By Alan A. Ayers, MBA, MAcc — President, Urgent Care Consultants
For an urgent care operator, the decision to sell is rarely made overnight. It’s the culmination of years of hard work, risk-taking, and operational discipline. However, when a private equity (PE) firm evaluates an urgent care target, they do not view the business through the lens of patient anecdotes or community sentiment. They speak the language of finance.
If you are preparing for a future exit, understanding these financial metrics is not optional—it is essential. You cannot maximize your valuation if you do not understand how you will be measured.
The Primacy of Adjusted EBITDA
In the world of urgent care M&A, the primary valuation metric is Adjusted EBITDA. While top-line revenue growth is important, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) serves as the proxy for the operating cash flow generated by the business. It strips away the noise of your financing structure and tax environment to reveal the core profitability of the operation.
However, PE buyers do not simply accept the bottom line of your tax return. They conduct a "Quality of Earnings" (Q of E) analysis to determine the normalized earnings of the business. Private business owners often manage their P&L to minimize taxes—expensing personal vehicles, travel, or paying themselves above-market salaries. In a sale scenario, these expenses are "added back" to EBITDA to demonstrate the true earnings potential of the business to a new owner.
Common add-backs often include the difference between an owner-physician’s salary and the market rate for a replacement Medical Director, non-recurring expenses like startup costs or extraordinary repairs, and personal expenses such as country club memberships or family travel run through the business.
| A comprehensive urgent care business plan, detailing everything from market analysis and financial projections to staffing and legal preparation, is crucial not only for securing investor funding but also for providing a necessary strategic roadmap to ensure the business's long-term success and growth. |
Valuation Multiples in 2026
Once Adjusted EBITDA is established, a "multiple" is applied to determine the Enterprise Value—the purchase price—of the business. As we move through 2025, we are observing a distinct stratification in valuation multiples based heavily on size and strategic value.
Currently, single clinics or small groups with under $5 million in revenue typically see multiples in the 3x to 5x range. These assets are viewed as higher risk with high owner reliance, often serving as "bolt-on" candidates for larger platforms.
However, moving up the ladder changes the math significantly. Regional groups generating $5 million to $20 million in revenue are commanding 6x to 8x multiples. These groups offer established infrastructure and diversified risk, making them attractive "platform" potential for secondary markets. At the top of the spectrum, large platforms with over $50 million in revenue, professional C-suites, and sophisticated technology are seeing multiples of 10x to 15x or higher.
The Key Insight for Operators: The goal of Urgent Care Consultants is to help clients climb this ladder. By growing from a single clinic (valued at a 3x multiple) to a 10-location regional group (valued at an 8x multiple), an operator does not just increase their EBITDA; they more than double the value of every dollar of EBITDA they generate.
| Learn More About Startup Consulting Services: Schedule a Discovery Call Today |
The Financial Health Check: Key KPIs
Beyond the broader EBITDA figures, PE investors scrutinize specific Key Performance Indicators (KPIs) to assess the health of your revenue cycle.
- Average Reimbursement Per Encounter (ARPE): This is essentially the price of your product. Investors look for stability here, typically in the $120 to $160 range depending on acuity and region. A declining ARPE is a red flag suggesting payor contracting or coding issues.
- Net Collection Rate: This measures the percentage of collectible revenue that actually hits the bank. A rate below 95% indicates a "leaky" revenue cycle.
- Days Sales Outstanding (DSO): Speed matters. A DSO greater than 45 days suggests billing inefficiencies that a buyer will view as a liability.
- Labor as a % of Revenue: As the largest expense line item, staffing is critical. PE firms typically target a total labor cost (provider plus support staff) of 45% to 55% of net revenue.
| Neglecting the urgent care revenue cycle due to high claim denials and slow collections is financially detrimental. Our six-step playbook focuses on data analysis, root-cause identification, training, and modern payment methods to optimize billing processes and ensure sustained profitability. |
Preparing for the Exit
The path to a successful exit begins years before the sale. Private equity investors pay for predictability, clean data, and scalability. At Urgent Care Consultants, we specialize in helping operators build the "PE-Ready" footprint that attracts premium valuations.
- Financial Hygiene: You Cannot Sell What You Cannot Prove
The most common deal-killer is messy financials. PE firms require accrual-basis financials, not cash-basis. If you are currently running your books like a checkbook, they must be converted. Furthermore, you must track your personal "add-backs" rigorously. If you run your car or family travel through the business, document it precisely so it can be defensibly added back to EBITDA during the Q of E process. Ideally, have your financials reviewed by a CPA who understands healthcare to signal to buyers that the business is well-managed.
- Operational Tune-Up
Before going to market, optimize operations to maximize the "trailing twelve months" (TTM) EBITDA, which determines your purchase price. This means implementing tech tools like online booking to boost throughput, stabilizing staffing to reduce turnover, and conducting mock audits of coding and credentialing files to fix compliance issues before they become liabilities during due diligence.
- The "Growth Story"
Finally, remember that investors buy the future, not just the past. You need a credible roadmap for growth. Identify the next two or three locations you would open and have the demographic data ready. Develop a second layer of management so the business does not fall apart if you go on vacation. PE buys businesses, not practices.
How Urgent Care Consultants Helps
Urgent Care Consultants has spent decades in the trenches of this industry. We help clients Start with data-driven site selection and scalable prototypes; Grow by optimizing operations and implementing RCM best practices; and Exit by acting as a strategic advisor to package the business and navigate the complex due diligence process. In addition to working with start-ups and scaling operators, we have also worked with acquirers by evaluating and benchmarking target practices, enabling informed, data-driven decision-making.
If you are considering a transaction in the next 12 to 36 months, the time to prepare is now.
Schedule a discovery call today to learn how we can help you maximize the value of your urgent care business.