You will sign an offer at a number. Then the buyer’s analyst will spend the next 60 to 90 days deciding whether that number was real. Every document you cannot produce in that window becomes a negotiation you hold from behind.
Getting your medical practice ready to sell means running that same review on yourself first, while it is still your decision what to fix.
Here is a quick test. If a buyer sent you their full request list tomorrow, could you answer it in a week? No panicked call to your CPA. No answer that starts with “well, the way we do it is…” If yes, you are ready. If no, the gaps on that list are where your price gets negotiated down.
Those gaps fall into five areas. Every buyer checks all five, whether the buyer is an individual physician with an SBA loan or a strategic buyer with a diligence team:
- Earnings a buyer’s analyst will accept
- Revenue that survives your departure
- Contracts that transfer to a new owner
- Records and compliance a buyer can review quickly
- A revenue trend you can explain with numbers
Not sure how you would do? The Practice Scorecard takes a few minutes and shows which of these areas would cost you the most today.
1. Earnings a buyer’s analyst will accept: the recast and add-backs
Your tax return was built to minimize taxes. A buyer needs to see what the practice earns for an owner who is not you. The bridge between the two is the recast: your profit and loss restated with owner compensation set to a market salary for your specialty, and with add-backs for expenses a new owner would not carry. One-time legal fees. The owner’s vehicle. Retirement contributions above what a buyer would pay an employed physician.
The price is built on that recast number, so the analyst’s job is to shrink it. The standard they apply is simple. An add-back survives when it has a general ledger line with a vendor name, tied to a bank or card statement, with a one-line business reason. It dies when it is a percentage of a category, a round number, or an amount remembered rather than documented.
An illustration, with made-up numbers. A practice shows $380,000 of profit after paying the owner a market salary, and the seller proposes $210,000 of add-backs. Recast earnings: $590,000. Of those add-backs, $140,000 have invoices and statements behind them. The other $70,000 sits in a line called “consulting” that the owner remembers as a one-time project, with no engagement letter and no invoices. The analyst strikes it. Earnings drop to $520,000, and because the price is a multiple of earnings, the seller loses several times that $70,000. Then comes the expensive part: the analyst goes back through the other $140,000 a second time, with less trust.
That is how one undocumented line costs a seller far more than its face value, usually in week six, after the owner has already started planning life after the sale.
Two rules keep you out of that story. First, anything that is not a legitimate business expense should come out of the practice now, with your CPA’s guidance, well before a sale. A short, clean add-back list beats a long one. Second, every add-back that remains gets its proof attached before a buyer ever asks.
We covered the bookkeeping side in Clean Your Books.
2. Revenue that survives your departure: owner dependency
If the patients come for you, the referrals come to you, and every decision runs through you, the buyer is purchasing a job. Buyers respond in two ways. They offer less, and they move part of the price out of closing and into earnouts and holdbacks that you collect only if the patients stay.
What a buyer wants to see is production by provider, with a meaningful share coming from associates, nurse practitioners, or physician assistants. Referral relationships that belong to the practice. A manager who runs the day without you. And a written transition plan that spells out how patients and referral sources get introduced to the new owner.
You cannot rebuild a practice in a quarter. You can document what already exists and write the handoff plan, and that alone moves money from the earnout column to the cash column. More on the long game in Escape the Founder Trap.
3. Contracts that transfer: lease, payer, and employment agreements
A buyer is purchasing a set of agreements as much as a set of patients. Any agreement that cannot move to the new owner becomes a discount or a delay.
The lease. Check the remaining term, the renewal options, and the assignment clause. A financed buyer needs the term plus options to run at least as long as the loan. Picture a buyer with a ten-year loan approved and a lease with three years left. The lender will not fund until the landlord signs an amendment, and the landlord now knows your sale depends on a signature. That conversation is cheap a year before a sale and expensive in the middle of one. If you own the building, read Selling Your Medical Practice With the Building.
Payer contracts. Know which ones assign, which ones require the buyer to apply fresh, and whether any come up for renewal in the next twelve months.
Employment agreements. Every provider and key employee should have a written agreement. Handshake arrangements with the people who generate revenue worry buyers more than almost anything else on the list.
Vendor, equipment, and software agreements. Know what has a change-of-ownership clause and what carries your personal guarantee.
4. Records and compliance a buyer can review quickly: your data room
Speed is a signal. A seller who answers document requests in a day looks like a well-run practice. A seller who takes three weeks and gets defensive teaches the buyer to widen the request list.
Build the data room before the first buyer asks. It holds the financials and the recast, production by provider, payer mix, the fee schedule, collection and denial rates, licenses, malpractice history, the staff roster, and every contract from section 3, all indexed.
On compliance, the job is an inventory: your HIPAA and OSHA programs, your billing compliance plan, any past payer audits and how they were resolved. Assemble it with your healthcare attorney. Where there is a gap, you have time to fix it with counsel now. After the offer is signed, the same gap becomes the buyer’s leverage.
5. A revenue trend you can explain with numbers
Buyers forgive a bad quarter. They do not forgive a bad quarter nobody can explain. If revenue dipped because a provider left, a payer changed its rates, or you cut your own schedule, say so up front, with the numbers, and show what replaced it.
Then give the buyer something to grow into. An unused exam room. A waitlist. A service line you refer out today. A specific opportunity a buyer can fund gets paid for. A projection does not.
How long does it take to get a medical practice ready to sell?
Be honest with yourself about the calendar. Documentation moves in weeks. Structure moves in years.
| What | When | What it protects |
|---|---|---|
| Recast with owner compensation at market | Under 30 days | The earnings number the price is built on |
| Add-back schedule with proof behind every line | Under 30 days | Keeps the analyst from striking add-backs |
| Written explanation of the revenue trend, with a twelve-month forward view | Under 30 days | Stops a dip from becoming a discount |
| Complete, indexed data room | Under 30 days | Speed, and the buyer’s confidence in everything else |
| Lease, payer, and vendor contracts reviewed for transfer, amendments requested | 30 to 60 days | The closing date and the buyer’s financing |
| Written agreements and a retention plan for providers and key staff | 30 to 60 days | Cash at closing instead of earnouts |
| Compliance inventory, assembled with your healthcare attorney | 30 to 60 days | Removes the buyer’s best late-stage leverage |
| Three months of billing metrics: collections, denials, aged receivables | 90 days | Proof the revenue cycle is under control |
| Production shifted from you to other providers | 1 to 3 years | The owner-dependency discount |
| Better payer contracts, value-based arrangements, ancillary services | 1 to 3 years | Raises the price, not only protects it |
| A management layer that runs the practice | 1 to 3 years | Widens the pool of buyers who can step in |
Everything measured in days protects the price your practice already supports. Everything measured in years raises it. If you are selling this year, do the first group and do it well. If you are three years out, start the second group today.
Want to know which track you are on? That is what the discovery call is for. It is confidential and carries no obligation.
What not to do in the twelve months before a sale
Do not coast. Buyers price the trailing twelve months. Medical practice owners who check out mentally once they decide to sell hand the buyer a declining trend and a reason to cut the offer. Run the practice like you are keeping it.
Do not make large discretionary purchases. Buyers pay on earnings. They will not reimburse you for the equipment you bought last spring. Replace what must be replaced and leave the upgrades to the next owner.
Do not sign long contracts without assignment language. That includes equipment leases, software agreements, billing company contracts, and above all a lease renewal. Every new contract should be written so it can move to a buyer.
Do not switch your EHR or billing company. A conversion usually dents collections for a quarter and breaks the comparability of your trailing twelve months, which is the exact period the buyer is pricing.
Do not hand out new guarantees or raises without a plan. Retention matters, and it should be designed as part of the sale, with the cost and the benefit visible to the buyer.
Do not improvise the staff conversation. Confidentiality is standard in every sale process, and it protects your team from months of uncertainty about a deal that may not happen. The conversation comes on a schedule, with a retention plan attached. Involve your attorney where key employees have agreements that touch a sale.
How we run it
Platano Advisors has completed more than 134 transactions and works with a network of more than 8,000 buyers. We run competitive sale processes for medical practice owners, and we watch buyers take practices apart. The readiness work below is built from what we see them do.
It starts with a number you can defend. The Practice Exit Assessment gives you a valuation built from your actual financials, an add-back analysis, and a read on what would put that value at risk in diligence today.
From there, the work described on our Prepare Your Medical Practice for Sale page does the buyer’s homework before the buyer does. We build the recast and defend every add-back, so the analyst has nothing to strike. We build and index the data room, so requests come back the same day. We write the red-flag report, which names every issue a buyer would raise and how to resolve it, with dates. Then we run a mock buyer review and ask you the hard questions before someone with money is asking them.
Not every owner needs all of it. If your books are clean and your contracts transfer, the recast and the data room may be the whole job. And when the honest answer is “you are not ready to go to market this year,” we say so, and we tell you what would change it.
For the value drivers behind the price itself, see How to Maximize Your Medical Practice Valuation Before Going to Market. For the questions buyers raise once you are in market, see How to Crush Buyer Objections.
Frequently asked questions
What documents do I need to sell my medical practice?
Three years of financial statements and tax returns plus the trailing twelve months, a recast with a documented add-back schedule, production by provider, payer mix and fee schedule, collection and denial rates, aged receivables, the lease, payer contracts, employment agreements, vendor and equipment contracts, licenses, malpractice history, the staff roster with compensation, and your compliance program documents.
How far ahead of a sale should I start preparing?
It depends on whether your gaps are documentation or structure. Documentation gaps, such as the recast, the data room, and contract reviews, close in 30 to 90 days. Structural gaps, such as revenue that depends on you, take one to three years. Find out which you have as early as you can.
Should I tell my staff I am getting the practice ready to sell?
Not at the preparation stage. Clean financials, written agreements, and an organized data room are good management whether or not you sell. The staff conversation comes later, on a schedule, with a retention plan in hand.
Can I sell if my practice depends mostly on me?
Yes. Solo and owner-driven practices sell all the time. Expect the buyer to ask for a transition period and a structure that ties part of the price to patients staying. The more of the handoff you plan and document in advance, the more of the price arrives as cash at closing.
Do I need to fix everything before going to market?
No. You need to know everything before going to market. A known issue that you disclose with an explanation and a plan is a footnote. The same issue discovered by the buyer in week six is a price cut.
The discovery call is confidential and carries no obligation. We talk through your timeline, what you want from a sale, and which readiness work would pay off first.
