Case Study: Sell-Side Due Diligence for a Multi-Location Therapy Business
Client Overview
Client: Healthcare – Physical Therapy and Rehab Services
Business Model: Clinic-based services across multiple U.S. locations
Annual Revenue: ~$2.5 million
Established: 2016
Background
The owner of the growing outpatient therapy group was preparing to sell the business. However, the financial records were in poor shape — the books had been maintained by a non-accountant and were incomplete, inconsistent, and unreconciled across years.With a potential buyer showing interest, the seller needed fast, professional support to clean up financials, prepare a credible Quality of Earnings (QoE) report, and support the business’s valuation for negotiations.
Challenges
- Financial data spread across multiple platforms with no centralized reporting
- Unreconciled books for multiple years
- Improper classification of revenue and expenses
- Missing documentation for payroll, owner draws, and clinic-level performance
- Urgency to present accurate financials to prospective buyers and advisors
Actions Taken
We provided a comprehensive Sell-Side Due Diligence support package tailored for small healthcare businesses:
- Cleaned and reconciled 3 years of books, using both bank data and internal POS systems
- Reclassified and normalized revenue and expenses across all locations
- Identified and adjusted for owner compensation, related-party costs, and one-time legal and marketing expenses
- Prepared a full Quality of Earnings (QoE) report with Adjusted EBITDA analysis
- Built an internal valuation model based on normalized earnings, industry comps, and expected buyer adjustments
- Supported the seller in answering buyer questions and preparing data room materials
Results
- The seller was able to confidently engage with multiple potential buyers
- Our clean and transparent reporting led to stronger buyer confidence and fewer post-LOI negotiations
- Achieved a valuation ~20% higher than initially expected based on normalized EBITDA
- Deal successfully closed within 60 days of project start
Client Feedback
“I was overwhelmed by the state of my books and wasn’t sure if I’d even be able to sell. Their team came in and cleaned up everything quickly. The QoE report and valuation helped me understand the real worth of my business and present it professionally to buyers.”
Founder, 3 Step Therapy
