Here’s a question worth asking today. When are you six years away from retirement? The answer could be worth an extra $1 million to $2 million for your practice.
It sounds dramatic but it isn’t. Timing your exit around retirement is one of the most overlooked aspects in medical practice valuation, and it’s also one of the most impactful.
Quick Answer
Practices where the owner-physician commits to staying four to five years post-sale typically trade at 5 to 7 times EBITDA. Practices with a three-year commitment trade at 3 to 5 times EBITDA. Practices where the owner plans to leave within two years often trade at just 1 to 3 times EBITDA. The gap between these bands can mean hundreds of thousands, or even millions of dollars.
A True Story That Shows the Stakes
We spoke with a physician this week that owns a small OBGYN practice. He’s delivered as many as 35 babies a week for much of his career. He recently stepped that pace down to 15. He’s worked hard his whole career. He’s done nearly everything right.
Except for one thing. He never asked himself when he’d be five years away from retirement.
When we raised the question, his face changed. He realized, in that moment, what “failing to plan is planning to fail” actually means with a sale. He told us that given his age and pace, he wouldn’t work more than a year after closing. He was ready to trade dollars for time. Had he asked this question five years earlier, he wouldn’t have had to make that concession at all.
Why Buyers Care So Much About Your Timeline
Buyers aren’t being difficult when they ask how long you’ll stay. They are managing risk. In business terms, this is called key-man risk. It’s the concern that a patient base and its profitability could shift materially once the founding physician walks away.
Take it as a compliment, in a way. The buyer knows your relationships with patients matter. They just need assurance that value doesn’t disappear with you from day one.
The Numbers Behind the Multiple
In our experience working alongside single-doctor practices, a clear pattern shows up again and again.
| Owner’s Planned Stay | Typical EBITDA Multiple |
| 4 to 5 years | 5x to 7x |
| 3 years | 3x to 5x |
| 0 to 2 years | 1x to 3x |
Put real numbers behind this, and the impact becomes clear. Take a doctor earning $250,000 in EBITDA per year, defined as profit after the doctor-owner is paid fair market compensation.
Using the midpoint of each band, a 0- to 2-year stay values the practice around $500,000. A 3-year stay pushes that to roughly $1 million. A 4- to 5-year stay pushes it closer to $1.5 million.
At $500,000 of EBITDA, the same math produces roughly $1 million for a 0- to 2-year stay, $2 million for a 3-year stay, and $3 million for a 4- to 5-year commitment. That’s a swing of $2 million based on one decision made years in advance.
So how do we get from staying 4-5 years to a doc asking themselves the question 6 years in advance? Simply – it’s good to have 12-18 months to make changes to your practice and see those changes materialize to increase revenue and EBITDA in preparation for sale, and the sale process itself takes 6-9 months.
Where This Fits Into the Bigger Picture
At Ellis & Associates, we tend to work with practices that are larger, sometimes considerably so. In some cases, we have worked with single-doctor practices, and we’ve watched this pattern play out firsthand.
We come from a family of physicians ourselves. That’s part of why this story matters to us. If even one single-doctor owner reads this and plans their sale five years out instead of one, that’s an extra $1 million to $2 million tendered for a life’s work. That’s not a small amount. It’s the difference between a comfortable retirement and a stressful one.
How This Plays Out Across Specialties
Retirement timing affects every specialty, but details shift depending on the field. As an OBGYN M&A advisor, the community has become more aware of them, and more physicians in that specialty have started planning earlier. The same logic applies elsewhere too.
Dermatology practices see similar dynamics, especially when a single physician’s reputation drives a large share of patient volume. If you’re weighing your own timeline, our guide on <how to sell a dermatology practice> walks through what buyers look for in that specialty.
Orthodontic practices face a similar question, often tied to case volume and ongoing treatment plans that depend on continuity of care. Our resource on how to sell an orthodontic practice covers how timing affects value there as well.
What This Means for Your Planning
If you’re a practice owner reading this, the takeaway is simple. Ask yourself the five-year question now, not later. A few practical steps can help:
- Identify your realistic retirement window today, even if it feels far off
- Start conversations with an advisor before you’re forced into a timeline
- Understand how your specialty’s buyers value continuity and key-man risk
- Build systems and staff that reduce your practice’s dependence on you personally
None of these steps require you to sell tomorrow. They simply put you in control of your own destiny.
Why Work With an Experienced Advisory Firm
A seasoned healthcare M&A advisory firm sees these patterns across hundreds of deals, not just one. That perspective helps physicians avoid the exact mistake our OBGYN client nearly made.
Whether you run a large group or single physician practice, working with an OBGYN practice sales firm or a specialist familiar with your field means someone is watching the clock along with you, not just the numbers.
Frequently Asked Questions
Q1. How does staying longer after a sale affect practice value?
Longer transition commitments generally reduce key-man risk for buyers, which often supports a stronger EBITDA multiple and higher final price.
Q2. What is key-man risk in a medical practice sale?
Key-man risk refers to the chance that revenue or patient volume drops significantly once a founding physician leaves. Buyers price that risk into their offer.
Q3. When should I start planning my retirement around a practice sale?
Ideally, five years before you intend to completely step away. That window gives you room to negotiate a favorable transition commitment and a stronger price.
Q4. Does this apply to larger practices too?
The pattern is most pronounced in single-doctor practices, but the underlying logic, that continuity reduces risk, applies across practice sizes and specialties.
Final Thoughts
One overlooked question can shift a physician’s retirement outcome by seven figures. Planning your exit around a five-year window isn’t complicated, but it does require thinking ahead.
Ellis & Associates can help you understand where your timeline stands today. Request a valuation or schedule a consultation to start the conversation before the clock runs out on your best number.