Receiving an offer to buy your healthcare practice can be exciting and a rewarding acknowledgement of your hard work and dedication. But it can also raise more questions than answers.
Whether the interest comes from a DSO, MSO, private equity-backed platform, or another strategic buyer, many owners immediately ask, “Is this a good offer?” Our team at 7 Pillars would argue that’s rarely the first question you should be asking.
Before you evaluate the purchase price or deal terms, you need to understand how the opportunity fits into your financial goals, your practice, and the future you’ve envisioned for yourself, your team, and your patients. The strongest decisions are made through thoughtful preparation.
To decide if an offer is worth pursuing, there are several important factors healthcare practice owners should consider.
Start With Your Personal Financial Plan
Before you evaluate a purchase price, you need to evaluate your current life expenses and desires for your future. Consider these questions:
- Do you hope to reduce administrative responsibilities while remaining clinically involved?
- When do you want to stop practicing?
- How much do you actually need from a transaction to accomplish your personal goals?
- What does retirement look like for you?
- Do you desire to build generational wealth?
An offer that appears attractive on paper may not provide the financial outcome your family needs. For example, an offer that isn’t necessarily the highest may create more long-term value because it aligns most with your objectives.
Your financial plan should become the framework through which every opportunity is evaluated.
Know the Numbers Behind Your Business
Knowing your practice numbers can help you see your practice through a buyer’s eyes and better understand how they assess acquisition opportunities.
Before considering any offer, you should understand key performance indicators such as:
- Revenue and growth trends
- Profitability and EBITDA
- Provider productivity
- Patient and referral metrics
- Operational efficiencies
- Future growth opportunities
Understanding your numbers allows you to determine whether an offer reflects the true value of your business, or whether there may be opportunities to increase value before pursuing a transition.
“You need to know your numbers at all times,” Michael said. “If you do not know your numbers, you will be negotiating and running a business from a position of weakness. Knowing your numbers allows you to run your business from a position of strength.”
Build Your Advisory Team Before You Need It
One of the biggest advantages an owner can have is assembling the right advisors before an offer arrives.
That team typically includes:
- A CPA who understands the tax implications of a transaction
- A financial planner who can model what life looks like after a sale
- An attorney experienced in healthcare transactions
- An experienced M&A advisor who understands the market, buyer landscape, valuation, and transition process
These professionals can help decipher an unexpected offer by guiding you to make informed decisions instead of emotional ones.
Many practice owners already have trusted CPAs and financial advisors who know them and their practice best. Those professionals can often help identify when it’s time to involve an M&A advisor to evaluate an offer, compare alternatives, or negotiate on your behalf.
Understand Why You’re Considering an Exit
One of the most important questions to ask yourself is why you are considering selling.
If your only answer is, “Because someone offered me a lot of money,” it’s worth taking a step back.
Successful transitions are about more than just financial security. They also involve choosing the right partner, preparing for retirement, and protecting your legacy and patients. With many stakes on the line, you’ll want to understand your true long-term goals.
The DSO or MSO route is attractive to some practice owners because it provides them with a firm transition plan that allows them to practice clinically and oversee their practice, while taking some of the load off. It gives them an exit plan leading up to retirement while maximizing the value of their practice. Other practice owners consider pursuing corporate offers to help with administrative, HR, or marketing loads.
The clearer you are about your personal goals, the easier it becomes to determine whether a strategic partner is actually the right fit.
Not Every Offer Requires a Decision
Receiving an offer does not always mean it’s time to sell your practice. Sometimes an offer simply provides valuable market intelligence. It helps you understand how buyers view your practice today and what opportunities may exist in the future.
Our team of advisors can walk you through your options, valuations, deal structures, and what the process looks like, providing the guidance you need to make confident, informed decisions for your future.
Schedule a confidential conversation with one of our advisors today.