12-18 months is not a guess
I have worked on enough practice sales to tell you this with certainty: the owners who start preparing 12-18 months before they want to close get better prices. The owners who decide to sell and want it done in 90 days leave money on the table. Sometimes a lot of money.
If you want to close a sale in 2027, the financial cleanup starts now. Not next quarter. Not when you find a broker. Now.
Here is why: buyers pay for certainty. Clean financials, stable revenue trends, organized contracts, documented processes. Every month of clean data you have makes their due diligence easier and your multiple higher. Every month of messy or missing data makes them nervous and your multiple lower.
A buyer who sees 18 months of clean, well-organized financials thinks "this is a well-run practice." A buyer who sees six months of clean data preceded by years of chaos thinks "what are they hiding?"
The timeline
Here is the 18-month timeline we use with clients preparing for a sale.
Months 1-3: Financial cleanup
This is the unglamorous work that has the biggest impact on your sale price.
Normalize owner compensation. Pull out every dollar you take from the business: salary, distributions, retirement contributions, health insurance premiums, car payments, phone bills, meals, travel, and any other personal expenses running through the practice. Buyers need to know what a replacement operator would cost versus what you actually take out. The difference is an EBITDA add-back.
One urgent care owner we worked with (anonymized Sorso client, Southwest, two locations) had $180K in personal expenses flowing through the business: two car leases, a home office deduction for a home he rarely worked from, family cell phone plans, country club membership. Those are all legitimate business expenses for tax purposes, but they need to be identified and added back for valuation purposes. His EBITDA went from $340K to $520K after normalization. At a 6x multiple, that is over $1M in additional enterprise value.
Clean up the chart of accounts. If you have expenses in the wrong categories, revenue lumped together that should be separated, or accounts that have not been used in years, clean it up now. Buyers want to see expenses categorized in a way that makes sense: clinical staff, admin staff, rent and occupancy, medical supplies, billing costs, marketing, technology, insurance. If your QuickBooks looks like a junk drawer, it signals sloppy management.
Resolve outstanding AR. Go through your accounts receivable aging report. Anything over 120 days is probably uncollectible. Write it off. Get your AR aging clean. Buyers will discount old AR or exclude it from the deal. Worse, a large amount of aged AR makes them question your billing operation.
Separate personal and business. If you are commingling personal and business expenses in the same accounts, stop today. Open a separate credit card for the business. Stop running personal purchases through the practice. This is basic, but I see it in more practices than you would expect.
Months 4-6: Build the story the numbers tell
Buyers do not just buy numbers. They buy a narrative supported by numbers. This is when you start building that narrative.
Create location-level P&Ls. If you have multiple locations, break out financial performance by location. Buyers want to know which locations are strong and which ones need work. A buyer looking at a three-location practice with one underperformer will either discount the deal or structure an earnout around the weak location. Better to fix it now and sell a stronger business.
Track revenue trends monthly. Start producing monthly financial statements if you are not already. Buyers want to see at least 12 months of monthly data, ideally 24-36 months. Revenue by month, expenses by month, EBITDA by month. The trend matters as much as the total.
Document your payer mix. Pull a report showing revenue by payer category (commercial, Medicare, Medicaid, self-pay, workers comp) for the past three years. Buyers want to see stability and they want to see a healthy commercial mix. If your Medicaid percentage has been creeping up, that is a red flag.
Calculate provider-level production. Show revenue and visits by provider going back at least two years. Buyers want to see that revenue is diversified across providers, not concentrated in one person (especially not in you). If 60% of revenue comes from the selling owner, the buyer knows that revenue is at risk post-sale.
Months 7-9: Optimize what you can
This is where you make changes that improve your financials before you go to market. You want the trailing 12 months at the time of sale to look as strong as possible.
Renegotiate payer contracts. If you have not renegotiated in two years or more, do it now. Even a 3-5% increase in commercial reimbursement rates flows straight to EBITDA. On a $4M practice, a 4% reimbursement increase is $160K per year in additional revenue. At a 6x multiple, that is nearly $1M in additional enterprise value.
Cut unnecessary expenses. Review every recurring expense. Cancel subscriptions you do not use. Renegotiate vendor contracts. Consolidate suppliers. Do not slash and burn (buyers can see that too), but clean up genuine waste.
Fix your billing operation. Get your denial rate down, your clean claim rate up, and your days in AR minimized. Buyers will look at your revenue cycle metrics. A practice with a 95% clean claim rate and 28 days in AR is worth more than one with an 82% clean claim rate and 45 days in AR.
Reduce key-person risk. If the practice depends heavily on you, start transitioning patient relationships to other providers. Bring in a new provider now so they have 12+ months of tenure and production data by the time you sell. Buyers pay more for practices that can run without the owner.
Months 10-12: Engage professionals
Hire a broker or M&A advisor. For practices under $5M in revenue, a practice-specific broker is usually sufficient. For practices above $5M, consider an M&A advisory firm with healthcare experience. Expect to pay 5-10% of the sale price in broker fees, but a good broker more than earns their fee by creating competitive tension among buyers.
Get a formal valuation. Before going to market, get an independent valuation from someone who is not the broker (the broker has an incentive to value high to win your listing). A formal valuation gives you a realistic range and prevents you from anchoring to a number that is too high or too low.
Prepare the Confidential Information Memorandum (CIM). This is the document that goes to prospective buyers. It includes practice history, services offered, provider bios, financial summaries, growth opportunities, and market analysis. Your broker will prepare this, but you need to provide the raw data and review it for accuracy.
Months 13-18: Go to market and close
Market the practice. The broker sends the CIM to qualified buyers. You may receive multiple letters of intent (LOIs). Review each one carefully, not just the headline price but the deal structure: cash at close, earnout terms, management agreement terms, non-compete scope.
Due diligence. The buyer's team will dig through everything: financial statements, tax returns, payer contracts, provider contracts, lease agreements, employee records, billing data, patient volume trends, malpractice history, compliance records. The cleaner your records, the faster this goes and the fewer reasons they find to reduce the price.
Negotiate and close. Final negotiations happen on deal structure, escrow amounts, earnout milestones, and transition terms. A good healthcare attorney is essential here. Do not use your regular business lawyer. Practice sales have specific legal and regulatory considerations (Stark Law, anti-kickback, state licensure requirements) that require specialized knowledge.
What buyers actually look at
After working with multiple practice owners through this process, I can tell you that buyers consistently care about the same things:
EBITDA trends. Three years of stable or growing EBITDA. A single great year surrounded by mediocre ones is not as valuable as three years of steady improvement.
Payer mix stability. Commercial insurance percentage stable or growing. Medicare and Medicaid stable or declining. Self-pay not increasing.
Provider retention. Low turnover among providers. Long-tenured team. No signs of a mass exodus after the sale.
Patient volume trends. New patient volume growing or stable. Total visits growing or stable. No evidence of market saturation or competitive pressure.
Revenue cycle health. Clean claims rate above 90%. Days in AR below 35. Denial rate below 8%. Net collection rate above 95%.
Operational documentation. Written procedures for front desk, clinical workflow, billing, HR. Buyers want to see that the practice can run as a system, not just as a reflection of the owner's personal habits.
Common mistakes
Waiting too long to start. The most expensive mistake. Owners call us 6 months before they want to sell, and we have to tell them that their financials need at least another 12 months of cleanup. They either delay the sale or sell at a discount.
Not knowing your EBITDA. If you cannot tell a buyer your EBITDA within 60 seconds, you are not ready. This is the single most important number in a practice sale, and most owners do not know it.
Running personal expenses through the business. Every personal expense that runs through the practice is an add-back during due diligence. But if there are too many, or if they are not well documented, buyers start questioning the integrity of the financials. Clean it up now.
Ignoring the management agreement. Owners focus on the headline purchase price and gloss over the management agreement terms. But if you are committing to stay for three years at a below-market salary, that cost reduces the real value of the deal. Read the MSA as carefully as you read the purchase agreement.
Trying to sell at peak without data. "This was our best year ever" means nothing without data to prove it and context to explain why it is sustainable. Buyers want to see a trend, not a spike.
How a fractional CFO helps with exit prep
A fractional CFO does the financial cleanup, builds the narratives, and sits across the table from buyers during due diligence.
We normalize owner compensation. We build location-level P&Ls. We calculate adjusted EBITDA. We create monthly financial reporting that tells a clear growth story. We identify and fix revenue cycle leaks that are suppressing your EBITDA. We prepare the financial data package that your broker needs to market the practice effectively.
Most importantly, we do this 12-18 months before the sale, not two weeks before due diligence when it is too late to fix anything.
If you are thinking about selling in 2027 or 2028, schedule a free assessment. We will evaluate where your financials stand today and build a timeline to get them sale-ready.
