Choosing the Right Location for Your Physical Therapy Clinic

Mar 21, 2023

If you’ve recently made the decision to open your own physical therapy practice, one of the major decisions you’ll have to make is where to open your clinic.

In today’s rehab marketplace, the options of where to open a new clinic seem endless. Some rehab entrepreneurs decide to take the safe approach and start their practice out of a small room located inside a major gym, while others decide to have no office at all and run a mobile physical therapy practice instead.

Where you decide to start and run your practice can have far-reaching implications. This guide will help you narrow down the right type of location for your new business using an objective process.

Criteria #1: Who is your target client?

One of the key principles to remember when choosing the right location for your practice is that this business isn’t for you — it’s for your clients.

Many new business owners only consider what they themselves would want in a new clinic.  Sure, as the owner, you need to choose a location that you want to work in for forty-plus hours per week, but that shouldn’t be the main focus!

You should be building a clinic to serve a specific type of person: your ideal client.  

If you’re a sporty person that might like a large gym space as your location, but your target client is a 70-year old looking to improve their balance, it’s likely they want a space that is more inviting, bright, and easy to navigate. You need to choose a location based on their wants, needs, and ideal environment for success. 

There is a concept called “product market fit” that applies here. Your “product,” which is the delivery of your PT service, should fit your target market. Be sure to choose a location that is the ideal fit for your ideal client, too.

Criteria #2: What is your target budget?

The rent you will pay for your location is considered a “fixed” cost.  This means that, once you sign on the dotted line of your lease, the price you will pay for that space will not go away. In fact, the only place it’s going to go is up! 

In business, it’s important to control your fixed costs to help control your bottom line profit.  Part of your business plan should be to create a 3-year pro forma, where you budget out your likely costs over 3 years compared to your expected revenue.

Across the board, businesses should aim to keep their rent costs at 10% or less of gross revenue. If your projects show that you will make $200,000 per year, then your rent should be no more than $20,000 per year, or about $1,700 per month.

This ratio helps keep a healthy perspective so you don’t overpay for rent.

Just like being “house poor” when you buy a house above what is comfortable, the last thing you want is to be “business poor.” You don’t want to leave your well-paying staff PT job to become a severely underpaid and overworked business owner. 

Criteria #3: How accessible is the location?

Physical therapy is considered a “destination business,” meaning you often don’t need prime visibility to be successful. But, that doesn’t mean you should choose the cheapest rent space that is way off the main drag.

The key in choosing the right location is assessing how easy it is to get to on a day-to-day basis.

Remember: clients are having to adjust their work schedule, kids’ after-school schedules, and any extra time or inconvenience in the process can add up real fast.

Here are some things to consider…

  • Is the space nearby easy freeway access?
  • Is the space near other known locations where clients already travel anyway? (e.g., Starbucks)
  • How inconvenient is the traffic around your location?
  • How difficult is it to find your location from the main road?
  • Is there enough parking for your maximum expected clients and staff?

The goal here is to remove any barriers to entry for your target market. Any difficulties in the process will reduce your likely client volume, no matter how amazing you are. 

Criteria #4: How much interior work needs to be done?

Even when you find the “perfect” location, you need to assess how much interior improvement is necessary. Very few locations come “turn key,” and even if they do, the price you’ll pay will likely exclude that location as an option. 

In many instances, you can negotiate for tenant improvements where your landlord will cover some or all of the cost to make your space client-ready.

If you’re unable to negotiate for tenant improvements, then you’ll need to budget correctly for interior changes. For commercial spaces, these costs add up quickly. 

Consider what kind of changes you need for the perfect space. Do you need to add a half-wall, update any lighting, repaint the walls, add flooring, or install an office space? Depending on what state you’re in, it could cost 30k to 100k extra — or more!

If you think you’ve found the ideal space but it needs a great deal of work, either negotiate for TI’s, or get a contractor to bid on the improvements so you can budget accordingly. 

The last thing you want is to sign a lease and put in all the work and money to get the space ready, only to leave yourself without any run-rate cash to operate the business until breakeven. 

Criteria #5: Remember that your first space doesn’t need to be your forever space! 

Just like buying your first home, your first lease doesn’t have to be your last.

In fact, it’s likely that it won’t be. Although moving locations is challenging, most rehab business owners move locations as their business grows. Very few new entrepreneurs can afford a space big enough to grow into over time.

You’ll need to determine what criteria for your space is non-negotiable based on your target client, as well as which criteria you can be without, if necessary. Always keep your target client in mind and avoid “shiny object syndrome,” where you buy all the bells and whistles of a space instead of the key elements.

Think of it this way: the more money you save on rent, without compromising the fit and feel needed for your ideal client, the more money you will have to spend on marketing — which is the most important use of money for a new business owner.

When it comes down to brass tax, the ideal space is only ideal if you have clients willing to pay you money to use it.