Don’t Buy Just a Job: Read This Before You Sign Anything!

So how do you make sure you’re acquiring a sustainable, cash-flowing asset — not just a demanding workload and endless hours?

Here’s a detailed checklist of what to examine before making an offer.

1. How Long Has the Practice Been Operating?
Longevity typically indicates patient loyalty, experienced staff, and consistent revenue streams. Practices with 10+ years of history often have well-established scheduling, billing, and referral systems. Newer practices might have potential but also carry greater risk, especially if driven by the personal brand of the current physician or owner.

2. What Medical Services Are Provided?
Not all medical practices are alike. Evaluate the specialty focus and service mix to understand growth potential and profitability. Does the practice offer:

• Primary care or pediatrics
• Specialty services (dermatology, cardiology, orthopedics)
• Ambulatory surgery or urgent care
• Inpatient hospital services
• Diagnostic testing or imaging
• Chronic disease management

A broad or niche service offering can influence patient retention and market positioning.

3. Financials: Clean and Transparent?
Request CPA-reviewed financial statements for the past 3 years, including:

• Profit & Loss statements
• Balance sheets
• Tax returns
• Revenue cycle and billing reports
• Insurance payer mix and write-offs
• Operational expense details

Unclear or inconsistent financials can hide risks such as revenue leakage or mismanagement.

4. Production and Revenue Trends
Analyze trends over recent years. Consider:

• Is patient volume growing, stable, or declining?
• How dependent is revenue on the current owner’s personal patient load?
• Are referral networks and reactivation programs strong?
• What is average revenue per patient visit?
• How active and engaged is the patient population?

A thriving practice shows consistent growth or stability, not reliance on short-term boosts.

5. What Is the Seller’s Actual Take-Home?
Beyond salary, assess all owner benefits and personal expenses run through the practice:

• Owner compensation structure (salary, bonuses, distributions)
• Personal expenses billed to the practice (vehicles, travel, memberships)
• Family members on payroll?
• Non-recurring or discretionary spending

Understanding true cash flow helps determine if the practice supports your financial goals.

6. Is the Practice Finance-Ready?
If you need financing, lenders will want:

• Strong Debt Service Coverage Ratio (DSCR)
• Normalized earnings with add-backs for one-time expenses
• Historical billing and collection consistency
• Clear transition plans (seller involvement post-sale)
• Eligibility for SBA or conventional loans

If the practice’s financials don’t support financing, consider renegotiation or walking away.

7. Market Competition and Demographics
Conduct thorough market analysis:

• How many competing providers are nearby?
• What is the patient-to-provider ratio?
• Is the local population growing or declining?
• Are local employers or referral sources stable?
• Is there significant turnover among providers or patients?

These factors will impact your ability to sustain and grow the practice.

8. Patient Base and Payer Mix
Understand your revenue drivers:

• Number of active patients
• Payer mix (private insurance, Medicare, Medicaid, self-pay)
• Are high-value procedures fully utilized?
• Patient retention and satisfaction rates

Certain payer concentrations might require renegotiation or operational adjustments.

9. Facility, Equipment, and Technology
Assess the physical and technological assets:

• Condition and age of medical equipment and diagnostic tools
• Use of electronic health records (EHR) and practice management software
• Facility size, layout, and compliance with healthcare regulations
• Lease terms or real estate ownership status

Modern technology and compliant facilities reduce future costs and improve efficiency.

10. Transition and Staffing Plan
A smooth transition is vital. Consider:

• Seller’s ongoing involvement (patient care, mentorship)
• Likelihood of staff retention post-sale
• Patient loyalty to the practice versus the provider
• Existing goodwill and reputation

Minimizing patient and staff turnover protects your investment.

11. What’s Your Growth Strategy?
Success depends on leadership and vision:

• Can you expand service hours or add specialties?
• Is there room for new technology or operational improvements?
• Can marketing increase patient acquisition and case acceptance?
• Are there underused spaces or equipment?

Buy a practice with clear growth potential, not just immediate cash flow.

Final Thought: Take Your Time, Don’t Rush
Buying a medical or healthcare practice is a major career move. The smartest buyers are patient, methodical, and focused on long-term success — not just quick wins.

The goal? Acquire a business that works for you and supports your professional and financial goals.

Thinking about buying a medical or healthcare practice?
Let’s talk. We help buyers evaluate opportunities, secure financing, and ensure you acquire the right practice to elevate your career and impact.