How do I read a physiotherapy clinic’s profit and loss statement?
Read a physiotherapy clinic’s profit and loss statement by asking where the revenue comes from, who earns it, and what it costs to keep them. Look at revenue by payer and by therapist, associate pay, the owner’s own treating hours and pay, and rent and equipment leases. Take your questions to the seller’s accountant.
A profit and loss statement shows what a clinic earned and spent over a period. For a physiotherapy clinic it only becomes useful when you break it apart. A single revenue line hides who pays the clinic and which therapists generate it. Start with the statement, then ask for the detail behind each line before you form a view of the business.
Revenue by payer
Ask for revenue split by who paid: direct billing to insurers, motor-vehicle claims, workplace claims and private pay. Each stream has its own paperwork, its own pace of payment and its own exposure to rule changes. A clinic leaning heavily on one payer carries a different risk from a mixed one. Ask which streams are growing, which are shrinking and why.
Revenue by therapist
Next, see how much each therapist brought in, including the owner. If a few people produce most of the revenue, the clinic depends on them staying. Ask who is an employee and who is a contractor, and whether any of them are likely to leave when the clinic changes hands.
Associate pay, the owner’s hours and the fixed costs
Associate pay may be the largest cost, so ask how it is set and whether it matches the signed agreements. Then look at what the owner takes. If the owner treats patients, part of that income is pay for clinical work you would have to replace or do yourself. Rent and equipment leases come next. Ask when each ends and what renewal looks like.
- Which expenses are one-time or personal to the owner?
- How are overdue insurer payments recorded?
- Does the statement match the tax filings and bank deposits?
- Are there costs the owner has not charged to the business?
Questions for the seller’s accountant
The accountant who prepared the statements can explain how each line was built. Ask for the supporting schedules, and have your own accountant review them. For background on the statement itself, the BDC pages on financial statements and income statements, listed below, are a plain place to begin. For the wider picture, see what it is like to own a physiotherapy clinic.
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Sources
This answer is checked against primary sources. Links were last confirmed on the dates shown.
- 01Business Development Bank of CanadaGovernmentWhat is an income statement?
- 02Business Development Bank of CanadaGovernmentWhat are financial statements?
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