Are You Buying a Business—or Just Buying a Billboard?

Introduction: The Mirage of “Profit Multiples”

If you’ve ever thought about buying another medical or dental practice, you’ve probably been told something like:

“Just pay a few times their profit.”

It sounds simple—but it’s often misleading.

In business-speak, that “profit” is usually called EBITDA, short for Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s meant to represent how much a business truly earns before extra accounting items.

But here’s the catch: in small healthcare practices, that number can be wildly inaccurate—because many owners don’t include their own pay as an expense.

Once you plug in what it would actually cost to replace that provider, the so-called “profit” often disappears. And when that happens, you’re not buying a profitable business—you’re buying a billboard.

A name on the door. A patient list that might not stick around. And a set of systems that may be running on hope more than health.

Before you buy, you need to know which one you’re paying for.

1. When the Numbers Don’t Add Up

Many small healthcare practices run at or near break-even once you account for the fair cost of the owner’s work.

On paper, it might look like a solid operation:

• Years of service to the community

• Loyal staff and steady patients

• A history of “profitability”

But once you normalize expenses—especially provider compensation—the math often changes.

For example: A practice reports $500,000 in annual collections. That sounds good… until you realize it’s paying the owner only $100,000 in take-home pay for full-time clinical work.

If you were to hire another provider for that same workload, their salary would easily reach $300,000–$400,000.That difference wipes out the “profit” entirely.

So before you even start negotiating, ask the only question that matters:

Is there any true profit left after fair costs?

If not, you’re not buying an income stream—you’re buying someone else’s history.

2. The “Marketing Buy” Mindset

When a practice doesn’t show real profit, you must think differently.

You’re no longer making a business investment—you’re making a marketing investment.

What you’re really buying is:

• A list of patients who already know the location

• Some degree of community goodwill

• Possibly a few usable assets (equipment, phone number, charts)

That’s not necessarily bad—it just needs to be priced like marketing, not like a business.

Here’s how to do that:

1. Estimate Converting Patients. How many patients are likely to stay once you take over?

2. Apply Realistic Retention. Assume 50% retention at best—many patients leave during transitions.

3. Calculate First-Year Margin. How much contribution (profit) will those retained patients generate for you?

4. Subtract Integration Costs. Include rebranding, EHR conversion, staff onboarding, and signage updates.

What’s left after that exercise is your maximum price—not your starting offer.

If the deal still looks good after that, proceed. If not, you just saved yourself a six-figure mistake.

3. Structure for Safety

Even if the deal pencils out, protect yourself with structure.

Use a conversion-based earnout instead of paying everything upfront.

That means the seller gets paid as patients successfully transfer and continue care under your practice. You might pay a small goodwill amount at closing, but the majority of the purchase price should depend on measurable retention.

This structure keeps both parties aligned—you only pay for what performs, and the seller is motivated to help patients transition smoothly.

4. Lessons from the Field

One real-world example: A three-location aesthetic group came to market with strong collections—but negative real profit once fair provider pay was included.

The buyer reimagined the acquisition as a patient acquisition campaign, not a business purchase.

They negotiated a small upfront payment and tied the remainder of the price to patient retention over the next 12 months. The seller got compensated for patients who actually transitioned, and the buyer eliminated nearly all downside risk.

The result? Both parties walked away satisfied—because expectations were grounded in reality.

5. The Takeaway: Think Marketing, Not Multiples

When the financials don’t show real profit, forget the “multiple of EBITDA. ”You’re not buying the past—you’re buying potential.

And potential should be priced carefully.

You’re not investing in a proven business model. You’re paying for access to patients, reputation, and maybe a head start in a new market.

Treat it like what it is—a marketing investment with walls, not a business with profit.

Bottom Line

Attractive clinics don’t guarantee attractive margins.

Before you sign anything, ask:

• Is this a profitable business—or just a billboard with someone else’s name on it?

Make sure you’re buying cash flow, not just curb appeal.

Because in the end, a real business pays you back. A billboard just costs you rent.