What Buyers See When They Look at Your Practice

I spent a good part of my career on the buy side of healthcare M&A. I built the target lists, scored the practices, sat across from the founder-owner physicians, underwrote the deals, and negotiated them.

So I can tell you what a buyer sees when they pull up your practice. It is rarely what most physician owners expect.

Over my career I have talked to dozens of physician practice owners across a multitude of specialties. The most common question, by far, is some version of:

"What do you think my practice is worth?"

My answer is usually the same. I don't know yet. Because the number on your tax return and the number a buyer puts on a term sheet are built from completely different inputs.

Here is what I mean.

Most physician owners anchor on revenue. "We do $8M a year." That is a data point, not a valuation.

The buyer is looking at something else. They are running your practice through a filter that has almost nothing to do with how good you are at medicine and everything to do with how acquirable your business is.

Here are the five things a buyer works through before they ever pick up the phone.

1. Provider economics, not practice economics.

A buyer does not care that the practice does $8M. They care what each provider generates, how that breaks down between E&M and procedures, what the ancillary revenue looks like (imaging, infusion, pharmacy, ASC), and how dependent total revenue is on one or two high-producing physicians. If 60% of your revenue walks out the door when the founder retires, that is not an $8M practice. That is a $3M practice carrying a $5M key-man risk.

2. Payer mix and contract quality.

Commercial lives vs. Medicare vs. Medicaid tells a buyer most of what they need to know about margin sustainability. A practice with 70% commercial payer mix in a growing MSA is a fundamentally different asset than one running 60% Medicare in a rural market. The buyer is also looking at the contracts themselves. Are you in-network with the right plans? Are your reimbursement rates competitive, or are you leaving money on the table that a platform operator could renegotiate on Day 1?

3. Operational readiness.

This is the gap most owners do not see, because they are inside it every day. How clean is your billing? What is your days-in-AR? Do you have an office manager who runs everything out of their head, or a documented workflow that survives if that person leaves? Do your cost centers make sense, or is everything lumped into one P&L that a diligence team will spend three weeks untangling?

A buyer will spend more time in your billing data than in your clinical outcomes. Clinical outcomes still matter. But billing data tells them how much work it takes post-close to get the practice running on their systems, and that work has a price.

4. Competitive positioning.

Where you sit in your market relative to other practices, and relative to the platforms already consolidating around you. Are you the last independent in a market where a PE-backed group just acquired your two biggest competitors? That changes your leverage completely. Or are you one of 40 independents in a market with no consolidation activity, in which case the buyer's urgency is lower and so is your price.

Most physician owners have no idea who else has been acquired in their MSA, which platforms are active, or what that means for their own negotiating position. From what I have seen, that context is often what separates a $2M EBITDA practice that sells for 8x from one that sells for 12x.

5. Succession signals.

This one is uncomfortable, but it is real. Buyers are reading your age, tenure, partner demographics, and lease terms. A 62-year-old founder with a lease expiring in 18 months and no junior partners sends a specific signal: this practice is going to transact whether the owner wants it to or not. Buyers who see that signal know they have time on their side. The owners who plan 3 to 5 years ahead and control their own timeline tend to get materially better terms.

Let me put real numbers on this.

Take two pain management practices, both doing $8M in revenue, both in the Southeast.

Practice A: 4 providers, balanced revenue distribution, 65% commercial payer mix, clean billing (32 days AR), 2 junior partners aged 38 and 42, lease renewed through 2031, in a market where two competitors just got acquired by a national platform.

Practice B: 4 providers, but the founder generates 55% of revenue. 50% Medicare payer mix. AR at 48 days. No junior partners with equity. Lease expires in 14 months. No platform activity in the MSA.

Both report the same topline. They will not price the same.

Start with the standalone benchmark. An independent pain management practice in the $1M to $3M EBITDA range trades around 5.5x to 7.5x EBITDA before you adjust for anything specific to the practice.

Practice B sits at the bottom of that band, arguably below it. The Medicare-heavy payer mix gets discounted, the founder concentration is a real key-man problem, and AR at 48 days is well past the under-40-days buyers want to see. Call it 5x to 6x. On $1.5M of EBITDA, that is roughly an $8M to $9M deal, and the buyer will likely tie a chunk of it to an earnout around the founder staying put.

Practice A is a different conversation. Clean economics, a commercial-heavy payer mix that on its own correlates with materially higher multiples, and younger partners already in the seats. As a standalone it earns the top of the band, call it 8x, or about $12M.

But Practice A will probably never sell as a standalone. Two competitors in its market just got acquired, which makes it an anchor or add-on for whoever is building that platform, and platform-level transactions routinely clear three to five turns above add-on deals. That pushes Practice A into double digits, closer to a $15M outcome.

Same revenue. Same specialty. Same region. Roughly a $6M spread, and almost none of it is about the medicine.

The physician owners who get the best outcomes tend to do three things 12 to 24 months before they ever talk to a banker.

First, they get an honest read on their competitive position. Not from the banker who wants the mandate. From someone who can show them who is buying in their specialty, what those buyers are paying, and where their practice sits relative to comparable transactions. That context changes every conversation that follows.

Second, they fix the operational gaps that compress multiples. Clean up billing. Tighten days-in-AR. Document workflows. Build provider-level P&Ls so a buyer does not have to guess. These are not exciting projects. They are worth millions at the closing table.

Third, they control their own timeline. Owners who start planning 2 to 3 years out get to choose their buyer, negotiate from strength, and walk into the process with leverage. The ones who wait until they are burned out and their lease is expiring tend to get whatever terms the buyer offers.

I built my career on the buy side of healthcare M&A. I know how buyers score practices, because I was the buyer. I built the models that did the scoring, and I sat at the table when the number got decided.

What I do now is work with physician owners well before a process starts: a clear read on their competitive position, the operational gaps that quietly compress multiples, and the market context that decides whether they negotiate from strength or from a corner.

The owners who do this 12 to 24 months out are the ones who control their timeline and their number. The ones who wait usually take whatever is offered.

If you are a physician owner and a sale has crossed your mind for the next 6 to 24 months, even casually, reply to this email. I will tell you what a buyer would see if they looked at your practice today.

No pitch. Just a straight read on where you stand.

This newsletter is for informational purposes only and does not constitute investment, legal, or financial advice.

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