If you own an urgent care practice, you operate in one of the most dynamic sectors of healthcare. You’ve built a valuable asset that serves a genuine community need. When you start thinking about the future, a natural question arises. What is your practice actually worth?
The answer is more complex than a simple multiple of your revenue or a “rule of thumb” you might hear from a colleague. Sophisticated buyers, like private equity groups and large strategic health systems, don’t use simple formulas. They use a detailed, evidence-based approach to determine what they are willing to pay. Understanding this approach is the first step in maximizing the value you’ve worked so hard to build.
The Foundation of Your Valuation: Adjusted EBITDA
When you look at your practice’s financials, your first instinct might be to focus on your net profit. This is a good starting point, but it doesn’t give a potential buyer the full picture of your practice’s financial health. For any serious transaction, the benchmark metric is Adjusted EBITDA.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It provides a cleaner view of your practice’s operational cash flow by removing the effects of accounting and financing decisions. You can get more detail in our guide, EBITDA Explained for Physicians.
The “Adjusted” part is where you can truly show the a buyer your practice’s earning power. Adjustments, or “normalizations,” are made to remove one-time expenses and non-operational costs that a new owner would not incur. Common adjustments for an urgent care owner include:
- Your own salary: If you pay yourself above or below the market rate for a medical director, your salary will be adjusted to a fair market value.
- Discretionary spending: Personal travel, vehicle expenses, or family member salaries that are not essential to the business are added back to your earnings.
- One-time costs: Did you have a major EMR upgrade last year or a one-off legal expense? These are not recurring operational costs and should be added back.
Let’s look at a simple example.
Imagine your urgent care’s income statement shows a net profit of $400,000.
* You paid yourself a salary of $350,000, but a fair market salary for a non-owner provider is $250,000. You can add back the $100,000 difference.
* You had a one-time $50,000 expense for new signage and marketing for a rebranding campaign. You can add this back.
* You also have $50,000 in annual depreciation and amortization on your books.
Your Adjusted EBITDA would be $400,000 (Net Profit) + $100,000 (Owner Salary Add-Back) + $50,000 (One-Time Marketing) + $50,000 (Depreciation/Amortization) = a total of $600,000.
Calculating this figure correctly is a foundational part of the valuation process. We provide a more detailed look at this in our Guide to EBITDA Normalization in Healthcare.
What’s Your Multiple? Key Drivers for Urgent Care Value
Once you have a defensible Adjusted EBITDA, the next question is what multiple to apply to it. You may hear about industry multiples being in the 2.0x to 2.5x range for smaller practices. Think of this as a baseline, not a fixed rule. The multiple a buyer is willing to pay is a direct reflection of their perception of risk and future growth potential.
A higher multiple is earned by practices that demonstrate lower risk and higher growth opportunities. Here are the key factors that sophisticated buyers analyze to determine your multiple.
| Factor | Impact on Multiple | What Sophisticated Buyers Look For |
|---|---|---|
| Scale & Profitability | Higher EBITDA reduces perceived risk | A history of stable, predictable cash flow. |
| Payer Mix | Stable in-network vs. higher-margin cash-pay | Diversified payer relationships with favorable reimbursement rates. See our guide on Payor Mix Impact on Valuation. |
| Provider Model | Associate-driven models are more valuable | Low reliance on a single owner-operator; systems that ensure clinical consistency. |
| Location & Competition | High-traffic, low-competition areas command premiums | Strong demographic tailwinds and a defensible market position. |
| Growth Profile | Demonstrable organic or expansion potential | Opportunities for de novo expansion, service line additions, or tuck-in acquisitions. |
A practice with $1 million in Adjusted EBITDA, an owner who can be easily replaced, and two new locations planned will command a significantly higher multiple than a practice with $250,000 in Adjusted EBITDA that is entirely dependent on the owner.
From Enterprise Value to Your Bottom Line
The formula is straightforward. Your Adjusted EBITDA multiplied by the valuation multiple equals your Enterprise Value. But this isn’t the amount that goes into your bank account. To find your net proceeds, you must subtract any debt (like business loans or lines of credit) and transaction fees from the Enterprise Value.
The final deal structure can also affect your take-home amount. Buyers may propose things like earnouts, where a portion of the sale price is paid out over time if the practice hits certain performance targets. Or you may be offered an equity rollover, where you retain a minority stake in the new, larger company. These are not just complications; they can be powerful tools to increase your total payout, but they require careful negotiation. You can learn more about these options in our overview of private equity deal structures in healthcare.
Avoiding Common Valuation Pitfalls
We often see practice owners make honest mistakes that leave considerable value on the table. Being aware of these common pitfalls is the best way to protect your interests.
- Relying on a generic “rule of thumb.” Your practice is unique. Applying a generic multiple without a deep analysis of your specific risk and growth factors will likely undervalue your business.
- Failing to properly calculate Adjusted EBITDA. Not identifying all legitimate add-backs is one of the most common ways sellers undervalue their own practice. An experienced advisor ensures all adjustments are identified and prepares a defense for each one that will stand up to intense buyer scrutiny.
- Being unprepared for due diligence. A buyer will scrutinize every detail of your financials and operations. Being organized and ready for this intense process builds buyer confidence and prevents issues that could lower the price or kill the deal. You can prepare by reading our Financial Due Diligence Guide for Healthcare Sellers.
- Accepting a single offer. The first offer is rarely the best offer. Without a competitive process that brings multiple qualified buyers to the table, you have no leverage. A professional M&A process, managed by the right advisor, creates the negotiating leverage needed to secure the best price and terms.
A credible valuation is more than a number—it’s the strategic narrative of your practice’s success and future potential. With urgent care M&A demand at high levels, understanding your value today positions you to capitalize on market opportunities.
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Frequently Asked Questions
What is Adjusted EBITDA and why is it important in valuing an urgent care practice?
Adjusted EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization with adjustments to remove one-time expenses and non-operational costs. It provides a clearer view of a practice’s operational cash flow, which is crucial because it shows the true earning power of the practice beyond just net profit. Buyers rely on this figure to assess financial health and value accurately.
What are some common adjustments made to EBITDA when valuing an urgent care practice?
Common adjustments include adding back the owner’s salary if it’s above or below market rate, removing discretionary spending like personal travel or family member salaries not essential to the business, and adding back one-time costs such as major EMR upgrades or legal expenses.
How do buyers determine the multiple to apply to Adjusted EBITDA when valuing an urgent care practice?
Buyers assess factors such as the scale and profitability (higher EBITDA reduces risk), payer mix (favoring diversified and favorable reimbursement rates), provider model (associate-driven models are more valuable), location and competition, and growth potential. These factors influence the perceived risk and future growth potential, thereby impacting the multiple.
What is the difference between Enterprise Value and the actual amount a practice owner receives from a sale?
Enterprise Value is calculated as Adjusted EBITDA multiplied by the valuation multiple. However, the actual amount the owner receives is less, as debts like business loans and transaction fees are subtracted. Deal structures such as earnouts or equity rollovers can also impact the final payout.
What are common pitfalls urgent care practice owners should avoid during valuation and sale?
Owners should avoid relying on generic multiples without specific analysis, failing to properly calculate Adjusted EBITDA with all legitimate add-backs, being unprepared for buyer due diligence, and accepting the first offer without creating competitive leverage. Proper preparation and professional guidance are essential to maximize value.