Exit Planning Two Years Out: What to Fix First
Two years before selling your PT practice, fix these first: your books, owner dependence, referral mix, growth trend, lease and documentation.
Two years is a useful runway for a physical therapy practice owner. It is long enough to fix real problems. It is short enough that every month counts.
The challenge is choosing what to work on first. Some fixes take a few weeks. Others need a full year of results before a buyer will believe them. Here is the order we usually recommend.
Start with the numbers
1. Clean up your books
Start with your financial records. Buyers price your practice on its earnings, usually as a multiple of EBITDA. If they cannot trust the numbers, nothing else you fix will get full credit.
Move to monthly, accrual-based financial statements if you are not there already. Separate personal and business expenses. Track revenue by location, payer and provider if your systems allow it.
Then document your add-backs. These are owner expenses or one-time costs that a buyer would not carry forward. Every add-back needs support, such as a receipt, a contract or a clear explanation. Your CPA should be part of this cleanup.
Then the slow fixes
2. Reduce owner dependence
This is usually the hardest fix and the slowest to show. If you carry the largest caseload, hold every referral relationship and make every decision, the buyer is really buying you. That makes the practice riskier and lowers what it is worth.
Pick specific tasks to hand off over the next 24 months. Introduce another clinician to your top referral sources. Train someone to run scheduling, billing follow-up and payroll. Reduce your own caseload gradually so the numbers show the clinic holding steady without you.
Buyers want to see that shift in the results, not just hear about it. That is why it belongs early in your plan.
3. Broaden your referral mix
Look at where your new patients come from. If one physician group or one hospital system sends a large share, a buyer will ask what happens if that source goes away. Heavy reliance on a single payer raises the same question.
Track referrals by source each month. Build relationships with additional physicians, athletic programs, employers and direct-access patients. You do not need to replace your top source. You need to show it is not the only thing holding the practice up.
4. Show a steady or rising trend
Buyers look at your last two to three years, not just last year. A practice with flat or rising earnings reads as stable. A practice with declining earnings invites a lower offer and tougher terms.
Over the next two years, focus on the basics that move the trend. Fill open visit slots, cut cancellations and no-shows, and follow up on denied claims.
Avoid large discretionary spending in the final year that drags down earnings without a clear return.
Then the paperwork
5. Review your lease
Your lease affects the sale more than many owners expect. A buyer needs to know it can stay in the space. A lease with little time left, or one that limits assignment, can stall a deal.
Read your lease now. Check the remaining term, renewal options and the assignment clause. If you own the building, think about what lease you would offer a buyer. Have your attorney review any changes before you sign them.
6. Organize your documentation
Diligence goes faster when your files are in order. Start a folder now and fill it over time. A practical starting list:
- Three years of financial statements and tax returns
- Payer contracts and fee schedules
- Employee roster, pay rates and any written agreements
- Equipment list with approximate age and condition
- Lease, licenses and insurance policies
- Written policies for scheduling, billing and clinical documentation
Organized records also signal that the practice is well run. Buyers notice that.
Why this order
The order follows how long each fix takes to show up in your results. Books come first because every other improvement depends on clean numbers. Owner dependence and referral mix come next because they take the longest to prove.
The trend improves partly as a result of that earlier work. Lease and documentation are mostly paperwork, but leaving them to the last month creates avoidable delays. Your practice may need a different order, and that is fine.
Your next step
Pull your last three years of financial statements this week. Note every place where you are unsure what a number means or where personal and business costs mix. That list is the start of your two-year plan, and our Exit Readiness work can help you build the rest.