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Should I sell my medical practice? New update page 4
Posted on 6/27/25 at 11:53 pm
Posted on 6/27/25 at 11:53 pm
I'll try to make this as brief as possible.
I started a healthcare practice (wont specify which discipline) 5 years ago just prior to COVID. It's really hard to say what my net profit is every year, because I recently opened a second office and have been pouring a lot of money into it. Between this business and another healthcare adjacent business I make a good income, but nothing crazy.
If I had to guess, when removing the scrape such as my wife's free ride 401k, etc, I make about 200-225k/year off both offices. The second office is only 18 months old and has just become profitable. The business is very beholden to insurance payments, which can be stressful depending on how collections are going that month. I make an additional 70-90k a year off the other business that is not on the table at all in this current deal, and I will continue to own it regardless.
Recently, private equity has been sniffing around my industry and my region, and made me an offer for both offices. The offer is 1.5 million, with an incentive to run my 2 offices and 3 additional offices in the immediate vicinity that they already own with a base salary of 120k, profit share of 60-70k, and a retention bonus of 60k annually for my first 2 years of work. The total package is about 230k/year for the first 2 years, then likely somewhere in the 180-200k range after that, pending profit sharing and growth/opening of new offices in the area. I can also walk away immediately after selling if I choose, though given the bonus opportunity I like wouldnt. I would continue to own the other business that is in the 70-90k range annually. Their main angle is they are void of leadership in the region and need someone with experience and knowledge to take charge of their current assets in the area. This would be a regional manager role, with opportunity for expansion in the region and profit sharing of 10-20% of new offices.
There is an option to reinvest some of the sale proceeds (up to 20%) into the parent company, who wants to turn around and flip to larger private equity in 18-24 months, and are (reportedly but speculatively) anticipating a 180-220% return on anything reinvested when they sell to larger private equity. This is the elusive "second bite of the apple" that is often marketed to people in my position.
I am 40 years old and have 4 (young) children. I have about 330k in retirement accounts, 350k in home equity, and 300k in debt on the business. The current offer to buy me out has no contract or non compete after 2 years. To be honest, I enjoy what I do, but am not necessarily in love with it, and the idea of having a large lump sum of cash to try a new venture while working for them in the meantime sounds very appealing. I have started 3 businesses in my 15 year career and all have done fairly well, nothing crazy but all fairly successful. I am leaning toward taking the money, or countering slightly higher. Am I crazy, or should I hang on and continue to grow the business?
I started a healthcare practice (wont specify which discipline) 5 years ago just prior to COVID. It's really hard to say what my net profit is every year, because I recently opened a second office and have been pouring a lot of money into it. Between this business and another healthcare adjacent business I make a good income, but nothing crazy.
If I had to guess, when removing the scrape such as my wife's free ride 401k, etc, I make about 200-225k/year off both offices. The second office is only 18 months old and has just become profitable. The business is very beholden to insurance payments, which can be stressful depending on how collections are going that month. I make an additional 70-90k a year off the other business that is not on the table at all in this current deal, and I will continue to own it regardless.
Recently, private equity has been sniffing around my industry and my region, and made me an offer for both offices. The offer is 1.5 million, with an incentive to run my 2 offices and 3 additional offices in the immediate vicinity that they already own with a base salary of 120k, profit share of 60-70k, and a retention bonus of 60k annually for my first 2 years of work. The total package is about 230k/year for the first 2 years, then likely somewhere in the 180-200k range after that, pending profit sharing and growth/opening of new offices in the area. I can also walk away immediately after selling if I choose, though given the bonus opportunity I like wouldnt. I would continue to own the other business that is in the 70-90k range annually. Their main angle is they are void of leadership in the region and need someone with experience and knowledge to take charge of their current assets in the area. This would be a regional manager role, with opportunity for expansion in the region and profit sharing of 10-20% of new offices.
There is an option to reinvest some of the sale proceeds (up to 20%) into the parent company, who wants to turn around and flip to larger private equity in 18-24 months, and are (reportedly but speculatively) anticipating a 180-220% return on anything reinvested when they sell to larger private equity. This is the elusive "second bite of the apple" that is often marketed to people in my position.
I am 40 years old and have 4 (young) children. I have about 330k in retirement accounts, 350k in home equity, and 300k in debt on the business. The current offer to buy me out has no contract or non compete after 2 years. To be honest, I enjoy what I do, but am not necessarily in love with it, and the idea of having a large lump sum of cash to try a new venture while working for them in the meantime sounds very appealing. I have started 3 businesses in my 15 year career and all have done fairly well, nothing crazy but all fairly successful. I am leaning toward taking the money, or countering slightly higher. Am I crazy, or should I hang on and continue to grow the business?
This post was edited on 9/3/25 at 7:08 pm
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Posted on 6/28/25 at 12:38 am to Saint5446
You should definitely take this deal, particularly if they are taking the $300,000 in business debt. You can pocket 1.5 million while essentially making the same money you already are bringing in for the next two years. I’m in clinical services as well and have always thought that the provider is the practice. Meaning an established practice has little value if you don’t have talent working there. I also would not reinvest for the “second bite.” They could sell to a greater fool but they could also lose their arse if they start changing things that are working. Optum was buying practices like crazy the last few years but these offices aren’t doing well once the founders leave. I would definitely take the money then leave after two years if you don’t like it and start another practice.
This post was edited on 6/28/25 at 12:41 am
Posted on 6/28/25 at 6:23 am to Saint5446
Is this negotiable? If so, try to squeeze more % out of new business expansion. This looks to be a great deal.
Posted on 6/28/25 at 6:38 am to Saint5446
Take it and work through the 2-3 year transition period then bounce. In my experience, PE is great for the owners but end up changing everything enough to make your current employees leave. In 2-3 years you’ll have a different team than the ones who built it with you and you likely won’t want to be there anyway.
Posted on 6/28/25 at 6:48 am to Saint5446
Being in the same business as you, ( you and I discussed your side business over email a few years back) I have some recent experience with the corporate purchase of clinics. The financial part for you sounds great. The good thing is you can always walk away whenever you want.
Just know dealing with the corporate part of the business is a major headache. My small clinic was bought out by a larger clinic that had gone corporate and they had a lot of turnover of clinicians they had to replace when it first happened. I didn’t stay for very long either before I got out myself. There is a lot more corporate BS and regulations to worry about that you’re not dealing with right now. They likely dont have good leadership because anyone that knows what they are doing ran away from them already.
Just know dealing with the corporate part of the business is a major headache. My small clinic was bought out by a larger clinic that had gone corporate and they had a lot of turnover of clinicians they had to replace when it first happened. I didn’t stay for very long either before I got out myself. There is a lot more corporate BS and regulations to worry about that you’re not dealing with right now. They likely dont have good leadership because anyone that knows what they are doing ran away from them already.
Posted on 6/28/25 at 7:00 am to Saint5446
I worked in the healthcare industry for 42 years, including 4 with a hospital, 6 managing physician groups and over 23 with large health insurers, some of whom acquired independent medical clinic groups, including one my sister was a CFO for.
My take...
In recent years, there has been a notable shift from solo or small private practices toward employment by or affiliation with larger organizations, such as hospitals, health systems, private equity firms, and large corporate groups including insurers or retail chains.
There’s something like 78% of physicians in the United States are employed by hospitals, health systems, or corporate entities such as insurers and private equity firms. Notably, practices owned by corporate entities (30%) have now surpassed those owned by hospitals (28%). This represents a significant shift from the traditional model where the majority of doctors were practice owners.
So....
Hang on or not? That's obviously a personal experience and what you think your future is in your market. Declining reimbursement. Rising overhead costs. Staff. Near impossible to run solo or small practices and survive these days.
Love providing care to patients? Hate the constant worry of meeting payroll, providing for your family, worrying about the future? Take the deal.
BUT..
Be advised (and this is from my sister's perspective, albeit she wasn't a care provider, just an administrator)...
Private companies often set unrealistic productivity standards for solo practitioners, causing burnout, reduced care quality, and loss of autonomy. Although corporate jobs provide financial stability, these drawbacks lead some clinicians to pursue independent or alternative practice models.
She ended up quitting and going to a county-based healthcare system. That might not be your experience because I don't know the players or your personality, just keep all of that in the back of your mind as you make your deliberations.
Best of luck!
My take...
In recent years, there has been a notable shift from solo or small private practices toward employment by or affiliation with larger organizations, such as hospitals, health systems, private equity firms, and large corporate groups including insurers or retail chains.
There’s something like 78% of physicians in the United States are employed by hospitals, health systems, or corporate entities such as insurers and private equity firms. Notably, practices owned by corporate entities (30%) have now surpassed those owned by hospitals (28%). This represents a significant shift from the traditional model where the majority of doctors were practice owners.
So....
Hang on or not? That's obviously a personal experience and what you think your future is in your market. Declining reimbursement. Rising overhead costs. Staff. Near impossible to run solo or small practices and survive these days.
Love providing care to patients? Hate the constant worry of meeting payroll, providing for your family, worrying about the future? Take the deal.
BUT..
Be advised (and this is from my sister's perspective, albeit she wasn't a care provider, just an administrator)...
Private companies often set unrealistic productivity standards for solo practitioners, causing burnout, reduced care quality, and loss of autonomy. Although corporate jobs provide financial stability, these drawbacks lead some clinicians to pursue independent or alternative practice models.
She ended up quitting and going to a county-based healthcare system. That might not be your experience because I don't know the players or your personality, just keep all of that in the back of your mind as you make your deliberations.
Best of luck!
Posted on 6/28/25 at 7:08 am to Saint5446
Ask on white coat investor forum, not here.
Posted on 6/28/25 at 7:39 am to GEAUXT
Assuming this is an opening offer, there will be room to negotiate. Places like white coat investors can be very helpful in what could be on the table and where you have the most leverage.
Posted on 6/28/25 at 7:50 am to Saint5446
Get with your attorney & CPA to poor over this deal.
You need to make sure the non-compete would not infringe on your ability to run your healthcare adjacent business.
If they are offering you that type of money now when you haven’t had a chance to scale the 2nd office; make sure they aren’t short changing you since there offer is most likely based on some sort of profit multiplier. Your want to make sure the “one time” setup costs are not driving your profit numbers down.
Also, based on current revenues & projected growth; what are the chances you will hit those metrics to earn all of the bonus & profit share numbers.
If you are considering it now, you most likely will do it; just need to make sure the deal is fair to you. And I can’t imagine there would be anything better than getting a lump sum up front, minimize your liability while keeping the same income level.
You need to make sure the non-compete would not infringe on your ability to run your healthcare adjacent business.
If they are offering you that type of money now when you haven’t had a chance to scale the 2nd office; make sure they aren’t short changing you since there offer is most likely based on some sort of profit multiplier. Your want to make sure the “one time” setup costs are not driving your profit numbers down.
Also, based on current revenues & projected growth; what are the chances you will hit those metrics to earn all of the bonus & profit share numbers.
If you are considering it now, you most likely will do it; just need to make sure the deal is fair to you. And I can’t imagine there would be anything better than getting a lump sum up front, minimize your liability while keeping the same income level.
Posted on 6/28/25 at 7:52 am to Saint5446
A lot depends on the private equity company's reputation. In similar industry and several colleagues quit management before their prescribed management time is up and leave money on the table because of the crap the private equity people do. Some have had great success and happiness after taking the deal. Quite often the profit share they offer is not what you will realize. There are some consultants out there who can help you value your practice to make sure this is a good deal. They may have insight into the reputation of this private equity firm. Your offer should be many multiples of your EBITA. Don't take their first offer.
Posted on 6/28/25 at 8:14 am to Saint5446
I am leaning toward asking for 1.8 million, to cover the cost of either paying off the debt or the tax hit from the 1.5 million.
If I do take it, I don't plan on being there beyond the two years. The bonuses are easy to get, and the language literally just says for remaining as an employee of _____ for a 12 month period. The profit sharing as another poster stated may be more nebulous.
Either way, after tax and debt payoff, having 900k-1.2 million in the bank would take so much pressure off me after years of meeting payroll, dealing with debt, etc. With 4 young kids, I would sleep a lot easier at night knowing that I had this as a nest egg.
I would probably use part of the money to start another business, but something that is not beholden to insurance and more healthcare adjacent. Thinking something like orange theory, anytime fitness, etc or coming up with something similar myself as I have a lot of knowledge and experience in the fitness industry and my previous skillset would be very marketable in this world.
If I do take it, I don't plan on being there beyond the two years. The bonuses are easy to get, and the language literally just says for remaining as an employee of _____ for a 12 month period. The profit sharing as another poster stated may be more nebulous.
Either way, after tax and debt payoff, having 900k-1.2 million in the bank would take so much pressure off me after years of meeting payroll, dealing with debt, etc. With 4 young kids, I would sleep a lot easier at night knowing that I had this as a nest egg.
I would probably use part of the money to start another business, but something that is not beholden to insurance and more healthcare adjacent. Thinking something like orange theory, anytime fitness, etc or coming up with something similar myself as I have a lot of knowledge and experience in the fitness industry and my previous skillset would be very marketable in this world.
This post was edited on 6/28/25 at 8:22 am
Posted on 6/28/25 at 9:05 am to Saint5446
Do this and don’t look back. I’d invest at least half of the windfall.
Posted on 6/28/25 at 10:06 am to Saint5446
You're a physician I assume? Not being a dick but a physician has more value than a mid-level. Not to offend anyone.
ETA-just by shite luck, you picked the absolute worst time in the history of medicine to start a practice. As overhead has skyrocketed, reimbursement has been cut to the bone. The fact that you have created a profitable practice during this time is a much bigger achievement than you may realize.
Especially with a second practice that is now cash flowing.
What state/area are you in?
Can you say what group is trying to buy you?
I know a little about this industry.
ETA-just by shite luck, you picked the absolute worst time in the history of medicine to start a practice. As overhead has skyrocketed, reimbursement has been cut to the bone. The fact that you have created a profitable practice during this time is a much bigger achievement than you may realize.
Especially with a second practice that is now cash flowing.
What state/area are you in?
Can you say what group is trying to buy you?
I know a little about this industry.
This post was edited on 6/28/25 at 10:11 am
Posted on 6/28/25 at 10:14 am to Saint5446
You get 1.5 million plus you get paid around 200K per year to stick around and keep working at the place? yea im selling and investing that million in the stock market. You still have a long ways to go before you retire so that million could be a lot in 20 years if you invest it right.
Posted on 6/28/25 at 10:22 am to Double Oh
200-250k a year with 2 medical offices seems like a fairly low take home income?
Is it closer to 500k and they used a 3x multiplier on free cashflow/sde?
Is it closer to 500k and they used a 3x multiplier on free cashflow/sde?
Posted on 6/28/25 at 10:25 am to Saint5446
Looks like a great deal. I don't know you, but your story make me very proud for some reason. I, too, juggle a few hats and in addition to my salaried job I have grown a small business and a consulting practice into something pretty nice - but it's a lot of damn work. I'm 45 and reaching burnout.
Take the deal. Be smart with the cash. Find something you love and go build another successful business. Cheers brother.
Take the deal. Be smart with the cash. Find something you love and go build another successful business. Cheers brother.
Posted on 6/28/25 at 10:27 am to SmackoverHawg
Not a physician, allied health fields.
Posted on 6/28/25 at 10:29 am to lsu for the win
Appreciate the kind words. Seems like the money opens a ton of doors for the second half of my life. Am leaning toward countering at 1.8, but may just accept the current offer, pay the taxes, pay the debt, and still have about 900k leftover.
Posted on 6/28/25 at 10:29 am to Saint5446
Short version - It is a good deal and if you go for it, no reason to 2nd guess.
At your age putting close to $1 million after taxes into investments and able to continue with a salary around $300,000, you would be around the top 10% of wealth in the USA. Just doing nothing crazy with the lump sum and leaving it invested would get you to top 5% by your mid 50s.
Now the other side, are you leaving money on the table? Have you had a valuation done on your business? It might be something to look into if you have not. $1.5 million might be roughly right, they may come back and say your company is worth $3 or $5 million though.
Once again, taking the initial offer is a good decision financially. Less work and peace of mind is always a good call
At your age putting close to $1 million after taxes into investments and able to continue with a salary around $300,000, you would be around the top 10% of wealth in the USA. Just doing nothing crazy with the lump sum and leaving it invested would get you to top 5% by your mid 50s.
Now the other side, are you leaving money on the table? Have you had a valuation done on your business? It might be something to look into if you have not. $1.5 million might be roughly right, they may come back and say your company is worth $3 or $5 million though.
Once again, taking the initial offer is a good decision financially. Less work and peace of mind is always a good call
Posted on 6/28/25 at 10:30 am to Nole Man
This guy knows what he’s talking about. I have some exposure to to this area.
Take the deal, hold on to as much of the cash as possible, work out your non compete and then try to repeat your prior success if you still want to stay in the industry.
For every PE firm that does a good job of managing healthcare operations there are 5 others that don’t understand the industry, try to gain returns that aren’t possible and end up eventually crashing.
Take the deal, hold on to as much of the cash as possible, work out your non compete and then try to repeat your prior success if you still want to stay in the industry.
For every PE firm that does a good job of managing healthcare operations there are 5 others that don’t understand the industry, try to gain returns that aren’t possible and end up eventually crashing.
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