What Is Your ABA Practice Worth? Understanding Its Value

If you’re wondering what your ABA (Applied Behavior Analysis) practice is worth, you’re not alone. Many business owners eventually face this question. This happens whether they’re thinking about selling, considering bringing on a partner, or simply trying to gauge the value of what they've built.

Start With the Right Question

The question isn't merely "What is my business worth?" Instead, it’s crucial to ask: "What is my business worth to the right buyer, and why?"

Valuation is not a theoretical exercise. It reflects what someone is willing to pay. This is based on what your business currently delivers and its potential for the future. Our goal is to examine the aspects of your practice that create significant, transferable value.

Understanding the Standard Formula

Most ABA practices are valued as a multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This multiple varies based on several factors. Typically, small-to-mid-sized ABA practices fall within the 5x to 10x EBITDA range.

For instance, if your practice earns $1 million in EBITDA, its value could range from $5 million to $10 million. However, this is a broad range. What influences the valuation up or down?

What Increases Value

Buyers are generally willing to pay more for practices that display:

• Clean Financials: Accurate bookkeeping and clear revenue streams by service line, payer, and location.

• Payer Diversity: Not relying heavily on a single funding source, such as a Medicaid contract.

• Strong Clinical Outcomes: Proven treatment success and high client retention rates.

• Low Staff Turnover: A stable workforce, including RBTs, BCBAs, and leadership.

• Compliance & Accreditation: A clean record of compliance with no hidden issues.

• Scalability: Efficient systems, EMR integration, and SOPs that enable growth for the buyer.

• Owner Independence: The less your business depends on your presence, the more it's worth.

• Training Programs: Effective ways to recruit and retain talent have become increasingly valuable.

  
  

Learn more.

What Decreases Value

Conversely, buyers may discount your practice if they notice:

• Poor documentation and disorganized billing processes.

• A heavy reliance on one specific staff member or administrator.

• High staff turnover and lengthy waitlists for clients.

• State audits or reimbursement issues from payers.

• Declining profit margins over time.

  
  

Even if your revenue appears strong, a lack of organization or perceived risks can deter potential buyers. Legal or reputational concerns raised during due diligence can be alarming. Additionally, failing to disclose these risks early may undermine a buyer's confidence.

Real Estate: Included or Not?

If your practice owns the real estate, you have options. You can sell the property with the business or lease it back to the buyer. Some buyers prefer to own the building, while others do not. The valuation of the real estate should be analyzed separately from the practice's operational value. It's best to maintain distinct financial reports for both the operating business and the real estate entity.

Addbacks & Adjustments

Sellers commonly ask, "What about my car lease? What about my salary?" This is where addbacks come into play. Addbacks are adjustments to EBITDA that reflect true earnings:

• Any owner salary above market rate.

• One-time legal or consulting expenses that are not repeat costs.

• Non-essential business expenses, such as travel or perks.

  
  

Buyers will scrutinize and verify these addbacks during due diligence. Therefore, honesty and conservativeness in reporting them are essential.

Find the Right Advisor

If you're serious about getting an accurate valuation or preparing for a sale, consider working with an investment banker who specializes in behavioral health and mergers and acquisitions (M&A). A general business broker may overlook nuanced details that drive value in this specific market.

Choosing the wrong advisor might lead to disclosures of your deal to inadequate audiences, compromising your confidentiality and potentially undervaluing your business. The right advisor will provide experience, discretion, and a network of genuine buyers ready to close.

At Healthcare Capital Advisors, we emphasize selectiveness. We are not just intermediaries; we are investment bankers and consultants with a thorough understanding of the industry. We don’t pressure you to sell; we help you make informed decisions through a confidential, no-pressure consultation.

Final Thoughts

Valuing your ABA practice is about clarity, not guesswork. Understanding what constitutes durable, transferable value in the eyes of prospective buyers is vital.

Take the time to clean your books and address any issues. Knowing your number is essential. Most importantly, don’t wait until circumstances force you to reassess your business value.

You only sell once. Make that experience count.

If you need assistance understanding what your ABA practice is worth or how to increase its value, we would be thrilled to help. Reach out to us at info@healthcarecapitaladvisors.com or complete our owner survey today.