Podcast: How (and Why) I Bought a Medical Billing Business
Find Out How Curt Neider Acquired a Medical Billing Company - And Why He Did
Curt Neider started his career in construction and real estate development. That got him involved with a private equity firm, where he learned even more about the ins and outs of starting and running a business. One of his biggest wins was being part of the team that brought celebrated burger chain Five Guys to Utah, its first location west of the Mississippi.
Starting a Business in Mini-Retirement
After a few years in private equity, Curt and his family moved from Utah to Hawaii and embarked on a Tim Ferriss-esque “mini retirement”. Geographically, at least. Curt still needed to work, so he started a fragrance and air freshener business, which he later sold.
“So that was my first experience,” Curt said, about getting his feet wet with business ownership. “And really, I had…been involved in the sale of businesses. But that was the first one where I personally owned the business and went through that process, start to finish.”
Back to Business, Minus the Fatigue
When his family moved back to Utah, Curt decided to start a new venture. This time, though, he didn’t want to start up a new business from scratch. Instead, he chose to acquire one that was already established, with a solid foundation for growth and processes to which he could simply add value.
“Starting up from scratch is a lot of work. It’s tiring,” Curt said. By purchasing an existing business, he got to, in his own words, “skip that first five to ten years of bootstrapping and scraping by, and come in and pick up a system that's already rolling.”
He hit the ground running by searching the classifieds on his local news station’s website as well as other well-known classified sites.
But he ultimately found the business he would come to own — Illuminate Billing Advocates — on BizBuySell.
Medical Billing: An Attractive New Niche
When asked how he chose medical billing as the business type he went after, Curt recognized the question. He joked that no one says they want to be in medical billing when they grow up, but the fact that it is so overlooked actually drew him to it. He wanted something impactful instead of something shiny or “sexy”.
Not only did Curt not mind being behind the scenes, he also felt that was the best fit for him.
“I’d started to find joy in helping other people with their business, and doing the kind of work that a lot of people don't want to do,” Curt said.
The barriers to entry were also low in terms of licensing. While doctors and other health providers must be licensed, those in the medical billing industry aren’t required. There are industry-standard accreditations—like Certified Professional Coder and Certified Professional Biller—but not all billing companies or their employees get them.
“There's definitely a lot of education around what we do, but no legal requirements to have any of that,” Curt told us. “Which creates a huge spectrum of quality in the industry.”
That spectrum of quality spelled opportunity, because Illuminate and the existing team were already at the higher end of it. Curt even chose to get his Certified Medical Biller accreditation during due diligence so he could better understand the daily work and nuts-and-bolts of his new industry.
Acquisition Requirements (and Some Surprise Bonuses)
When it came to the criteria that led him to find and choose Illuminate, Curt had several requirements:
- A business doing about $1 million in annual revenue.
- Ability to cover roughly $15,000/month in debt service AND still allow for his family to maintain their lifestyle, which meant at least a six-figure annual income for him.
- A multiple of two to three times earnings.
Illuminate itself had an added bonus, which Curt called an “altruistic kicker,” in that it serves substance abuse and mental health care providers.
“So our clients in many cases are bleeding hearts,” Curt told us. “They're out there trying to help people get better. They're fixing lives. They are saving people on a day-to-day basis.”
By helping these practices get their billing in order and their insurance payments through the door, Illuminate’s work enables practitioners to help more people. The other thing Curt liked about Illuminate was that it deals only with insurance companies, never the patients themselves.
“We don't chase any individuals for money and that kind of thing,” Curt said
Bumps in the Road Turn into Unexpected Boons
Curt was fortunate that, unlike many medical billing businesses listed for sale, Illuminate Billing Advocates was actually still available. It was also unrepresented, which gave both the seller and Curt more freedom to make the deal work, with margins that were advantageous to both of them.
“You see medical billing companies online for sale, really, all the time, and it's rare that you find one that’s still available,” Curt admitted.
Still, just because Curt’s acquisition was going more smoothly than he’d expected didn’t mean there weren’t bumps in the road.
“One of the issues that I ran into is this business was keeping their books on an accrual basis, but paying their taxes on a cash basis,” he said. “During the due diligence period, that turned out to be kind of a nightmare, because they didn't line up.”
Curt turned to his trusted friend, CPA and long-time CFO, Mike Hansen, to help make sense of the books and make sure everything looked good. To Curt’s happy surprise, Mike said the numbers looked good and that he wanted to come into the business as Curt’s partner.
A Different Kind of Loan Structure
The funding structure was also something Curt did a little differently than a straight 7(a) loan from the SBA, per his banker’s advice. Curt did the deal with an 80% SBA note, 10% seller note, and 10% capital injection. But on top of that, he got a separate SBA Express line of credit for working capital, which he could continue to use flexibly, and which also saved him some money over doing everything through a 7(a).
“It's actually a little cheaper to do the line of credit version, both on interest and on fees,” Curt explained. “Because the fees on a 7(a) are gonna be higher than on an SBA Express.”
Steady Improvements When Buying a Business, Not Hypergrowth
In keeping with Curt’s commitment to the un-sexy behind-the-scenes part of running a business, his first initiative wasn’t to blow the marketing out of the water or hit the gas pedal toward hypergrowth.
Since acquiring Illuminate Billing Advocates in late 2020, Curt and his core team have been hard at work on their systems and processes, implementing new software that helps them better track and manage claims. This lets them make sure that nothing falls through the cracks.
“Every single one of these claims that comes through for us is almost like a sacred responsibility to make sure that it doesn't disappear,” Curt said.
“There's a patient on the other end who's getting care, and insurance companies have provided a policy where they have guaranteed coverage for this care. An individual has been paying against that. So for that claim to get lost, for it to not get paid, to me felt like…we had a moral responsibility to make sure that there were no leaks at all in our system.”
Curt still isn’t using the “buy then build” model in search of rapid growth with Illuminate. In fact, he set his expectations realistically and humbly from the beginning.
He explained that he focused mostly on protecting against the downside, rather than banking on a huge upside.
“When I was looking at deals, I was always hedging against that. Every deal I looked at, I was saying, ‘Okay, if I buy this, and it makes 50% of what it does now, am I still going to be okay?’ We try to kind of keep [growth] in the ‘blue sky’ realm.”
Acquisition Number 2?
When we spoke to Curt just nine months into owning Illuminate Billing Advocates, he was already thinking about his next acquisition. He and Mike wanted something that would complement, not replace, Illuminate Billing Advocates.
“I don't think the intent would be to step away yet or soon,” Curt confided. “We certainly would still like to stay involved…but have more bandwidth.”
That new venture might end up being another billing company, although, as Curt has already learned and despite his first-time good fortune, those are usually hard deals to actually get done.
As for the long-term future of Illuminate, Curt has altruistic ideas there, too. He’s thinking of giving his team a chance to buy into it once it has “some meat on the bones”.
“There's some great employees in it,” Curt said. “Potentially, down the road, [selling to them] could represent a really meaningful opportunity for them to recognize some upside.”
Acquisition Learnings and Advice for Buyers
“I certainly would not want to sell that it's been easy,” Curt told us.
He credited much of his success to coming in with a team mindset, a partner, and a strong understanding of each person’s skill sets and the unique value they brought. He knew how to assess and leverage those things, how to “put aces in their places” (including himself and his partner).
One piece of advice he had for buyers looking for businesses was to start connecting with specialized bankers early in the process, like he did.
“You don't borrow money from the SBA, you borrow money from a bank,” he explained. “Every bank has a different appetite, a different specialty.”
That means buyers have to first make sure the banks they’re considering offer SBA loans, which not all banks do. Curt warned that it’s not always possible (or advantageous) to approach the same bank where you secured, say, your car loan or mortgage for an SBA loan, because that bank may not provide SBA loans.
After finding a bank that does SBA loans, the key is to find the banker who specializes in acquisitions and has deeper knowledge of how to structure loans for the kind of business a buyer is acquiring.
For example, some lenders only deal with real estate businesses, while others may be experts in other industries. It was Curt’s banker—Colin at CIBC Bank—who helped him structure his funding so advantageously. Curt’s deal wouldn’t have been nearly as good without the knowledge and advice Colin brought to the table.
Ultimately, successfully acquiring a business is about having the right people in your corner. That includes partners, as well as lenders or investors, advisors, and the team you acquire.