How School Contracts Can Lower Your Practice Valuation

At one time, I had a very small practice that I built to a much bigger size and then sold when I was made an offer I couldn’t refuse. I am super-passionate about sharing any information I have to make sure things go really well for you. I hope that you get an offer that you can’t refuse at the end of your journey because that’s what I want for you.

I know a lot of people do school contracts that result in appointments between 9:00 and 2:00, and I did too when I was first starting. I loved school contracts. They paid a lot. It’s consistent money. You don’t have to fight to get paid like you do with insurance. The payment is very predictable and you get paid for every minute. It’s not a question of whether or not you’re going to get paid. 

For that reason, I think school contracts are great, so do them. I don’t think anybody should not do them. In my practice, however, we stopped doing them. I’m going to explain the reasons behind that.

 Can You Keep School Therapists Busy All Year Around?

We used to hire all of our staff on salary and that creates a problem when you have a lot of school contracts. (I’m not judging how anyone else pays their staff, I’m just saying that’s what we chose to do)

But when I had school therapists, I had to figure out how to keep them busy and productive.  They were off for school holidays—which there were a lot of—and they were off for the summer. 

To keep school therapists working year-round, we would offer camps. Kids could come during holidays. In the summer, most school-age kids could come during the day. So we were able to keep our staff busy-ish. It was always the biggest negative for us that during non-school times, we had a more difficult time keeping our school therapists busy. If you hire school therapists that only want to work the school schedule, you could do that, and that takes care of that problem.

Does Your Private Practice Buyer Value School Contracts?

About a year-and-a-half ago, I had a big realization of a second problem with school contracts. A colleague of ours merged with a larger company. More than half of the smaller practice’s business was school contracts. When they merged, the corporation they merged with did not find value in the school contracts.

If a corporation ends up buying your practice or if you end up merging with someone larger, the school system may not choose to renew the contract. If the school system does not renew that contract, then that contract has no value to the corporation. Basically, when you’re bought out by another entity, school contracts like that don’t have value. Therefore, be aware of the possibility that someone else may not see the same value in these contracts that you do. 

School Contracts and Private Practice Profitability

When you’re looking to make an exit from your practice, will a buyer or larger company see your profitability the same way you do? 

On the other hand, you can contract with schools now but discontinue this practice later. You just need to have that in mind. You’ll need to be ready to consider whether a school contract is right for your profitability or if it’s going to be viewed as profitable by another party. 

If you are bought by another partner, a small entity such as a one-man band or two-man band, then the school will probably renew that contract and it will be of value. But I just want you to think with these factors and understand why they may not be of value. If they work for you, school contracts are one way to build the schedule between 9:00 and 2:00 and keep your people busy.

If you need more help learning how to manage school contracts, insurance, scheduling and much more, visit our Lemonade Library for plenty of tools to help you grow your practice!

About Diane Crecelius

Diane Crecelius is a physical therapist and founder of a multi-million-dollar, multi-location practice with well over 3,000 visits per week and 200 staff! In the past several years, Diane has worked tirelessly to support the Peds-A-Palooza group and the success of Private Practice Owners. Diane has presented at nearly every Peds-A-Palooza live and virtual conference since the first sold-out conference in 2018. Her extensive knowledge derives from her decades in practice and from being trained and consulted by Survival Strategies, Inc. She uses this training to help Private Practice Owners learn how to thrive and expand while keeping their stress low.