How We Sell Clinics for $500K, $1M, and $10M (170+ Deals Closed)

Yeah, this year should be another solid year. There's definitely a lot of good activity. I think we're probably aiming for $45 to $50 million of transactions to be completed this year. Could be higher.

How to get smarter in business and in life. This is the question and I'm on a journey to get you that answer. I'm going to interview the world's top entrepreneurs and deconstruct their winning secrets. Going to talk about everything from marketing, money, and living a bucket list life. I'm Rick Lau. Healthcare entrepreneur. I grew and exited my 127 locations in my 30s. Welcome to the Clinic Boss Show. All right, good morning or good afternoon, everybody. Today we have two special guests, two good friends of mine. We got Soroush Peyvandi, we got Paul Peyvandi, and they are the experts in buying and selling a clinic at, uh, Clinic Accelerator, right? So, um, welcome to the show, guys.

Thanks for having us back.

Yeah, you guys are— Soroush is a regular now, right? So Soroush, why don't you give us a, um, I'm curious, what is the, uh, just to get a sense of the types of transaction values we're dealing with in 2026, what's the, what's your estimated total clinic transaction value that we expect to, um, close this year in 2026?

Uh, yeah, this year should be, uh, another solid year. There's definitely a lot of good activity. I think we're probably aiming for, uh, $45 to $50 million of transactions to be completed this year. Uh, could be higher. There's definitely a few, you know, irons in the fire. We'll see, um, how those pan out, but that's what we're looking at right now.

That's a lot of deals. And Paul, uh, how many clinic sales have you personally involved with, like maybe in terms of like locations?

Uh, in terms of locations, in the last couple years we've probably, uh, we've probably altogether done about, uh, 50 to 60 different locations.

What about your lifetime, Paul?

A lifetime, probably at least a couple hundred for sure. Okay.

Um, yeah, I think if I, if I was to add your part, around 170, 180 or so, right?

Yeah, something like that. I mean, if you're talking about due diligence we're in the thousands for sure, but, uh, definitely a lot of activity.

Yeah, yeah, yeah. Well, it's not like a due date, that's a lot of due dates, but in terms of closes, you've been, you know, I think personally, um, you've probably closed about 170, 180 deals so far in your career.

Yeah, something like that, for sure.

Yeah. Okay, and, and, and this is interesting topic, you know, like, um, I find that this year we have a lot of owners, uh, knocking on our door, um, and one of the common themes is A lot of these owners are sick of running their practice right now. Right, Paul? Can you maybe talk about and maybe share the sentiment that you're seeing on the streets on why people are sick of running their practice and they're considering selling right now?

Yeah, I mean, I get on a call with a lot of clinic owners and there is definitely a resounding theme when it comes to running their businesses, even if their businesses are doing well. And they're making a lot of money. There's a lot of pressure, pressure and stress that comes with running the clinic. A lot of it has to do with, you know, recruitment and finding physios, chiros, massage therapists that want to work in the clinic. But a lot of it also has to do with a lot of macro factors. So things like inflation, people asking for pay raises, And then ultimately, if let's say you're not set up with the right systems and processes in your business and you're not running it efficiently, that adds a lot of stress and pressure to the business. Some people, when they're scaling their business as well, they don't necessarily know what the next steps are. And so, you know, when you feel like you have, you know, 20, 30 different things going on at the same time, it's a lot of pressure to put on yourself as a clinic owner.

Soroush, anything else you want to add to that?

Yeah, I mean, Paul summed it up really well, but it's hard running a healthcare business. I mean, it's not an easy thing to do. There's so much headwinds, you know, barrier to entry might seem low. I mean, you can probably go to a bank and get funding to open a clinic up, but, you know, again, the challenges really start after that point. So it's, I think a lot of people are You know, they still want to be involved in, in these businesses, but they don't want the pressure of having to have to hold the bag if something like catastrophic happens. And I think COVID really made people start rethinking their future because, you know, we didn't know what was going to happen on March 23rd, 2020, when everything started shutting down. Nobody really knew what was going to happen. And so that fear, that uncertainty is always there as an owner. And, um, and you can have an amazing business. It doesn't mean that it's not going to decline. So having that support from, you know, another party or another group that they can maybe take on some of the backend stuff, that's been a big theme for a lot of the people that I'm working with is it's not that they want to get out of the industry, they just want to have a little bit more support and, uh, somebody they can rely on, uh, to, to help them continue to grow the business for even a longer term. But that unknown is, I think, driving some of that fear, but also just the challenges of the industry and the macro factors that we're seeing too, like recruitment, shrinking margins, lower reimbursement, increasing copay. Those things are all critical things that result in people wanting to make a move out of ownership, but not always out of the industry.

Yeah, and just something that I'd add to that as well is You know, there's a lot of clinic owners that are noticing some of their clinicians are becoming competitors. So they're leaving their clinics.

Some are a lot.

It's happening a lot where clinic clinicians are leaving their clinics and some of them are their superstar clinics, sorry, superstar clinicians, and they're taking their billings with them. So for a clinic owner, that puts a lot of pressure on the clinic. It kind of pulls the clinic owner back into the business where they have to kind of take over some of the clinician duties. And so you can kind of imagine that would be a very hard thing to deal with.

Yeah, I see that trend happening where these clinicians maybe just rent a room at a gym or rent a room at a doctor's office, right? Cost them $500, $1,000 a month, and then they move all their billings over.

Yeah.

Right? Especially if they've been there for 5, 10 years, they've been an anchor of the business, right? And you know, I just, I met, I met, I mean, an owner who, who did this startup about a couple years ago, she rented this space in one of those big corporate gyms that has 10,000 members. Um, she's billing $200K in a year and she's paying whatever, $1,000 a month and run a completely new setup where she doesn't even have a front desk.

Yeah.

And she's billing herself.

Yeah, it's a, it's a great point. And, and it's not just other clinicians opening up. Their, their solo practices. But because the competition is so stiff for, for physios, chiros, massage therapists, they're getting recruited away to other clinics with signing bonuses and all those sort of incentives to come over. So it's becoming super competitive to, to really hold on to your clinicians, especially the top performing ones.

And Paul, when we were running clinics a long, long time ago, right, you know, 20, 20 years ago, Typically a physio clinic would hire only a physio clinic, or a chiro will only hire chiro. But now you're seeing, you know, chiro's hiring physio, massage, chiro's massage hiring chiro, physio, massage, uh, you know, and this is not just happening in Canada, it's happening in the US, it's happened in Australia. And so that pool of, of, uh, of, um, the pool of people offering jobs to the same pool, uh, of, uh, of, uh, of staff is like, it's just gone up so much.

Yeah, 100%. And, and, and as Soroush Peyvandi mentioned, COVID really changed things as well, right? A lot of people are thinking of, you know, having more of a lifestyle, um, you know, instead of a career and moving up within a clinic in an urban center. And so there, there are a lot of clinicians are actually moving to some of these rural centers you know, where it's a little bit laid back, a little bit easier life. And that's also putting a lot of pressure on these clinic owners who, who need to recruit for their businesses.

Right. All right. So, we've done a lot of deals the last couple years. What would you say is the top 3 biggest mistakes that you guys seen when it comes to selling your practice from a, from an owner's perspective? Top 3.

Um, probably number one is prep. We've probably talked about this many, many times. The deals go significantly different when the prep is there versus when it's not. And a lot of times in this prep period when we work with, uh, with people wanting to list their business we find a lot of issues that, again, if they don't get addressed before we present it to the group, those become leverage points against your valuation. And so again, a lot of people kind of rush to just put it out there. And, uh, again, we see, we see them get grinded down in their valuation a lot faster.

And what do you mean by prep? Like, what's included? Like, what's in— what's part of a prep?

Like, so quickly, when we, when we work with clinics, this isn't like, hey, just send me some financials and, you know, we're just gonna throw this in a folder and share that. That's not, that's not prep. Prep is actually like looking at the business like we're, we're a buyer. Like, because again, a lot of us, you know, at Accelerator, we were actually buyers before. You know, we grew our clinics through acquisitions. PT Health Group predominantly through acquisitions. So we, we know what we're looking for to grind out value. So we actually put the buyer hat on and we look at their numbers. Okay, is your number set up properly? Is your org structure set up properly? Is the systems and the like mix of your services set up properly? And then there's a couple options. Then they're like, you know, then we give them, hey, you can either still go on the market, we just obviously have to just clean up some of the financials and things like that through through the prep portion that we do, or we can actually work with them, you know, through some coaching or whatever to actually help them put in the right tools so that eventually they gain a lot more value when they actually go for an exit, right? And that's kind of the beauty of us working with groups because like we didn't, we didn't go to school to buy and sell clinics. We went to school to become clinicians who own clinics, who went through the process who now are, you know, in this buy and sell position. So we've seen it all from start to finish.

Yeah, and I just add to that, um, you know, I think the prep is absolutely important. A lot of clinic owners go into these negotiations and they don't even know their own numbers, and that's a real, um, you know, sort of problem, especially when the other buyers, and especially when you get into the higher valuation businesses, the other buyers have literally like master's degree analysts, business analysts that are looking at the numbers and trying to find any little piece of information that will try to bring the valuation down. And so, and they have a whole team of people doing it. And so if you as a clinic owner are not, you know, really fluent in the numbers of your business, you're sort of setting yourself up for a little bit of a a lower valuation. The other thing that I would say most clinic owners make a mistake of is not trying to get multiple bids to the table or multiple buyers to the table. A lot of clinic owners, they'll know someone that might be interested in their clinic and they sort of put all their eggs into that one basket. And the problem with that is that buyer typically is, let's say, someone in the community or another clinic owner or maybe even a staff member, when they know they're the only buyer at the table, that gives them all the leverage. And, you know, ultimately you have nothing to work against to make sure that you keep that person honest. And so deals start to overextend in terms of time. You start to get grinded down in terms of valuation and it becomes a real, you know, grind to actually get the deal done. right? So I think that's, that's a real big—

that's a good point because the same thing as like real estate, you know, if you're going to sell your house, you want to have multiple bids. It's like no different than selling your clinic. So the more amount of buyers, the more amount of like bigger that pool is, you know, it will naturally just drive the price up.

Yeah, 100% speed too, and speed as well. And, and the worst part is when, let's say, that buyer who is the only buyer at the table, they start getting advice from their counsel. So whether it's their legal counsel or whether it's their accountants, and they start getting involved. What the heck?

That's the worst, typically, right?

Oh, it just, it slows the entire deal down. And, you know, a lot of these accountants and lawyers, they actually don't have a lot of experience in clinic acquisitions or clinic, you know, the selling of clinics. Or the business of it. They may have dealt with 1 or 2, whereas, you know, we've dealt with literally hundreds or thousands. And ultimately what you want is someone that can guide that process with the, you know, whoever they're getting represented by and be able to set those people straight. I think that's a thing that a lot of people are missing in their negotiations. So I think representation, getting multiple bids, those are really—

Is that the third one then?

Like you're saying, like, I would say representation is a big thing and, you know, it doesn't matter if it's us or any other group, but, you know, ideally it's someone with experience. That's the big thing that you want.

So representation meaning what? Like getting someone that is helping you sell or pitch your clinic to buyers?

Yeah, 100%.

Negotiate the deal, help you close the deal.

Yeah, negotiate the deal, not only with the buyers coming at your table, but also dealing with the accountants and the lawyers. Because a lot of times clinic owners just acquiesce to whatever the lawyers or accountants' opinions are. But a lot of those lawyers and accountants actually have the wrong idea of how deals should happen in, you know, in this market, in this industry.

Yeah, they might have it for like a traditional industry that has a mass amount of like transaction and volumes, but like, let's be honest, there's not that many It's not a big industry of selling and buying clinics, right? For a typical accountant or lawyer.

Yeah, that's right.

And you can't value it the same thing as a convenience store.

Yeah, they may have a lot of experience with real estate or, you know, small businesses, but when you're dealing with a niche industry like, you know, healthcare with physio, chiro, massage, there's definitely a lot of nuance that comes with it. And, you know, You also don't want to get bullied by the buyers as well. Like I was saying, they have a lot of team, like a lot of, you know, manpower behind them. And, you know, ultimately you want to be able to fight fire with fire, right?

Yeah, that's a good point. Soroush, anything else you want to add to the 3 that we've talked about?

I think it kind of goes in line with the representation piece, but getting too emotional. You know, it is, it is sometimes can be an emotional process.

Like the seller being too emotional or the— like, what do you mean emotional?

Yes, the seller being— and, you know, also this kind of maybe for the less sophisticated buyers, sometimes they get emotional too. But usually the bigger buyers, the more sophisticated buyers, they don't get too emotional with these deals. They're very, you know, stick to facts. And, you know, when they come back with numbers or the valuation and if things are looking different, you know, it's important to stay neutral to, uh, to whatever is coming to you because, uh, you know, that's not the end of the road, right? And so there's always ways to—

what do they typically get emotional about, you know?

Well, you know, if anytime anything related to any valuation drops, people sometimes take that personally and they'll say, oh well, no, my business is worth this much. I put this many years of time into it. I put my blood, sweat, and tears into it. So which, which makes sense, like it you know, it is, you put a lot of energy, it is your baby and you're kind of giving your baby away and you want to protect your team. You want to make sure you're getting the value that you've built into it out of this business. And so sometimes people just get emotional with the process, right? If anything comes last minute, you know, they'll, you know, lose their head or, you know, they'll say something they don't mean. And that sometimes actually negatively influences the deal, which is kind of why it's interesting in the real estate world. A lot of realtors don't want buyers and sellers to even talk to each other ever. But in this case, it's a little different. You can't run this like a real estate transaction because actually talking to the sellers is critical. But you have to still You know, stay positive through the process. In order for you to get what you want out of the deal, you can't start being pessimistic or cynical with parts of the process because it's not over until it's over. So we still have time.

But yeah, yeah, I'd say that's, that's a great point, Soroush. And I think one of the things that people get really emotional over is the transition process, like what happens after the deal is done and how long they got to stick around for. And the valuation process. So I'll give you two examples, and it might be within the same transaction, but some people think that their clinic is worth double what the market is going for, and that's the number that they have in their mind. And so they're really stuck on that number, and it becomes a little bit of a problem because, you know, these buyers, a lot of them are very sophisticated, especially when you get into the higher valuations. So they're seeing the numbers across the board and they're saying, well, this clinic is really out of whack in terms of valuation. And so when an owner can't handle the fact that their clinic is overvalued, you know, that becomes a little bit of a problem and people— you lose a lot of deals because of it. And in terms of the transition process, you know, some owners think they can, especially at higher valuations, they just want to leave after a month after the deal has closed. And sometimes there's a lot longer transition periods, especially if you want to get into the millions of dollars of valuation. And that's something that, you know, people have to understand. And so again, going back to what Soroush was talking about, the preparation, how do you talk to the buyers? How do you get them really enticed in terms of wanting to buy your business? You have to understand what their sort of motivations are. They want really strong teams, they want really strong cash flow, and, you know, ultimately if you create too much of a high valuation and you don't create a very friendly transition, it becomes a little bit of a problem to close the deal.

Yeah, I would probably think people will also get emotional when it comes to add-backs, right? You know, yeah, with what type of expenses they should add back to the profit so they actually have get a higher valuation, right? You know, well, this expense, I'm not going to be paying this expense as a one-time It was a one-time thing to go to Hawaii, you know.

Yeah, the add-backs are— that's an interesting process as well. We've lost deals because the add-backs were so extreme that the buyers had lost a little bit of faith and trust in the numbers itself.

And okay, it was questioning the, the transparency and also the accuracy of the numbers, right?

100%.

Yeah, less transparency, more more it looks like if they have to dig through a forest to find this small blue rock, which is your actual EBITDA, then they're going to be like, we don't— we can't trust the numbers because we— it's not that they're not being upfront about it, we're giving everything upfront, but sometimes that just immediately looks off. And so if you're, if you're like, you know, EBITDA is $100,000 and you're adding back $400,000, like that's a pretty big discrepancy, right? This is why the clean books is attractive. Yes, you do pay more tax with this method, but it does make selling the business a lot easier down the line. So of course you need to obviously work with an accountant to get kind of a nice middle ground. It doesn't mean you can't have any, you know, add-backs. People will have stuff in their, in their business anyways, but if it's an extreme point, it does go the other way.

That's a, that's a great point. And It kind of points to the fact that when you're preparing to sell your business, sometimes it's a 2 or 3-year process beforehand before you even sell the business to work on cleaning up your books, to make sure the add-backs are not too extensive, to make sure that when a buyer is looking at your financials, they're looking at really clean financials. That definitely helps close the transactions a lot easier.

Okay, so just on that topic, if you're looking to sell in the next 18, 24 months, right, what are, What do you think are 3 things they need to start doing like now, like today? So you talked about the, you know, getting clean financials, right, is one.

Well, yeah, yeah, clean up your financials. You know, you have to look at your work structure and you have to look at what the systems you have in your business, because at the core of it, by the end when you want to sell, those 3 things, they need to make your business look investable in and turnkey, as turnkey as possible. Because if you want high valuations, if you want a strong multiple, those buyers, a lot of the big buyers that are out there in our private marketplace, those buyers, they want good clinics. They want established clinics, mature clinics with mature profit. And so they're not looking for the $100,000 opportunity to flip into a $200,000 valuation. They're looking for $200,000, $300,000, $400,000 EBITDA established clinics that they can bolster on into their current group of clinics because they want the clinics to continue to run and continue to perform over time, right? It's different than a smaller buyer like myself. Like at the beginning when I was starting out, when Paul and I were working on the clinics, we were hunting for the opportunities that weren't established or mature because we wanted to gain the value of creating that maturity within the business. So it's a different strategy, but that also meant that the sellers weren't going to get the top dollar because the business wasn't set up for that point. But they— but everybody won at the end with, with the structure that we had. But in this scenario, if you are looking to get the maximum dollars, you need to design your clinic for the groups that are going to give you the max amount.

So can you repeat the 3 things again, Soroush Peyvandi?

Your financials need to be clean and they need to be organized and properly set up. So you do need a good bookkeeper and a good accountant to do that. You need the right org structure that's going to help with the continuation of the business in the future.

So that when you're not there, the business keeps on running profits, right? You know, yeah. What's the third thing?

And the third thing is the systems within the business that keep the engine going. So these are— could be your system for recruitment, for your marketing, to also get different types of patients. Again, you don't want this concentration with one contract, like 90% of your revenue comes from one contract, because that's a risk. Right. You gotta think like, you know, it's like a, if you've ever heard of an all-weather portfolio, which is a diversified portfolio, whatever macro conditions happen, it's not gonna fluctuate that much. But let's say Canada is like, we're not gonna do WCB anymore. And 90% of your revenue comes from WCB and WCB shuts down. Your business is toast.

Yeah. If, if you look at all the deals that have collapsed, right? What would you say the top 3 reasons why they collapsed? Like what, what are the scenarios?

Yeah, luckily we don't have too many examples of that, so I can only draw from like a few examples. And, but, but I have seen deals collapse in other outside of us. And so I'll kind of draw from that experience too. One of the main things is the add backs. So if the add-backs are too aggressive, I'll say it again, or they're not correctly done, then you lose trust with the buyer and the buyer feels less confident with the business. So immediately that could cause a buyer to walk away. The second piece—

what are unreasonable add-backs? Just quickly.

So I'll give an example. There's a scenario where we had somebody had hired somebody, a physio, and they were paying them hourly, but they want to add back the full physio salary because they didn't meet their potential. And we advise against this, but oh yeah, yeah, they really wanted to push, to push this forward. I said, okay, but I can almost guarantee you the buyers are not going to accept that because this is something that I wouldn't accept as a buyer.

Well, you can't add back like shitty staff that you hired. It just, that doesn't make sense, right?

So, so we did. And that deal didn't materialize.

Yeah, right.

Because the add-backs— and there was a few examples of that within the same deal that created a little bit of tension, I think, on the back end. Again, buyers will also not tell you the whole story. They'll just make, you know, they'll give you part of the story.

What other add-backs, Soroush, that are like— you shouldn't— like, that are kind of red flags for buyers?

Uh, anything that is, uh, potentially an audit risk. So any, any add-backs that, you know, might, you know, create an audit for the corporation, because if they're buying this business, they're buying the corporation. And although in most of the language in the agreements, there's still reps and warranties where if something happens from previous, you know, that still could spook some people. And so, you know, those are like, we're talking like truly non-legitimate stuff. Like there's like shady stuff happening, right? Um, I've seen that before. Again, not in our deals specifically. I've seen that in other deals. And the third thing that really— and this, this has happened to us almost many times, but it hasn't really materialized, but it has happened to many other individuals— is when the other advisors come in and start, you know, doing things in the last hour, at the 11th hour, creating problems for everybody without communicating with us or with the sellers. And, you know, things, you know, they, they, like, lawyers do their lawyer thing, accountants do their accountant thing. And again, we know they're doing it to protect their client, but, you know, this is a group effort. It's a team sport when you're trying to get a big deal across the finish line. And if one member of your team is just going rogue and doing their thing, that could result in the deal completely collapsing.

It's typically the lawyers, isn't it? Or are you seeing it 50/50? Not always.

Accountants as well.

I find like lawyers are like deal— like they're the ones that block the deals. They'll give you 100 reasons why it's, you know, it's not in your— it's not— it was not 100%.

When we give— if we ever give a referral out for a lawyer or an accountant, and I've had this, I've done this now because we have a lot of people in our network and people want to like— they don't know who to use and we have multiple— we can refer to them. The first question I ask them, and this, if you're a lawyer or accountant listening to this, the first question I ask them, are you a deal maker or a deal breaker? Because you're always one or the other. You're never both. And, and most people that are actually good M&A accountants or M&A lawyers are always deal makers because they understand the concept of there is, it's not a perfect solution.

There's, this is acceptable risk, you know, to close the deal.

Exactly. There's a certain amount of risk that's always going to be acceptable on both sides. Like buyers have this, their counselor is saying the same thing. Like their counselor wants what's best for the buyers. This council wants what's best for the sellers. They got to meet somewhere. They can't get the best for each other. So that's just the reality.

Okay. Okay. So we talked about add backs, we talked about lawyers and accountants, right? You know, Paul, is there anything else you want to add that you've seen on why deals collapse?

I mean, I think the— well, just to add to what Soroush is saying with the lawyers and the accountants, one of the things that I tell people is Make sure when you talk to your lawyers that you have this sense that it's the 80/20 rule. You're not going to get everything that you want in the deal. 20% of it is going to be stuff that you're going to have to acquiesce on. But the reason why most lawyers become sort of blockers of the deal is because they want everything 100% risk-free. And in any deal, that's just not possible on both sides, right? So I think that's something, just a mindset that's sort of important to keep in mind. In terms of other scenarios that, you know, break deals, I would say the one of the, one of the things that a lot of people go through is again the valuations, having unrealistic expectations of their valuation. If you, if you talk to, you know, anybody who's in the marketplace, and you can see sort of some comparables that will give you a sense of where you should value your business. But nothing much more to add to what Soroush was saying.

Okay, cool. And how do you, like, you know, actually, let me back up. So what type of, what would you say the top, you know, top buyers right now that are buying these type of clinics, buying physio clinics, massage clinics, chiro clinics, right? If you were to put them into buckets?

The top buyers, there are 3 buckets. One is like maybe similar buckets, which is the financial buyer. So we do have obviously groups that are financial, they have financially backed like private equity or other family offices where they have funds behind them that are coming out and wanting to make their moves in the space, which is very common. We have obviously the strategic groups, these are the large corps that that are obviously looking to continue their acquisition hunt. That's not nothing new.

Uh, these are the ones that have, you know, hundreds or thousands of clinics in their network already. They're just adding more, right?

Yeah, yeah, they've got, uh, fairly large networks. Then we also have the mid-sized chains, which is, you know, the groups that have between like 10 and 50 clinics, like 10 and 100 clinics.

Well, these are more your regional competitors, would you say, Soroush?

Um, well, they, they've kind of taken a national position So they're just not as aggressive actually in certain regions, but they are, they have started to expand to become more national overall. So they are becoming contenders across the board. But yes, more regionally, they have more power in those regions. But they've also, again, some of those individuals have backers as well. They're looking to grow and become real contenders with, with the bigger groups.

Yeah, and then you got— you also got a local competitor, right, um, down the street, or it could be a— or a clinician, right? You know, anything else you want to add, Paul?

Uh, no, no, I think— I think that just about covers it. Um, but I mean, if you're talking about clinics or groups that are buying large organizations or larger valuation businesses, you're really limited to you know, the groups that Soroush was talking about. So the bigger strategic buyers as well as the financial buyers and then the mid-market buyers, the ones that are, you know, have 10 to whatever, 50 locations. But other than that, there's not, there's not really many other buyers that can afford the bigger valuation locations.

Yeah, for sure. And what do they look for? What's it— what are they looking for when they buy like a business, right? Like, what are they valuing? What's important to them?

Uh, it depends on the buyer. So let's, let's start small, like the individual buyer or someone who's getting in, or a clinician that wants to buy. They're looking for, uh, upside potential, right? A lot of those guys wanting a business that's on the cheaper side, that's affordable, but with a lot of upside, uh, they can hopefully gain in the next 2 to 3 years. That's what they're looking for. The, uh, the chains, the kind of mid-sized chains, they're looking— they're actually way more strategic with locations. So they are more concerned about where the business is. And then the second big priority would be obviously the profitability. Both, both of those need to be, uh, factors that are conditions that need to be satisfied. And then you have the larger, uh, groups that, you know, want mature established businesses that, um, are gonna add value to their group, they're going to add reputation to their group, and hopefully they're also going to be adding additional leaders to their group, which is why they're okay to pay premium because they're getting more than just the EBITDA of the business, but they're getting a lot of the, you know, intangibles as well that comes with it.

Yeah, yeah, yeah. Like the staff, right? You know, and so this is where what we talked about earlier, like making sure that you have a good org structure because they're really buying the org structure, you know, right? Or they're, they're buying the systems and running the business because they want to continue operating, right?

So yeah, I 100% agree with Soroush. Like, typically it's the 3 things: geography, location, and leadership. Those are the 3 things that the bigger buyers are looking for. Uh, sorry, geography, cash flow, and location— or leadership.

Sorry, say it again.

Geography, cash flow, and leadership.

In that order?

Uh, not necessarily, not necessarily, but, uh, I'd say the top 2 things for sure are, um, you know, uh, cash flow and leadership. Those would be the top 2 things. Geography, if they're being strategic about where they need to place their clinics. So especially strategics, they're looking for clinics that where they know they have a lot of referrals and they can spread those referrals around. Or they, let's say they have a preferred providership network that, you know, they have these deals with insurance companies or, you know, WorkSafe or workers' compensation. They know that they can fill these clinics up. But the main two are cash flow and leadership, I would say, are the key things. Agreed.

Right. And what are, what valuations are you seeing right now in 2026?

Uh, in terms of what, multiple?

Uh, sure. Yeah, maybe you could describe that for the people who don't understand that, right? You know, like, what is the— like, how does, how do, how does, um, how does a clinic typically get valued, right? You know, and, and what, what is the valuation that you see in 2026? You know, maybe for, um, you know, uh, yeah, maybe for a smaller clinic that's doing half a million, and maybe, uh, talk about, you know, a clinic that is doing like a much bigger, for the bigger clients, right?

Yeah, it gets, yeah, it's, it's, it's a little bit more clear and more black and white as the business gets bigger versus as the business gets smaller. And I'll, I'll explain why in a second. In a smaller deal, typically again, you know, your, your main source of valuation in the healthcare space is gonna be the, the multiple, using a multiple and your, your normalized, profit. So you look at how much normalized profit or cash flow you have and you attach a multiple to that. And that's what— that's your valuation. Typically, that's the most consistent, most average way to look at the valuation of healthcare businesses. When it gets small or when the business is breaking even or losing money, things obviously get a little bit trickier. So you do typically deploy some level of a revenue-based valuation in order to try to come up with a value of the business that's as close as possible to what you wouldn't— you would need to pay for all the other things that are, you know, present in the business because there's still the assets, there's still the patient list, there's still the staff, there's still obviously a lease if it's solid. Uh, there's a lot— there's still value in that. And but again, it's harder. You can't do an EBITDA multiple because if there's no actual profit, then it's harder to do that, right? Um, the, you know, as you get bigger, as the valuations, as the EBITDA grows or the profit grows, that's where you start to see the multiples coming in where, you know, let's say under $200,000, we're, we're seeing somewhere between, again, the 3 to 5 range still. And again, that's $200,000 profit, right?

Normalized profit. Is that what you mean, Soroush? Okay. Not, not, not revenue, right?

No, not revenue. Under $200,000 of profit, EBITDA, adjusted EBITDA at the end. That's what, what we're seeing. And the range, again, totally different, different, differs based on the based on the factors we talked about for, you know, financials, org structure, and location. Those will impact the multiple. And, and then as they go above $200K, as the number of locations start to come into effect, that's when the multiples start going up, and obviously it will be above 5.

If you enjoy my content, I write a clinic owner newsletter. I share with you what's trending right now in marketing, selling your business, recruitment, operations, front desk, and more. Become a better clinic owner. Join over 22,000 clinic owners who get this free newsletter each week. Go to clinicowner.com to sign up today. Right, what's the range you're seeing in that one, like from, uh, from low end to top end?

Uh, more consistently we're seeing between the, the 5 to 8 in this market. Obviously markets continuously change, so today's multiple may not be the same as tomorrow's multiple. But the, again, the, the factors that really drive that multiple at that stage is the total profit of the group, the number of locations, again, the org structure, which is very critical, that who's going to be moving on and carrying on the business, and, and the location and geography as well, right, is going to be obviously critical to some buyers.

So that's what we'll see, kind of the valuation rate, just And Paul, like, you know, I think in a few years ago, I think people's expectations of valuation was way higher. Maybe you can explain why and why, why is it like, why is there, why was it way higher like years ago versus what it is now, right?

Well, I mean, the valuations were a little bit higher years ago. Um, I think COVID was sort of the demarcating line where things had really changed prior to COVID. You know, there was a lot more competition. Money was very cheap.

So the interest rates were super low back then. It was almost nothing, right?

You know, interest rates were super low. The cost to borrow, the cost of capital was very, was very low. And so you got— you see a lot— you saw a lot of aggressive purchasing and a lot of competitive bidding. And that just you know, sort of escalated with all the competing offers. I think the vet space really kind of, uh, yes, for a lot of people. Um, yeah, you know, there was some crazy valuations that were happening in the vet space where—

what kind of valuation did we see for the vet? I remember seeing like $15, $20 or something, right?

$15,000.

Yeah, for a single location.

For a single location. And it's, it's— that, that was just unheard of. Anywhere. And so that sort of percolated through the, you know, towards physio, chiropractor, massage clinics. We never really got up to more than, um, you know, 12 times. 12 times I think was the highest that I'd ever seen. Um, but when you look at the market now, like 5 to 8 times is actually really good. And Soroush Peyvandi and I have gone on calls with, um, a lot of people in the M&A industry, not necessarily in the healthcare industry but other industries like some of the blue-collar industries, and they're shocked that we're getting 5 to 8 times for our businesses. So relatively speaking, I think we're doing all right. And, you know, and I think, I think we're still going to continue to see those types of multiples because the interest rates aren't necessarily coming down as fast as, you know, we'd like them to.

But there's a new Fed chairman. Isn't this guy like going to be like slashing rates?

It's sort of a— yeah, we'll see. We'll see what happens. We'll see what happens. I mean, Canada has been diverging a little bit from the US as well when it comes to interest rates as well. So yeah, they're not— they used to follow in lockstep with the US, you know, interest rate setting. Now they're kind of diverging a little bit.

So we'll see what happens the next couple of years. Something you brought up earlier, Paul, was that it's key to get multiple offers, right? You know, maybe, maybe describe how do you get multiple offers?

Well, that's where, that's where, you know, you know, sort of a plug for what we do becomes really important. We have the contacts with the big buyers, with, you know, multiple financial firms, the private equity groups, the family offices. We have those contacts and they're all wanting to break into the industry or have already broken into the industry, you know, from at least from a private equity standpoint. And so we, those, and especially the strategic buyers, they're very hungry for high-quality, high-value, high-quality, well-run businesses. And so when we bring those clinics to the table and prepare them in the right way, you know, they're happy to take a look at those offers. I think, and Soroush can talk to this a little bit more, but the preparation that Soroush and his team have done for these high-value clinics have become branded now. We call it Ocean Express, but they're branded. And when these buyers know that an Ocean Express clinic is coming down the line and have gone through that, that preparation, framework, they're very happy to take a look at it. And, you know, it does improve the valuations because of, of the amount of work that goes into it. So that's one thing. If, if we're going— if you're going through sort of the regular marketplace, you know, we have an email list of about 30,000 clinic owners, buyers, clinicians across Canada and the US. And so when we market this— market these listings to this email list, a lot of buyers come out of the woodwork and start competing for the same clinic. And so especially for those—

yeah, I think distribution is important, right? So you talked about the email marketing, which is 30,000, but it's also on the social media side for some of these public listings. Like, you know, I think last month we, you know, between all the channels, we got close to about like 800,000 like impressions or views, right? Like that's a lot of eyeballs, right? Both in Canada and the US.

100%. And what's crazy is, uh, some of these lower value clinics, these clinics that, you know, um, are let's say selling for $700,000 or less, we're literally, especially if you're in an urban center, we're literally getting 30 to 40 different, uh, clinic owners wanting to bid, not bid, but like at least view one location. Like it's an incredible amount of activity for just one location. And we're seeing that over and over again, especially if you're, you know, a high-value geography or location. So that exposure is really what you want when you want to sell your clinic at the most optimal value. So yeah, I think, I think distribution exposure, that's really critical to getting the multiple bids.

Soroush, can you talk more about that private marketplace, you know, and how that works?

Yeah, so, um, when we started, uh, Ocean Express, you know, one of the things that was very critical was that the, the groups that are going through Ocean Express, both on the buy side and on the sell side, so the sellers and the buyers, they— the, from the seller side, the— we needed to be sure that these are truly strong businesses. Again, we've seen so many different clinics. We've seen their backends, we see how they run. We can very quickly tell if this is going to be a very strong business or if it's a business that needs to work up to becoming to that value where they can come into Ocean Express. So we— so this marketplace is kind of like an off-market deal for real estate. You know, when, when billionaires want to sell their homes, they don't want to post it somewhere publicly because they don't want the attention. They don't want that attention. So they talk to some of the high-end realtors in LA, New York, or whoever, wherever they are to help them sell the business quietly on the backend. So then, and the realtors or agents have these contacts with some of these really strong buyers, other billionaires that might want to buy that house. So this is kind of a similar concept with Ocean Express. So we've already curated the, the list of buyers and we have really good relationships with the buyers too. You know, we know We know how they work, they know how we work. They also have now trusted that the groups that are coming through Ocean Express are groups that are very strong businesses. They've got good org structure, good leadership, uh, they've got very strong financials. And so we, uh, because of that, we like— we— I say no to more people coming into Ocean Express than yes because to qualify, right? Yeah, we have to qualify people coming in because we also have a reputation to hold within Ocean Express. So we're not going to suddenly put any business into that funnel. So there's very specific criteria they have to hit before they can even be considered for that group. But there's a path. If someone is not qualified right away, we show them the path because again, this is where the coaching comes in and we help them grow it to get to that qualification point. And then we can put them through the Ocean Express marketplace and that's where the valuations are way better and way stronger.

But some people want to sell bids as well, right? You know, right? And just so we're clear, um, these listings, you would never see it on the website, and you would never see it like on social media, right? You know, um, these are, these are buyers, um, who are like we said earlier, they are, uh, they are financial buyers or strategic buyers that have big wallets, and they want quality And they want, uh, they want quality and they want reliability, right?

Yeah. And we know, again, we, we also do the same with the buyers because every month we're getting at least one or two calls from financial groups or other groups that want to be a part of this group. But we've also declined buyers because, you know, something might be off or we don't trust them or there's some level of thing that we don't know about them yet. Or, you know, we don't want to put sellers in front of a buyer that might not be an actual potential because that's a waste of time for everybody. So we go through multiple conversations, we get to know them. And again, we have to trust these individuals because they are again dealing with highly sensitive information and sellers want this to be done in a very sensitive and private and confidential way. So we need to make sure that we know who's going to get access to this information. And so that's why we're very picky with who's coming in from both ends. And, and, and that's what's allowed Ocean Express to be a marketplace that's very attractive to both sellers and buyers because we know the results and we've seen the results already.

Okay, cool, awesome. Let's talk about some numbers, right? Um, maybe we'll start with, uh, this first one with you, Soroush. Like, maybe walk through, uh, can you walk through a, a sale of a clinic that sold for, you know, roughly about half a million dollars, right? You know, and Maybe talk about, talk about what happened and, and, and, and the process.

Yeah, maybe I'll throw this one to you, Paul.

Yeah.

Yeah.

So there's, there's a clinic. We sold it close to about half a million dollars. And the process is relatively straightforward. So this is, this is a clinic that was going through our public marketplace. What we typically do is we collect a lot of information right from the get-go. So we'll collect your financial information, we'll collect your contracts, your leases, your EMR reports, anything that we need to actually develop a presentation and an actual valuation report. And so what that allows us to do is justify the valuation that we're providing for the business. Then we'll list the business publicly on the website. That will start the marketing and kickstart the marketing process. We'll start a little bit of a blitz, an email marketing blitz, as well as a social media blitz. And that's what brings in a lot of interested parties. So for this one in particular, I think we had over 50 people sign an NDA to want to take a look at the business itself. And through that, we sort of whittled it down to about 3 very interested buyers.

Interesting. So 50 people was— 50 interested parties and 3 people presented, like, an offer. Is that what you mean?

That's right. That's right. And so especially in the marketplace, you're going to get a lot of tire kickers, but that's okay. What we want is a lot of people looking at the business, and anybody who signs an NDA becomes a potential person that we could follow up with. So even if they don't make an offer, we can obviously follow up with them, try to understand what their objections or their motivations are, and then ultimately try to see if there's a solution. But in this case, we didn't really have to do that because there were 3 people that were really interested in the clinic.

And were they, were they, were they clinicians, another competitor? Like, what was their— what was the buyer's persona?

Yeah, so the— we had one clinician and we had two clinic owners who already owned either a clinic. One clinic owner had one clinic, the other had two clinics.

Okay.

So they were sort of perfect fit, target match for—

And what type of multiple did it end up selling at?

They ended up selling for a 3.5x multiple.

Okay.

So what, they were doing $100,000 or so, like roughly of profit? Yeah.

That's right, that's right.

Um, actually no, 100-something, right? 150. Yeah, yeah, yeah, yeah.

So, uh, so what we did was we actually, uh, told these buyers there is a date that you'll have to submit an LOI by, and, um, once we select, uh, or once you submit the LOI, the owner and myself will go through each of the LOIs and we'll sort weigh the pros and cons of each of the LOIs. The beauty about this scenario was that all the buyers knew that it was a multiple bidding process. So the one buyer that actually finally won the bid basically gave asking price with no conditions and full cash up front, because sometimes the buyers will say, hey, I don't want to give full cash up front, I'll give maybe 70% or 60% of the cash upfront and I'll pay the rest in a year's time or 2 years' time.

Is that what's normal, Paul, like for these smaller deals typically, like 70% upfront and then the rest is earned out over 2, 3 years? Or is it cash upfront typically for these smaller half a million dollar deals?

I'd say it's 50/50. In the larger deals, you're definitely going to get more of this structured approach where they're not putting 100% of the cash upfront. Yeah. But in these smaller deals, you're going to get a lot of deals where it is cash upfront, or, you know, 50% of deals you do cash upfront, 50% you're going to get, you know, 70%, 60% down.

So obviously the seller was very happy about this all-cash deal, right? So that surprised them? Like, were they expecting that or no?

Uh, I don't actually— I'm not sure what their expectations are, but they were definitely very happy about it.

It.

The other thing that they were happy about was that this was sort of their ideal candidate because it was an individual practitioner who we sort of confirmed they had the finances to, to actually come up with the money to, to pay for the deal. But the individual practitioner who was willing to take over and sort of carry on the brand of the business, that was really important to the clinic owner.

Whereas the other buyers We're definitely going to come in, rebrand the whole thing, and like probably change, rip up the logo and whatever, Alpine Physio or Alpine Health, right?

That's right. Like change a lot of things, maybe change some of the staff members.

Does that matter anymore? Like, you know, like actually, let me— like, not matter, but like, is this still important for a lot of these small like owners where like they like their personal brand, like they want that to continue?

Well, it's not necessarily the brand. It's more they want the team to stay intact. They want the team and the feel and the culture of the business to, to continue on. Um, whereas they felt like the other clinic owners, they had their own systems, their culture, their, you know, whatever it was. And, um, they felt like they would come in and really shake things up, and they really didn't want that. They've owned this clinic for 20 years, 25+ years, They've developed a lot of like strong relationships with the staff and so they wanted that to continue on.

And why was the seller thinking of selling?

They were getting ready for retirement.

Okay.

So yeah.

Okay, cool. Interesting. And so, and what was attractive? What was the, say, top reasons why the buyer want to buy this clinic?

Well, the revenue was really good. The top line revenue. They know that they would have to make some changes into the business.

What was the top line? Do you remember?

I was about $800,000.

Yeah.

And how many years would it take you to start at, uh, to have a clinic that does $800,000 of revenue in a year, like a startup?

Well, for people that don't, like, they're just starting out, they don't have a lot of experience, it'll probably take 5 to 6 years.

Yeah. You know, so this is like a shortcut, literally.

There's a huge shortcut for, for this clinic.

They're buying a cash flow caseload, right?

Yeah, cash flow, caseload, staff, like it makes a big difference. You know, one of the philosophies I've had with clinics is I never will do a startup, or it's very rare I'll do a startup. There's just too much risk and there's too much competition. So if you can buy your way into a clinic, it's probably the best thing. And yes, there is a little bit of difficulty with, you know, getting the staff to come on board and follow you as a new leader. But if you have the skill set of being a good leader, you could probably make that change and be successful with it. So yeah, so, so the going back to what you were asking, the buyer found this really attractive because the high revenue, it had the staff, it had the assessments, which again, it's very difficult thing to get when you're just starting out brand new from, from scratch. The valuation was reasonable. but there's also a path for them to buy the property as well. So, oh, okay, that was an interesting component. Um, the one thing that we advised the seller to, uh, to do is not to bundle the sale of the clinic and the property together because any two separate transactions, right? Yeah, anytime you're trying to put two deals together, it gets a little bit complicated. So we advise the seller to sell the clinic first and then, you know, even a month after close, you can start working on selling the property. So, and we think that was the smart, that was the right move for sure.

Okay, so we talked about half a million. Let's talk about, let's talk about a deal where the clinic sold for a million, like a million or more, right? You know, roughly around a million. Million, million and a half.

Yeah, so there was a deal that was done, um, and it was kind of interesting because— so, you know what Paul was mentioning, actually, sorry, before I go into this deal, just one thing to mention because this always comes up with people asking about the public marketplace. You know, when we— when Paul mentioned we listed publicly, nobody's going to know it's your clinic because everybody always asks me like, well, I don't want people to find out it's my clinic. Uh, we're not putting in Paul's Physiotherapy in Calgary Southwest like, you know, no one's going to know what that clinic is. So confidentiality is still top of mind, and people only get access to the information once they have an NDA signed that you will see. So just as a process perspective, just so people understand that portion.

Well, especially if your staff finds out, like, you would be very upset, right? Yeah.

And we actually set up the NDAs where it's blind, meaning like the seller will always see who's requesting, uh, you know, requesting, like, who's the buyer. So if, for example, if maybe it was one of your staff requesting to look at the clinic, you will see their name and you can accept or decline, and they won't know.

Has that happened before or no? Have you guys seen that?

You know, I think one time it happened with a competitor that was nearby, and the seller did not want the competitor to get the access to— for the information, and so they declined that NDA, but it was only one time. But we know that that does come up.

And when that happens, uh, what, uh, what do you tell the, uh, person that's interested?

In this case, that competitor declined to move forward.

Okay.

With your NDA.

And how do they— how do they accept that?

We could tell you, there's not much else we can say, right? Because we can't give it away.

Okay. Okay. All right. So let's continue this. It was a million, right? It was a sale. How much did they close for this deal?

How much was what?

How much, that example of that clinic that sold for about a million, like what did it actually close at? Was it?

Above a million. Let's put it at that. And so again, going back to this where this is where profit and process really came together. In Paul's example, that was really— process was very, very important to get the offers and the deals in front of the seller at the $500K range. In this one, it was, let's say, let's call it roughly $1.5 million. This was both a clinic group that was very strong from a profit perspective, great reputation, and the process really was helpful in allowing the number to get to where it needed to get to for us to be able to close that deal. And so what, what really happened with that was, you know, just like a lot of other, you know, deals, the first offer is never the last offer. And, you know, you got to think about it. Buyers coming in, they want a deal. They're going to probably offer you a lower number, which is common. And, you know, you kind of have to understand why that is. Now, this is a little bit different on like the Ocean Express side where we dig into the numbers a lot more because 'cause usually financials are a little bit cleaner, there's more to dig into. And so there's quite a bit of back and forth we'll have with the analyst or with some of the leads on the buy side to figure out why they came up with the EBITDA number versus what our number was.

So in this deal, how many offers was presented by the seller in total? 3 offers. So the buyer.

3 offers from, so we put it out in front of 6 groups, 2 declined due to location, and the other 4 were interested. One was moving a little too slow, so it never materialized, and 3 offers came in.

Okay, so it had 3 offers, right? You know, and what was the revenue size of this clinic, Soroush?

Roughly about $1. $3.4 million.

Okay. Okay. And what, what did it end— what multiple did it end up closing on?

Roughly 6.3.

6.3. Like 6.3, not 6.1 or 5.9, right? 6.3.

Yeah, roughly 6.3. Very, very, very strong multiple.

Okay.

For a clinic, um, of this size of profit. But again, going back to the process, like, you know, we really worked with the seller to make sure every step of the way what they were talking about, what they were mentioning, how the conversation was being panned out. Those are all very critical steps. So it was multiple well-constructed moves in order to get to this point where the buyer was very confident and they got a great business. Like, this is a very, very strong business. This is why we, we had them come into Ocean Express, um, because we were confident.

How long did it take to close a deal from, um, from start to finish?

Uh, from start to finish, uh, from the process, I believe about 3 to 4 months was like from all this to negotiations to LOI. And then this one actually had a really, really strong, uh, less than 60-day diligence period, and, uh, they closed it very quickly.

Oh, I wanna, I wanna underscore, 3 to 4 months is a crazy fast close. Um, and that is in large part because of Soroush's preparation process.

Being prepared will make you close 3 to 4 months. Is that what you're saying?

Yeah, 100%. Like, when I, when I was looking at deals from the past, the average I would say is 6 to 8 months is what I would see, right, of deals of this size.

Or you wait that long, you get buyer fatigue too, right? Because it's just taking so long. Like, the buyer might not be interested. Maybe something, a macro thing happened, or the interest rates, or another, another news event. Right?

100%. There's so many outside variables that you bring into the equation the longer the deal goes, right? Or the negotiations go. And so 3 to 4 months, uh, in large part it was a lot of the preparation work that Soroush and his team did.

Yeah. In this case, what made the buyer want to buy this business? Like, what was your top 3 reasons?

The positioning, first of all, like how we positioned the clinic. There was obviously There was some price tension already from the process, but really the critical thing is we made sure that the story of the business and the owner and the future potential of it was well, you know, well created and also communicated to the buyers. So they understood what they're buying because again, buyers, when they look at these things and they're buying these businesses, how they also think about it, not only is this group going to add value to my business, but they're looking at something called effective multiple. Multiple as well. The, the effective multiple is if we grow this over a certain period of time and we, let's say we paid X amount for it, then we have now, let's say it went from $250,000 to $350,000 of profit through that time we're working together. Theoretically, the effective multiple goes down. So that's what they want to see because they still want growth potential in the businesses, which we still have to communicate why that is, you know, how that could actually be brought to fruition. It's not a guarantee, of course. Obviously the buyer has to be involved in that. But the, uh, the reality is they want to know, um, you know, that they're not just buying something that's going to be good for only another month. They want to know that this is something that's going to add significant value. If they're paying you 6 times, they want to feel like they're getting 12 times back, right? And that's the messaging. And through the process, through visuals or the conversations or the meetings, all of that is really, really critical. And what steps and when to talk about what Those are all the very specific things that have to be done with— and it's what we did with this deal to, you know, get the deal up $400,000 from the initial offer.

Yeah.

And was this an all-cash deal or, or, or there was a like a performance period too, Soroush?

So this is the interesting part. So they, they— this, this kind of— this was a, uh, a scenario where there's still upside potential. They— this individual could still make more money out of the deal, uh, which was really good. Obviously, we always want to see that. So with bigger deals, um, typically we attach, um, something called an earnout structure to some of these deals, which allows sellers to essentially, you know, extract some of that value over the transition period as they grow it. So this is not a scenario where, you know, as you get bigger and bigger, they— there's very low likelihood where they're going to be 100% of cash upfront at closing. So obviously you get a good portion, typically, you know, whether it's $1 million, $2 million, $5 million, $10 million, you know, that range is actually very similar between 70-80% of cash is likely going to be received at closing. And the remainder will be, you know, through some sort of deferred or some sort of mechanism where you can either earn more or you earn that same amount by the end of that transition period.

And what's the typical formula you would see on those type of like earnouts, right? For that remaining 30%?

Yeah, so typically, uh, so again, the remaining 30% we'll, we'll call the deferred amount because that's not the earnout. Earnout we're talking about above and beyond. Okay, valuation was that close?

Okay, so there's 3 components there, right? You know, yeah, yeah, yeah.

So usually mature established clinics will likely just get a deferred component. So it's, it's just a portion of cash that's remaining because the buyer wants to incentivize the seller to help maintain the business for a certain period of time. Very common. We've seen that with all the group types, all the different deal structures. This is probably one of the most common classic things. Even on the smaller deals, we have scenarios where buyers will do that too. It's again, very classic approach. Then you have the earnout, which is a scenario where usually reserved for clinics that haven't realized the performance. Let's say you have a group of 3 clinics and you have, you just opened your 4th clinic and you want to sell. You're not going to get almost no value out of that business. If we're looking at an EBITDA multiple, if that's contributing $0 of EBITDA, then 0 times whatever multiple is still 0. So you have to have a structure where you're able to earn cash through the deal. Typically you have multiple structures where either the multiple at closing is the multiple they use to calculate how much money you're going to get through an earn-out. So let's say this clinic was doing $0 of EBITDA and you close your deal at 5 times. They might say, okay, we'll give you 5 times by the end of the year, 1 year, 2 year, 3 year, whatever period it is. And we'll calculate the value and then give you the money at that time. Or they might do a capped earnout where they're going to put a ceiling of X amount you can really earn through the deal. Or it might be a multiplier based on a certain ratio. Like they might say X number of, of, you know, dollars from your profit will give you as an additional above and beyond like earnout. So there's a few different ways they can structure it, but This, and again, in this specific deal, there's a different component and a component where you could still earn more through the deal, which is obviously a great opportunity for the seller to be able to make some more money.

Just to summarize, so for some of these bigger deals, whether it's like a $1 million, $5 million, $10 million, there's a cash component, there's a deferred amount, and there's a performance earnout, right? But not everyone gets the performance earnout.

Right, that's right.

Yeah, yeah, that's right. Anything else?

Yeah, you can kind of understand why buyers would want to do that, um, because they want to spread out their risk, right? Um, so they don't want to pay for everything, for 100% of the deal upfront. So they may pay 70% of the deal on, on the day of closing, and then the deferred component is still part of that original deal. But the earnout is really what allows, like, if the buyer has a lot of confidence in the team and the team feels that there's a lot of potential still left in the business, then it allows both parties to have sort of this, you know, collaborative sort of deal in place where, hey, I know I can make my clinic a little bit more money and I want to be rewarded for that 2 or 3 years down the road, right? So that's, that's really where you— this is where what Soroush is saying in terms of the story is really important, right? If you can tell the buyer that I have a great team, they're going to continue on, they're going to help you grow the business, and we get to benefit from it if we do that with you in partnership, then they're more likely to close that deal because they're going to see the long-term value of, of you and the team working together with the, with the buyer, right?

I love that. Yeah, how to sell the story, that is the hardest part, you know, because, because what they're buying is the potential, right? You know, in the future, right? You know, past performance doesn't necessarily get the same returns, right?

You know, so it's like buying a stock, you know, you don't invest in a stock because you, you look at past performance to see how likely is it going to continue that performance, and you can look at historical trends, but you know, if you find that, you know, value stock that, you know, the Buffett strategy that, you know, no one sees that value yet, you are to gain the most than anybody if you invest early enough in that business.

Yeah, I remember this, you know, Paul, and when we're, when we're buying, you know, we bought a lot of clinics in our career, right? You know, and I would say that 70% of the clinics that we bought ended up doing worse, right? And back then we were way less sophisticated. These new buyers now, like, they don't want that. They want that to be flipped. They want it so that if for every 10 clinics that they buy, like, they want it so 80, 78% of them still, like, continue making the same amount, if not more, right?

Oh yeah, yeah. They, they've been just like what we went through. They've been burned in the past. Some of them have been burned very badly. Um, and so they want to prevent that. And part of this is going through the process of setting up the deferred and the earn-out process. But more and more what we're seeing, and Soroush maybe you could speak to this, is that these, especially the big strategic buyers, they want to have a relationship with the sellers. They want to make sure that the sellers are the right people, that they're going to stick around, that they're going to make sure their teams are are happy and continue to work hard after the sale happens. So again, that's where that story is critical. If you're not telling that story and you're just completely focused on the numbers, the deal becomes a little bit less secure. But with the story of the leadership and, you know, the transition process and people wanting to stick around, if you get that story right, you can get some really healthy earnout structures put in place.

Oh, wow. Wow. It's, it's, it's one. How are you guys doing for time? You guys got another like 15, 20 minutes?

Uh, yep.

Okay.

Uh, I actually have a meeting. Okay, cool.

Well, Soroush, nice seeing you. We could, we could, uh, I could have Paul, uh, me and Paul can continue, but why don't we do a couple of rapid fires and we'll just wrap it up, wrap up this podcast, Paul.

Sure.

Sounds good.

Yeah, Soroush, thanks for coming on the show, and I'm sure I'll chat with you soon. Okay.

Thanks, guys.

Take care. Yeah. Oh, wow. So we talked about the half a million dollar deal. We kind of talked about a deal between $1 and $2 million. Would you say the deals like $5 or more, like very similar as well, Paul, right? I think anything at that, would you agree?

Yeah, I'd say very similar. I'd say the larger you get, the more confidence the buyers need in the team. The team at that point becomes very, very critical. So looking at the org structure, you know, part of the process that we had with this one $10 million deal is we wanted to make sure that the buyers were very comfortable. So we had some of their team meet with the seller's team for dinner. And that, I think, made all the difference in the world because, you know, the— maybe not necessarily the owner of the business, but the people right underneath the owner, that layer of management, they were sort of minority partners in the business. So this wasn't going to be a retirement situation for them, whereas it was a retirement situation for the owner. But having those people, that layer of management, meet with the buyers and understand their personalities and what their sort of vision of the business was and how they would get integrated into the business was absolutely critical. And so those are the sorts of things that people don't think about that we'll, we'll recommend to make sure that there is this sort of smooth, easy transition.

Well, especially if you want a $10 million check for the group of clinics that you're selling, right?

So 100%.

So in this scenario where this clinic sold for around $10 million, like what was the multiple that it sold at, Paul?

That one sold at just a little over 8 times multiple.

8.3 or 8?

It was probably 8.1, 8.2.

Okay. Yeah. Okay. And in this scenario, it sounds like the most, you know, outside of cash flow, geography and all the stuff we talked about, like the leadership team and the system sound like it's really important because that's really what they're buying now, right? You know, at these numbers, right?

Yeah, 100%. I mean, you know, I would say like systems and process and cash flow, those are all very important. But I'd say the leadership structure and them, because they're writing a very big check, so they want to make sure that the business continues on long after the deal closes. They knew that the owner was not going to continue to stick around. So understanding that second layer of management and who they are, that was critical to their decision-making process, right? And seeing that management team outside of a business environment was also very critical. Right? They wanted to know that these are people that they could, like, you know, trust and, you know, even have a relationship with, right?

Yeah. All right, so if you look back at all the negotiations that you've done with deals that closed and the deals that haven't closed, what would you say is the top things that a seller should never say or talk about during negotiations?

They should never say It's not things that they should not say. It's more things that you want the buyers to hear, right? So, you know, maybe part of it is, you know, what's happening with the leadership team. If you're having a lot of sort of infighting or issues with the leadership team, you don't ever really want to talk about that even if it's true. Or if you're having a little bit of an exodus of people and you know you have people to replace those people from a clinical clinician standpoint, you can— you don't need to talk about those things until you really get down to the actual negotiations. Once you've signed a deal, that's when you can sort of really open up what's happening with the business.

Or you fix it before you start that process, right? You know?

Yeah, 100%.

Which is probably better because it'll come out during— it's your skeletons in the closet, right?

It's the skeletons in the closet for sure, right? Yeah.

What else?

You know, if you have any sort of liability or lawsuits or any of those things happening, it's actually better to talk about those things right from the get-go, and especially if it's things that are not very serious. So for example, if you have malpractice lawsuits that are happening right now, or, um, that's okay. Like, a lot of the big buyers know that those things happen, but, uh, it's a worse-off situation if you try to hide it. So it's better to talk about those things right off the bat. Any sort of issues around billing and insurance where if you're doing things that are not, you know, on the up and up, the big buyers will definitely get scared right away and they'll err on the side of caution. Even if you think you're doing things appropriately, you kind of want to make sure that either one, you fix that process or you don't really talk about it and then you fix it, right? Yeah.

One thing I was just thinking about, like we talked about earlier, was sellers typically get very emotional, right? So, you know, there's probably something around, you know, you should— maybe you shouldn't get too emotional when you're negotiating, right?

Yeah. One thing that I tell people is even if you're really upset, try to keep a poker face. And not express that during like any sort of live phone call or Zoom call or anything like that. It's better off to just accept what they're saying, have a conversation with us afterwards, and then we can figure out a way to respond to that in a very sort of, you know, calm demeanor. Remember, what you're doing is you're dealing with people on the other side too. And you're dealing with people that actually don't own any of the businesses. Some of these people are just business analysts, right? And so if you piss off the analysts, they're actually going to find ways to make sure that your deal doesn't close, even if the numbers tell a different story. So you have to be very careful about how you talk to these people. Now, in some cases, it does make sense to get upset, but it's better for, for us as representatives of the business to be the upset ones versus you as the clinic owners. It's kind of like bad cop, good cop, right? Let us be the bad cop and you guys continue on with the relationship afterwards, right?

Yeah, because I've seen scenarios where like the owner or the seller would say something that is offensive that like that ruins the deal because the buyer in this case, like, this is what it would be like working with you. When it is stressful. This is what it would look like during our transition when I take over the business and it's going to be stressful. And you're showing me like what it would be like working with you when there are difficult conversations.

100%. It's— and, and again, going back to the business analyst type scenario, I've seen an owner, um, who's being questioned about their numbers, uh, lose their temper with a business analyst. Basically questioning their ability to do math, simple math. And they basically said like, do you even know what you're talking about? You know, said in a very rude way. And, you know, before that, the deal was running very smoothly. And then after that, the deal kind of fell apart. And we don't know, we can't pinpoint exactly what happened there. But my assumption is that it was because the business analyst just basically steered the direction towards the actual decision makers to say this deal is not appropriate. And so that was a little bit unfortunate. But, but people are people. People get emotional.

And if you're emotional, it comes to money and retirement and, you know, like these big checks, right?

So, yeah, 100%. And you're dealing with people who have owned their businesses for years, for decades. Right. And so, of course, they're going to— they have every right to be emotional. But our recommendation is just hold it in and then let us deal with it.

Yeah, let's, let's zoom up a little bit, Paul. Is there an optimum— is there an optimum age to sell your business? Are you seeing some— like, do people just sell when they're older? You've seen that that's happening with like the younger generation too?

Uh, no, we see it in all ages, all, uh, age groups for sure. Um, we're definitely getting a little bit of, um, you know, people who are retiring and wanting to get out of the business. But like we were talking about earlier, people are really sick of running their businesses. It's a hard environment to, to run your business in. And so they're ready to sell. Some of them are, again, not performing as well as they could. But again, we can, we can definitely help with that. A lot of times people just don't know what to do next in their business. And so if you have like a real like strategic plan on how to actually get to a certain level, you can sell your business within 2 to 3 years and sell for optimal value. We've had many cases where we've helped people, you know, optimize their business and they don't end up selling. They actually end up acquiring and growing even further because they have so much more confidence now in how to run their business. And then they sell a couple years after that. So adding locations, adding new revenue and profitability to the business. It's always good for your peace of mind. But, but for some people, it's just they're done. They're just tired of the business, tired of dealing with people. I hear this all the time where, you know, clinic owners are psychologists, you know, they're not, they're just not just running a business, but they're dealing with, you know, the problems, the personal problems of all their people in the business. And also the interpersonal relationships that happen in the business as well. And so they're kind of tired of that and just want to get out. So, um, but whatever the situation is, you know, we can definitely help. Um, you know, if you want a fast close, we can help with that. If you want to grow your business and sell for a higher value, we can help with that as well. And if your business is already doing well, there's definitely lots of buyers.

I'm seeing a lot of— I'm seeing a lot of these owners who are at, I would say, at their, um, top of their game in terms of the business, right? You know, yes, they got the— you know, I would say as your business makes more money, it gets more complex, and you become more of an important psychologist, right? Depending on how strong your leadership team is, right? But I'm seeing a lot of people who are at the top of their game, right? And they're growing and you would never think they would sell, but they're actually selling and they're kind of in their 40s.

Yeah, that's, that's the interesting part to me because I've seen there's some owners who I was like, even some of my business partners were like, this person is never going to want to sell. They're too young, they're too ambitious. They want to I want to grow. And the minute they see a number on the table, like, the minds change, right? And I think in large part it's because there's, there's a lot of freedom that comes with having a big chunk of change that's, you know, maybe they invest with their wealth advisor, making, you know, 10, 12% a year. They can live off that but then have the freedom of not owning the business. Like, that's a that's really appealing to a lot of people. And so I think there's a trend for people to want to sell even if they're young, right?

Yeah. You know, if you get a $5 million check, right, you know, making 8 to 10%, you know, like in some ETFs, right, you know, and yes, you get an earnout as well, right? And you're getting paid as as a manager or a leader as well, right?

Yeah, a lot of these people continue to work after in the business and they're happy to do so. Like, I've seen that a lot, right? And when you're just doing the day-to-day and you don't have to deal with all of the business's problems, it's a much easier life, right?

Yeah, it's getting some chips off the table, right?

So yeah, 100%.

Yeah. So when you look at P&Ls, Paul, right? What are the biggest red flags you see in P&Ls from a buyer's perspective?

Yeah, the number one thing is when clinic owners, let's say they pay themselves, they don't pay themselves a clinician salary or clinician fee split, and they just pay themselves through dividends. They feel like their EBITDA is really strong, but if you add back what it would cost to actually pay a clinician to do the work, your EBITDA actually is a lot smaller than you think, right? And so buyers will, especially sophisticated buyers, will look at that and then ultimately say, yeah, there's no way your clinic is worth this valuation. That's where you get a lot of static, right? You know, some times where in the P&Ls where you get a lot of static is, you know, a lot of owners will income split. So they'll pay, let's say, their mom or they'll pay their, you know, brother-in-law who has nothing to do with the business, and those expenses are in there. And they want to take all those expenses out and have zero management expenses in the business. That becomes a problem too because the buyers know that in order to run the business, you have to actually pay someone to lead the business and run the business. And especially as you get larger, if you try to take all the management fees out or the management expenses out, then you're not going to have a lot of trust with the buyer. So ensuring that you have some expense, you know, that's allotted for management fees, I think is really important as well.

We're looking at benchmarks of certain like ratios within, uh, within, uh, the clinic.

Oh, I see. So, um, yeah, so administrative costs, you're looking at about 8 to 10% of revenue. So front desk costs, especially in the larger clinics, that's a good number.

So anything over beyond that, you're like, oh my gosh, like you see that as a buyer, do they see opportunity or they just say, oh my gosh, like this is a lot of work. Like what are they? Yeah.

8 to 10% is efficient, but if I— I've seen P&Ls where the administrative costs are 20%. Yeah. And so as a buyer, I would question that. It wouldn't be a— it wouldn't be a deal breaker for me, but I would question it. And if I knew that if I implemented, again as a buyer, my systems, my process, my efficiencies into the business, and I could bring that 20% down to 8 to 12%, to me that's an opportunity. And I would say nothing about that. I wouldn't mention that at all because I want to make sure that, you know, that obviously reduces your EBITDA, reduces the valuation because the multiple on that EBITDA is, is a lot less. Um, and so I would say nothing about it. And this is again where we prepare you. If you— if we know your ratios, then we can say, okay, well, these are the changes that you need to make when you do sell, right? So that's one ratio. Obviously, we'd look at the ratios of the staff, like the clinical staff. A lot of clinic owners pay fee split, and so let's say standard fee split for a physio might be 50%, you know, the average might be 50% across Canada. If I see an actual ratio in the P&Ls of 60 or 70%, to me that's a turn-off because I know that I'm going to have to either renegotiate contracts with clinicians, or I'm going to have to take the long-term approach and wait for attrition of those clinic clinicians and replace them with clinicians that get paid a little bit less. You know, there's, there's been a lot of clinics where they've had revenues, very high revenues, like let's say $1.5 to $2 million in revenues, but very little profit because they're paying their clinicians 70%.

Yeah.

And it's no wonder that these clinician, uh, clinic owners don't want to keep their clinic because you're taking all this risk, you're making all this revenue, but you're not actually reaping any of the cash flow rewards. And that's a—

and then from a buyer standpoint, like you say, I gotta renegotiate all the contracts. This number is way off, you know, and once I renegotiate these contracts, they'll likely leave and the revenue will tank as well. Right.

So yeah, it's, it's, that problem is a very hard problem to deal with. Right. So the other thing that I'd say, looking at the P&Ls, not necessarily the P&Ls, but the balance sheet, if your AR is very high, right? So I have one clinic where the AR is $800,000. They did a lot of work with lawyers and assignments to pay, and it's a little less common, but the idea is that you want to be able to collect on that. But when it's that high, the likelihood of actually collecting on 100% of that is very low. And so even if you have a good system and you're able to actually bring that money in and you can prove it, it will scare a lot of people away.

It also means you overstated your profits in the previous years, right?

Yeah.

Your revenue, right? Because you can't collect it.

That's right. That's right. Yeah, that's a revenue— they call it revenue recognition problem, right? You're recognizing the revenue a couple years ago, but you actually haven't collected it, so it's not real revenue, right?

Yeah. Yeah. And does it matter, like, or, but most clinics are doing like cash accounting or accrual accounting, or what are you seeing, or is it a mix of both?

Most clinics are doing accrual accounting. So, okay.

So, so in this case, like, you know, you'll get like, yeah, like, so, so if you, if you can't collect your AAR, then you overstated all your, uh, your P&Ls had been overstated with like profits because you never realized that revenue.

That's right, that's right.

Yeah.

And then the last thing, which is not as sort of, uh, I mean it's common but it's, it's not as common, but, uh, when you have a lot of liability on your balance sheet, like you have a lot of loans outstanding, uh, let's do a lot of shareholder loans, or you have like loans with a bank Or if you've, let's say, paid off a loan but you didn't tell your accountant, and so that loan is still on the books and you can't explain it away, or the books have been already closed, but then the buyer looks at it and says, oh, this is still a liability. How can you prove that the loan has already been paid off if your accountant hasn't closed it off? Then that's a problem because now it's a trust issue. Right? And so, um, you gotta— again, that's something that we would look at is like, you know, can we explain all these liabilities on your balance sheet? And if there's, if there's an anomaly where, you know, it was not— it was paid off but it was not closed off in your books, then we work with your accountant to make sure that that gets cleaned up, right?

Okay, wow, that's great. Um, that was a good session. Um, really enjoyed that. So Paul, So if I'm an owner and I'm thinking of selling my business in the next like 18 to 24 months, like how do I, how do I get ahold of you, Paul?

Oh yeah, you can, are you going to put a link down below, Rick, or?

Yeah, we can put a link in below. Yeah. But you can go to the website, right? You know, and then, and they could email you as well, right, Paul?

Yeah. You can go straight to the website, clinicaccelerator.com. You can email me at paul@clinicaccelerator.com. And, you know, you can— there's a calendar link on the website that you can, you know, book a time with me at. So yeah, but we can go through your situation and try to figure out what's going on.

Okay. And just high level, what does that process look like? You know, if I want to prep my— if I want to prep my business for sale, you know, I'm thinking of selling in the next, you know, let's just say in the next 24 months, like what would that look like?

If you want to sell within the next 24 months, um, there's a couple options. Um, the main option really would be for us to assess your business, and if we feel like you have a lot of cleanup to do, or if we feel like your clinic has a lot of potential. So we'll look at your numbers, look at the number of assessments you're getting, we'll look at certain ratios of whether you're maximizing the revenue that's coming in based on your assessments. If we feel there's a lot of, let's say, meat on the bone that's still left, we would recommend that you take the full 24 months and sort of apply what we will teach you to do. And if you apply those things, typically I'd say 80-90% of the cases, people get a significant bump in their profitability and their revenue, and then we can get— we can go for much higher valuation. The other thing that we do as well is not only with the prep of your financials, the prep of your business, your org structure, you know, your systems and process. Obviously, that's all going to contribute to higher revenues and profitability. But the other thing that we'll do is we'll actually sort of tease the buyers to say, hey, we got to even like 6 months before you're ready to list, we'll tease the buyers to let them know, hey, there's this really great opportunity coming down the line. Make sure your budgeting team is getting prepared for this project. We feel like this, their EBITDA is going to be X, and we feel like the valuation is going to be Y. And so what that does is allows the buyers to really be prepared and close quickly on the business. And, uh, that's really what we're known for is like, you know, very quick closes because the preparation has been done so well.

And then for the owners that don't have the appetite to do the work, because it, you will have to do the work as you get coached by Paul and Soroush Peyvandi's team over 24 months to actually make the changes to your org structure, your systems, and also to show the profit growth. For the people who aren't willing to do the work, right, you know, then there's also that option where, you know, Paul and Soroush Peyvandi's team could help you get to market as quickly as possible. And depending on after the assessment, it'll determine like whether you're eligible for maybe for Ocean Express or the private marketplace, right, that we have. Which will open up the big financial and strategic buyers, right?

Yeah, some people are just ready, like they've run their business really well. They're really tight with their systems and processes. So for us, it's just we're really looking for the yellow flags in the business that can sway the valuations, you know, 5 to 10%. That 5 to 10% is actually a lot of money. We're talking about hundreds of thousands of dollars, right? So if we can get all those yellow flags out of the way, then you know, will maximize and optimize the valuation.

Okay, cool. Awesome. Thanks for your time, Paul, and thanks for coming on the show.

All right, thanks, Rick. Talk to you guys soon.

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