Why Selling to Private Equity May Not Be the Best Choice—Instead, Build Your Own C-Suite for Long-Term Success

In today’s fast-paced healthcare world, doctors and dentists often feel overwhelmed by the day-to-day demands of running a practice. Between managing patient care, finances, and administration, it can seem impossible to balance it all. Enter private equity (PE)—offering an attractive solution: a sizable payout and the promise of relieving administrative burdens.

On the surface, selling to private equity might seem like the perfect fix—immediate cash, fewer headaches, and more time for what matters most: patient care. But before leaping, it’s crucial to look deeper. While PE offers advantages in certain situations, long-term trade-offs exist. In many cases, building your leadership team, or C-suite, can allow you to keep control and maximize your practice’s value for years.

Let’s explore why selling to private equity might not always be the best path—and how you can secure your future by taking charge of your practice’s business side.

The Offer: Quick Payout or Long-Term Profits? 🤑

Private equity firms often present an appealing offer: a generous upfront payment based on a multiple of your practice’s annual profits. For example, if your practice generates $500,000 in annual profit, a PE firm might offer 5 to 8 times that amount—meaning a payout between $2.5 million and $4 million.

While the instant cash is enticing, it’s essential to remember that private equity is buying the future profits of your practice. PE firms see the potential in your business and expect it to grow or they would not be offering you such a large upfront payment. They plan to benefit from the long-term revenue stream while you receive a one-time payout. In other words, the money you get upfront might seem like a windfall, but your practice’s long-term value could far exceed that payout if you keep control.

What You Might Be Leaving Behind: Long-Term Wealth 💸

Let’s break it down. If you continue running your practice for 20 years, generating $500,000 annually, you could earn $10 million in profits over that time. With modest growth—say, just a 3% annual increase—those profits could reach $13 million.

When you sell to private equity, they’re buying that future stream of income. They’re taking on the long-term value of your business while you’re left with a fraction of what your practice could ultimately be worth. It’s not that selling is inherently bad; it’s about understanding what you might be trading for that upfront cash.

What Happens Next: How Private Equity Boosts Profits 😬

Private equity’s main goal is to maximize the value of your practice. To do this, they typically make adjustments aimed at increasing profitability. These changes are often effective, but they can shift the dynamics of your practice in ways you may not have anticipated:

• Cost Efficiency: PE firms often focus on cutting operational costs, which could mean streamlining staff, adjusting benefits, or finding other ways to save. While this can improve the bottom line, it’s important to consider how these changes might impact your practice’s culture and patient experience.
• Increasing Patient Volume: You may find yourself under pressure to see more patients per day, which can boost revenue but could also reduce the amount of time you spend with each patient. The goal is efficiency, but it is important to balance this with maintaining the quality of care your patients expect.
• Expanding Revenue Streams: PE firms may introduce new services or products that align with market trends. While these additions can drive growth, the financial benefits usually flow to the firm rather than you, unless you negotiate ongoing profit-sharing arrangements.

For PE firms, these strategies often lead to significant increases in revenue, but it’s important to evaluate whether these changes align with your long-term vision for your practice.

The Investment You’ve Already Made 🎓

Selling your practice to private equity doesn’t just impact future profits—it also affects the return on the investment you’ve already made in your career. Becoming a doctor or dentist requires years of education and significant financial resources. By the time you’re running your practice, you’ve likely invested a decade of your life and hundreds of thousands of dollars into your training.

Let’s not forget the costs of dental or medical school:

• Four years of undergraduate education and four years of medical or dental school can total around $500,000.
• Additional materials, exams, and specialized training costs can easily add $30,000 to $40,000 more.

When you sell to private equity, you’re capping the financial return on that massive investment of time and money. If you retain ownership, you have the potential to continue growing the value of your practice and maximize the return on your career.

The Intangibles: Autonomy, Legacy, and Vision 🚨

The decision to sell is about more than just money. The non-financial aspects of ownership can be just as significant—if not more so:

• Maintaining Autonomy: When you sell, you may no longer have full control over key decisions like staffing, patient care standards, or business strategy. For some, this loss of autonomy is a small price to pay for the benefits PE offers. For others, maintaining control is crucial to staying true to their values and vision.
• Preserving Reputation: PE firms’ changes to boost profits can affect the patient experience. If the balance shifts too much toward efficiency and away from care, it can impact your practice’s reputation, potentially undoing years of hard-earned trust.
• Protecting Your Legacy: Your practice isn’t just a business—it’s the culmination of your life’s work. Selling to private equity might shift the focus away from the personal legacy you’ve built. If preserving that legacy is important to you, it’s worth considering how a sale could affect it.

The Better Option: Build Your Own C-Suite 💡

If selling to private equity doesn’t align with your goals, there’s another path: building your own leadership team to manage the business side of your practice. Here’s how you can take control:

• Invest in Business Training: You don’t have to do it all yourself. Consider leadership courses, mentorship, or an executive MBA to improve your business skills, helping you steer your practice’s financial and operational aspects with confidence.
• Hire a Leadership Team: Hire experienced professionals like a CFO or COO to handle the day-to-day operations and financial management. Often, a fractional CFO or COO can provide the knowledge needed to improve your business. This allows you to focus on what you do best—patient care—while ensuring your business thrives.
• Look Into Alternative Financing: If you need capital to grow, explore joint ventures, partnerships, or specialized healthcare lenders. These options provide the resources you need without giving up control of your practice.
• Leverage Technology: From telehealth platforms to AI-driven management systems, the right tech can help you scale efficiently and improve patient care, all while reducing costs.

When Selling to Private Equity Can Make Sense 🏦

Of course, selling to private equity isn’t always a bad option. In some situations, it can make perfect sense. If you’re nearing retirement, want to step away from day-to-day management, or need more resources to expand rapidly, a PE firm can offer a clear path to liquidity and growth.

The key is finding the right partner who shares your values and is committed to maintaining the quality of care your patients expect. With the right PE partner, you can scale your practice while preserving the core values that make it successful.

Conclusion: Keep Control, Keep Growing

Selling to private equity can be an attractive option for some, but it’s essential to understand the long-term trade-offs. By handing over control, you may be giving up more than just future profits—you’re also giving up the ability to shape your practice’s future and preserve your legacy.

Building your own C-suite gives you the best of both worlds: control over your business, the ability to scale, and the chance to reap long-term rewards. Instead of selling out, you’re doubling down on your future—on your terms.