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The Biggest Mistakes Before Selling Your Practice

Posted in BGP Blog

After advising more than 25 physician groups on successful private equity (PE) partnerships—and speaking with hundreds more who considered selling—we’ve seen several common mistakes that can reduce your practice’s value or leave you with a bad partner. Here’s how to avoid them.

  1. Waiting Too Long to Start the Process

PE invests in practices for future cash flow. If you plan to retire soon after the deal – especially if you’re a top producer – it can scare off buyers. Most require key owners to keep practicing for at least three, often five, years. As a result, if you wait until retirement is near, you might leave money on the table or fail to find buyers. You may even end up delaying retirement to avoid these tradeoffs.

Bayshore takeaway: Plan at least five to six years before the main partners want to retire.

  1. Failing to Grow Profits or Diversify Production

Buyers pay a multiple of EBITDA. EBITDA is your practice’s profit or cash flow after paying partners a fair market salary. Bigger, growing practices with multiple providers can command both a higher multiple and higher EBITDA—leading to a much higher valuation and more options.

Bayshore takeaway: Keep investing in skilled providers and exceptional patient care. Buyers will pay more if they see a strong future.

  1. Not Having Your House in Order
  1. Not Using Specialized Advisors—or Signing an LOI Too Soon

Buyers want the best deal possible. Private equity groups that have completed hundreds of deals are more experienced than owners who sell only once. Not using specialized advisors can cost you 15-30% (or more) of your practice’s value and limit your options to find a good partner.

A good sell-side advisor levels the playing field by:

If you sign a Letter of Intent (LOI) without an advisor, you lose most of your leverage. In our experience, it’s also critical to have a lawyer who knows healthcare deals—they’ll handle the complex tax, regulatory, and structuring issues.

 

Bottom Line
Sell from a position of strength: stay profitable, keep growing, and hire experienced advisors to attract multiple buyers. That’s how you’ll get the highest price, best partner, and meet your long-term goals.

 

Have questions about PE or your practice’s value? Let’s talk.
Email: [email protected]

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