What is a private equity buyer looking for?
I had a conversation with Drew Thomas, a Director at Bundy Group, a healthcare-focused investment bank that serves as a sell-side advisor to physician practices.
He shared the section of the diligence process that is most often overlooked by practice owners preparing for a transaction.
Here it is, word for word:
Please provide any available information that demonstrates the recurring nature, retention, and durability of the practice's patient base.
Examples include:
Revenue or patient visit breakdown between new and returning patients.
Total patient visits by year.
Patient retention, revisit, or loyalty metrics maintained by the practice.
New patient inquiries, appointment requests, scheduling/conversion metrics, and related marketing KPIs (if tracked).
Membership statistics (if applicable), including active members, average spend per member, and retention/churn.
Any other reports or analyses that demonstrate the stability and recurring nature of the practice's patient base.
The buyer is asking you to prove that people come back and keep spending.
Most practices have this data scattered across an EMR, a POS system, a marketing tool, and someone's spreadsheet. The EMR was built for charting, not for measuring recurring revenue.
The marketing tool tracks leads in, not what those patients are worth later. And most practices' "loyalty program" is a punch card, a note in a chart, or a discount the front desk hands out at their own discretion.
None of that produces an answer to the questions above.
Even a practice running an actual membership program often can't report active members, average spend per member, membership-driven cross-sales, or churn — because the tool they bought wasn't built to answer those questions. It was built to store a credit card.
“Buyers want evidence that patients continue to return, remain engaged, and generate recurring revenue over time.”
In our own data at Model Rewards:
Patients in a loyalty program more than double their spend after they join — a +127% median increase in post-signup spend.*
Rewards members are up to 140% more valuable than non-members.
Now imagine sitting across from a buyer and being able to show:
Exactly how many active loyalty program members you have
Average spend per member vs. non-member
Retention by cohort
Revenue concentration in your top loyalty tier
Referral velocity from existing patients
That's a different conversation than "we have a lot of repeat patients, we just don't have it in a report."
A loyalty program doesn't just prove retention — it drives acquisition too.
Drew says, “Strong financial performance will always matter, but sophisticated buyers are looking beyond the income statement. Patient metrics such as retention, recurring visits, membership participation, and new patient conversion provide valuable insight into the quality and durability of a practice's patient base. Those metrics help validate that future revenue is sustainable, making them an increasingly important driver of practice value."
Every practice already has patients referring their friends. They're just doing it for free, off the books, with no way to track it and no reason to do more of it.
Drew continues, “Unfortunately, many practices are unable to track or report these metrics in a meaningful way, missing an opportunity to tell a much stronger story about the quality and predictability of their business."
Reward that behavior, and you turn something invisible and unleveraged into a real acquisition channel.
Loyalty should be a channel you can see, measure, and grow on purpose instead of hoping it happens. That's actually how I ended up building Model Rewards in the first place. I didn't set out to build a retention tool; I started by asking why practices were letting their best form of growth run entirely on autopilot, uncounted and unrewarded.
You shouldn't build a loyalty program because you might sell your practice someday. Build it because it's the highest-margin growth channel you have — patients you've already paid to acquire are worth more than the ones you haven't met yet.
But the discipline that produces retained, high-value patients is the same discipline that produces a clean answer to this section of due diligence. The metrics a buyer wants are the metrics you should already be tracking every week.
You got the patient. You should get to keep them. And when someone wants to buy what you built, you should be able to prove it.
Thanks to Drew Thomas at Bundy Group for the conversation.
*measured across 2,579 patients, statistically significant at p < 0.001, and it holds after removing the top and bottom 1% of spenders as outliers.
