Skip to content
Private PracticeSimulator

How the Simulator Works

Learn how our simulation models calculate practice metrics and financial projections

Disclaimer

The information provided by this tool is for general informational purposes only and should not be considered as professional financial, legal, or business advice. All calculations and projections are estimates based on the information you provide and general industry assumptions.

Every practice is unique, and actual results may vary significantly. We recommend consulting with qualified professionals before making any financial or business decisions based on the information provided by this tool.

Practice Economics Models

How we calculate practice financials and valuation

Break-Even Analysis

Our break-even model calculates the number of clinicians needed to cover fixed expenses based on the contribution margin per clinician. The contribution margin is calculated as:

Contribution Margin = Revenue Per Clinician - (Clinician Compensation + Variable Overhead)

The break-even point is then calculated by dividing total fixed expenses by the contribution margin per clinician.

Practice Valuation

Our valuation model uses multiple approaches commonly used in practice acquisitions:

  • Revenue Multiple: Based on annual revenue multiplied by a factor that increases with practice longevity
  • EBITDA Multiple: Based on earnings before interest, taxes, depreciation, and amortization
  • Adjusted EBITDA: Accounts for owner replacement costs for clinical work

Client Acquisition Models

How we model marketing funnels and client value

Marketing Funnel

Our funnel model tracks conversion rates through each stage of client acquisition:

  • Website Visitors → Inquiries (typical conversion: 3-7%)
  • Inquiries → Consultations (typical conversion: 40-70%)
  • Consultations → Clients (typical conversion: 50-80%)

Client Lifetime Value

Client lifetime value (LTV) is calculated based on:

LTV = (Average Session Rate × Average Sessions) + Referral Value

Referral value is calculated based on the percentage of clients who refer others and the revenue those referrals generate.

ROI Calculation

Return on investment for marketing and acquisition efforts is calculated as:

ROI = (Total Revenue - Total Costs) / Total Costs × 100%

Total costs include marketing, administrative processing, consultations, and service delivery labor.

Simulation Methodology

How we ensure accurate and useful simulations

Our simulator uses data models derived from industry benchmarks and real-world practice data. While every practice is unique, these models provide a solid foundation for financial planning and decision-making.

Data Sources

  • Industry association surveys
  • Practice management benchmarks
  • Mental health practice acquisitions
  • Marketing conversion studies

Model Limitations

  • Regional variations not fully captured
  • Specialty-specific factors may vary
  • Market conditions change over time
  • Individual practice variables

Best Practices

  • Use multiple scenarios for planning
  • Update inputs with your actual data
  • Consult with financial advisors
  • Revisit simulations quarterly