Reading the three clocks: market, practice, you

The short answer

How do you know if now is the right time to transition your physical therapy business? Read three clocks at the same time: the market, your business, and you. Paul Martin, Founder and President of Martin Healthcare Advisors, explains each one.

The three clocks:

• Market clock: acquirer appetite, current transaction multiples, and the cost of capital
• Business clock: your EBITDA and the quality of that EBITDA, how your metrics compare to best practices, and which levers would raise your value
• Personal clock: what you need financially from a transaction, what you will do next, and whether you can stay at least 3 years after a partner takes over

When all three read positive, you have leverage. You control your business and personal clocks. You do not control the market, and you can only transition when acquirers are buying.

Full transcript

Knowing whether now is your moment comes down to reading three clocks at the same time.

First, the market clock. What is the current acquirer appetite? What are the current transaction multiples? What is the current cost of capital? These are just a few of the factors that cause a market to be either strong or weak.

Next, your business clock. What is your current EBITDA, and what is the quality of that EBITDA? How do your operational metrics compare to best-practice metrics? And would the value of your business be significantly higher by just pulling a few levers?

And then finally, the personal clock. How much do you need from a transaction in order to meet your personal financial goals and objectives? What will you do after you finally leave your practice? And are you giving yourself enough time to stay with your business for a minimum of 3 years after a partner takes over?

When all these clocks are reading positively, you as the owner have leverage. And keep in mind, you have some control over your business clock and your personal clock. The market clock, not so much. The only time you can truly sell a physical therapy business is when there are acquirers in the market that are acquiring physical therapy businesses.

Transcript lightly edited for readability.