Every physician reaching the practice-ownership decision point faces the same fork in the road: buy an existing practice with a built-in patient panel and revenue stream, or start from scratch with a blank slate and lower upfront cost. Neither path is universally better — the right answer depends on your financial position, risk tolerance, specialty, and long-term goals.
This guide provides a data-driven comparison of both approaches, drawing on practice valuation data from the Goodwill Registry, MGMA transaction reports, lender requirements from SBA lending guidelines, and interviews with practice brokers active in 2025–2026.
Upfront Costs Comparison
The most obvious difference between buying and starting is the initial capital required. The table below summarizes typical cost ranges for each approach based on primary care and selected specialty practices in mid-sized metropolitan markets:
| Cost Category | Buying an Existing Practice | Starting from Scratch |
|---|---|---|
| Practice purchase price / goodwill | $150,000–$400,000 | N/A |
| Equipment & furnishings | Included or $20K–$50K refresh | $50,000–$100,000 |
| EHR & practice management software | $10,000–$30,000 (migration) | $15,000–$40,000 |
| Leasehold improvements | $5,000–$30,000 | $30,000–$80,000 |
| Legal & accounting (entity formation, contracts) | $8,000–$15,000 | $5,000–$10,000 |
| Working capital (3–6 months runway) | $30,000–$60,000 | $40,000–$100,000 |
| Marketing & branding (launch) | $2,000–$5,000 | $10,000–$25,000 |
| Insurance & licenses | $5,000–$10,000 | $8,000–$15,000 |
| Total estimated upfront | $200,000–$500,000 | $50,000–$150,000 |
Sources: The Goodwill Registry (2024–2025), SBA 7(a) loan program data, MGMA transaction surveys, interviews with practice brokers (2025). Ranges are for primary care/family medicine practices in markets with 200K–1M population. Specialty practices (orthopedics, cardiology) typically fall 30–50% higher on both sides.
The headline number is clear: buying requires 2–4× the upfront capital of starting fresh. However, that premium buys something tangible — immediate revenue, an existing patient panel, trained staff, and established payer contracts.
Timeline Comparison
Time to break-even is often more important than upfront cost. A practice that generates revenue from day one can service debt immediately; a startup may burn cash for a year before seeing meaningful collections.
| Milestone | Buying an Existing Practice | Starting from Scratch |
|---|---|---|
| Search & due diligence | 2–4 months | 1–2 months |
| Financing & legal closing | 1–2 months | 2–4 weeks |
| Facility setup / leasehold improvements | 2–6 weeks | 3–6 months |
| Payer credentialing & contracts | 60–90 days (supplement existing) | 90–150 days |
| Staff recruitment & training | Minimal (existing team) | 2–4 months |
| Total pre-revenue period | 3–6 months | 6–18 months |
| Time to break-even cash flow | 0–3 months | 6–18 months |
The timeline advantage of buying is perhaps its strongest argument. An acquisition can be seeing patients and generating revenue within 60–90 days of signing. A startup typically takes 9–15 months from concept to positive cash flow, and some primary care startups report taking 18–24 months to reach full panel capacity.
Revenue Ramp-Up Comparison
The revenue trajectory is where the two paths diverge most dramatically. Buying an existing practice means you inherit the seller's patient panel — typically 2,000–4,000 active patients for a mature primary care practice. A startup must build that panel from zero.
| Time from Opening | Buy (Existing Patient Panel) | Start (New Practice) |
|---|---|---|
| Month 1 | $40K–$80K collections | $0–$5K |
| Quarter 2 | 85–95% of seller's prior revenue | 10–25% of target capacity |
| Year 1 | $500K–$1M (primary care) | $150K–$400K |
| Year 2 | $550K–$1.1M | $350K–$700K |
| Year 3 | Stable or modest growth | $500K–$1M (near capacity) |
| Cumulative revenue (3 years) | $1.6M–$3.2M | $1M–$2.1M |
Revenue estimates assume a full-time primary care physician in a mid-sized market with blended commercial/Medicare payer mix. Actual results vary significantly by specialty, location, and payer mix. Source: MGMA Provider Compensation and Production data, physician practice financial models (2024–2026).
A buyer starts 12–24 months ahead of a startup in cumulative revenue. For a physician who values near-term income stability, this is the single most compelling reason to buy.
Lender Requirements
Whether you buy or start, you will likely need external financing. The requirements differ by path.
SBA 7(a) Loan Requirements (Most Common for Both Paths)
| Requirement | Buying an Existing Practice | Starting from Scratch |
|---|---|---|
| Minimum down payment | 10–20% | 15–25% |
| Personal credit score | 680+ (700+ preferred) | 700+ |
| Collateral required | Practice assets + personal guarantee | Personal guarantee (fewer assets) |
| Cash flow requirement | Historical P&L demonstrates debt service | Projected financials; harder to qualify |
| Industry experience | 2+ years | 3+ years preferred |
| Typical interest rate (2026) | 11–14% (SBA 7(a) prime + spread) | 11–14% |
| Loan term | 10 years (equipment) + 25 years (real estate) | 7–10 years |
Source: SBA 7(a) loan program guidelines, interviews with healthcare lending specialists at Live Oak Bank and BOM (2025–2026). Rates reflect prime rate of ~8.5% as of early 2026 with typical spreads.
The key difference: a practice acquisition has historical financial data that a lender can underwrite against. A startup is purely speculative from the lender's perspective, which means higher equity requirements and more stringent personal guarantee requirements. Some lenders will not finance de novo practices at all.
Due Diligence Checklist for Buyers
If you choose to buy, a thorough due diligence process is non-negotiable. Use this checklist:
Financial Due Diligence
- 3–5 years of tax returns and P&L statements — Verify revenue trends, expense ratios, and EBITDA. Look for revenue declines exceeding 10% year-over-year.
- Aged accounts receivable report — AR over 90 days should be less than 15% of total. Anything above 25% signals collection problems.
- Payer mix report — Commercial vs. government ratio. Practices with >60% Medicare/Medicaid are riskier acquisitions.
- Fee schedule — Compare to Medicare allowable rates. Practices with heavy discounting to commercial payers are leaving money on the table.
- Provider compensation history — What did the selling physician take home? Is that sustainable with a debt service payment?
- Lease agreement — Remaining term, renewal options, escalation clauses. A lease with <3 years remaining is a negotiation risk.
- Equipment inventory and age — List all major equipment with age, condition, and remaining useful life. Get quotes for any needed replacements.
Operational Due Diligence
- Staff roster with tenure and salaries — Key person risk: is the practice dependent on a single high-producing employee?
- Managed care contracts — Are contracts assignable to a new owner? Many payers require re-credentialing upon change of ownership.
- Pending or past litigation — Malpractice claims history, employment disputes, payer audits.
- Licenses and certifications — CLIA, DEA, state medical board, facility accreditation.
- IT systems audit — EHR platform, data backup procedures, cybersecurity posture, HIPAA compliance documentation.
- Patient panel analysis — Number of active patients (seen in last 18 months), visit frequency, new patient volume.
Practice Valuation Basics
Understanding how practices are valued helps you negotiate and avoid overpaying. The three primary methods used in medical practice transactions:
1. Asset-Based Valuation
Tangible assets (equipment, furniture, supplies) plus intangible assets (goodwill, charts, payer contracts). Most common for smaller primary care practices. Typical range: 40–70% of one year's gross revenue. Goodwill typically represents 60–75% of the total purchase price, per the Goodwill Registry.
2. Market Comparable Valuation
Based on recent sales of similar practices in the same geographic area. Benchmark data is available through the Goodwill Registry and practice broker networks. Multiples typically range from 0.4× to 0.8× gross revenue for primary care, 0.5× to 1.0× for specialty practices.
3. EBITDA Multiple Valuation
Used for larger practices or those with significant earnings. Typical EBITDA multiples for medical practices range from 2× to 4×, compared to 6–12× for hospital systems or DSO aggregators. The lower multiple reflects the key-person dependency of most practices.
| Specialty | Valuation as % of Gross Revenue | Typical EBITDA Multiple |
|---|---|---|
| Primary Care (FM, IM, Peds) | 40–65% | 2.0–3.0× |
| Dermatology | 50–80% | 2.5–4.0× |
| Orthopedics | 55–90% | 2.5–4.0× |
| Cardiology | 50–75% | 2.0–3.5× |
| Psychiatry | 45–70% | 2.5–4.0× |
Sources: The Goodwill Registry (2024–2025), practice broker survey data, MGMA transaction analysis. These are broad reference ranges; every practice is unique.
Risk Comparison
Both paths carry distinct risks. Understanding them honestly is critical to making the right choice.
| Risk Factor | Buying | Starting |
|---|---|---|
| Patient attrition after transition | Moderate (10–30% may leave) | Not applicable (no baseline) |
| Hidden liabilities (billing errors, audits) | Higher risk; rely on due diligence | Lower (clean slate) |
| Staff retention | Moderate; key staff may leave | You hire your own team |
| Revenue shortfall | Lower (inherited panel) | Higher (no patient base) |
| Debt service burden | Higher (larger loan) | Lower (less debt) |
| Operational culture | Must manage inherited culture | Build your own from day one |
| Technology stack | May be stuck with legacy systems | Choose modern systems |
| Payer contract renegotiation | Limited initially (existing contracts) | Must negotiate from scratch |
Decision Framework: Weighted Scoring
Use this framework to score each path against your personal priorities. Assign a weight (1–5) to each factor, then score each option (1–5). Multiply weight × score and sum the totals.
| Factor | Weight (1–5) | Buy Score (1–5) | Start Score (1–5) |
|---|---|---|---|
| Speed to revenue | __ | __ | __ |
| Lower upfront cost | __ | __ | __ |
| Control over culture & processes | __ | __ | __ |
| Risk tolerance | __ | __ | __ |
| Debt aversion | __ | __ | __ |
| Existing patient panel desire | __ | __ | __ |
| Technology & systems freedom | __ | __ | __ |
| Timeline flexibility | __ | __ | __ |
| Totals | — | — | — |
When Each Path Makes Sense
Buying is likely the better choice if:
- You have $200K–$500K in available capital or strong SBA loan qualifications
- You want immediate positive cash flow and minimal ramp-up period
- You prefer lower revenue risk and are comfortable managing an existing team
- You find a practice with clean financials, stable payer mix, and a willing seller who will stay for a 3–6 month transition
- You are buying in a specialty where patient loyalty to the practice (rather than the individual physician) is established
Starting is likely the better choice if:
- You have limited capital (<$150K) or prefer to minimize debt exposure
- You want complete control over your team, technology, and practice culture
- You have the financial runway to sustain 6–18 months of negative cash flow
- You are entering a market with demonstrated unmet demand (growing population, physician shortage)
- You have a strong existing referral network or patient following from a prior position
- You want to avoid the risk of inheriting someone else's problems (billing issues, staff conflicts, outdated systems)
Sources
- The Goodwill Registry, "Medical Practice Goodwill Valuation Data," 2024–2025 edition. goodwillregistry.com
- U.S. Small Business Administration, "7(a) Loan Program Overview." sba.gov
- MGMA DataDive Financials and Operations — Transaction and valuation surveys (2024–2026). mgma.com/datadive
- Live Oak Bank, "Healthcare Practice Acquisition Financing." liveoakbank.com
- Bank of America Healthcare Banking, "Medical Practice Lending Guide."
- Healthcare Practice Brokers Association member survey data, 2025.
- Kaufman Hall, "Physician Practice Acquisition Trends," 2025.
- National Association of Certified Valuators and Analysts (NACVA), "Healthcare Valuation Guide."