sell. I'm relatively new in my practice and I could be here for another twenty years and maybe grow with a couple of clinics? 

You want to make sure that as you grow your business and if you're on the very frontend of your career, the reason private equity is investing in this business is that it's a good business to be in. We work with companies across the country that are looking to remain independent in their markets. The keys to that are knowing and understanding what's going on around you, but looking to find and to capitalize on market niches that are focused on things that you serve those people better. You double down on those specific market niches that you can serve because you will typically be able to serve them better than the large companies. Being and living in your own market and in many cases, having grown up in that market. Going out and finding those market segments that you can serve better is I think one of the first things that we talk to companies about as they're looking to evolve within a market looking to grow. 

It comes down to solid blocking and tackling. You are making sure that you're establishing operations and financial budgets. You are making sure that you're looking to grow your staff in a way. You're looking to evolve leaders in your company and continuing to provide the best service of any company in your market or state and active in your community. Don’t let anybody out there tell you that just because such and such company did an acquisition in your market that you're not going to be able to survive anymore and you have to sell to one of these companies. No, that is not the case at all. 

I had guy John Dearing on and wtalked about what to do to prepare to sell. The big takeaway for me was that even if you're not looking to sell, being ready at any time, having your house in order per se, to be ready to sell at any time typically means you're profiting the most. You're running at peak performance anyways. Acting as if you were on the market can definitely lead to benefits as you said, having a leadership team where you're not the sole focus of management and leadership for your company. Having set policies and procedures, having clean books have an operating budget. Have your compliance manuals together and your policy and procedure manuals together because they're going to look at all those things. Even if you weren't selling, having all of those things in place makes you a more profitable company and it improves performance. 

We've seen companies have great success who early in the game have said, “I wonder what the value of my company is now in this market.” What that does is it makes it very clear internally what some of those value drivers are and can help guide decision making in the future. If you're looking to provide value so that you can pass this along to your children that may go into physical therapy or you're looking at some point in time to transition out of your company. We’re all going to leave our companies at some point in time. Understanding what that value is and what the internal value drivers are I think is also a good step to take early on because it will also uncover some of the things that you just said. 

Do you have that compliance program in place? Are your financials in a structure that's going to be easily assessed by acquirer? Are your leases in a structure? Do you own buildings and how are you dealing with your building ownership? Is that ownership in your company or did you put that separate? Are you running fitness programs and other programs that also under a structure, should be looked at and done differently? I think it's important early on to prepare your company for that value look later on and whether that's passed down to your staff, your children or going out to a third party. It is important. 

PTO 62 | Selling Your PT Business
Selling Your PT Business: Even if you're not looking to sell, being ready at any time means you're profiting the most.


I love that you tied it back to value. If we use them what increases our company's value as a decision filter, then that would lead our decisions to improve our value and improve our profitability. 

Profitability is important, but as you look across the company, it comes down to profitability and risks. What you want to do is to look to minimize risk by having a very diverse referral base, by having a payer base that's fairly diverse versus one singular payer base, a payer that may be federally funded, that could be changed overnight. As we look at our staff and the arrangements that we make with our staff, as we look at our management structure, everything we do, you want to look to build solidly which reduces risk. 

Is there anything else you want to share with us, Paul? 

This has been great and I appreciate you having me on. I hope this has been valuable to your audience. As I said before we got started, you're doing a great thing for our industry and I appreciate that. I'm glad I found you and I'm glad I was able to get on and talk to everybody. 

Thanks for your time. If people wanted to reach out to you, how would they do that? 

You can send me an email. That’s a pretty long one, but it goes right to our name. It's and certainly jump on our website to see what we do and how we do it, which is 

You're going to be presenting some of this information in the future whether that's at PPS or other conferences. 

We are. We did mergers and acquisitions conference that is called Better Strategies for Higher Valuations. We did that in Chicago back in early June and we're looking to do another one right before the Private Practice Section Conference on October 29th in Orlando. We'll be sending out invites for that and it's a nice way to start the conference. We'll do a five-hour teaching a training session and then that would be followed by dinner and it's a great time to network with other business owners across the country. 

If people were looking to go to that meeting the day before PPS, do they go to your website or do they reach out to you individually? How do they do that? 

We’re going to be sending invites out. Certainly send me an email, tell me you're interested and we will make 100% sure you get an invite and you're able to attend. 

Thanks for offering that and being a resource in that regard againThanks for your time. It's been great getting to know a little bit more about the M&A market. 

Nathan, it’s great talking to you. 

Thank you. 


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About Paul Martin, PT

PTO 62 | Selling Your PT BusinessPaul Martin’s personal experience makes him an expert on growing a PT company and selling it to a larger corporation. Early in his career, he grew his three-clinic rehab company in Moorestown, NJ to 21 clinics in only three years before personally negotiating the sale of the company to NovaCare in 1996.In 2000 he founded Martin Healthcare Advisors, a consulting and M&A Advisory firm dedicated to the outpatient Physical Therapy industry. Over the years, MHA has helped more than 500 business owners grow and prosper with their proprietary approach to strategic growth and succession planning.

As CEO of MHA, Paul has advised many of the most successful owners in our industry and his M&A team has led more outpatient rehab transactions during the last four years than any company in the country. He is a nationally recognized expert on the state of our industry and where it’s headed.

No one is better qualified to speak about what it’s like to sell to and work as a partner with private equity-backed companies than Paul Martin.

Paul holds a master's degree in Physical Therapy from Hahnemann University, as well as the prestigious “Certified Business Intermediary” (CBI) and “M&A Master Intermediary” (M&AMI) designations from the International Business Brokers Association (IBBA).


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