Acquiring Minds Podcast: How to Buy a Medical Billing Business
Host: Will Smith
Guest: Kurt Nider
Date: September 28, 2021
Overview
In this episode, Will Smith interviews Kurt Nider, who, with his partner Mike Hansen, acquired “Illuminate Billing Advocates,” a medical billing company, and is now seeking his second acquisition less than a year later. The discussion covers Kurt’s background and path to entrepreneurship-through-acquisition, why he targeted medical billing, the ins and outs of buying and structuring the deal, early operational wins, and plans for growth.
Key Discussion Points and Insights
1. Guest Background and Motivation for Acquisition (01:00–08:55)
- Experience: Kurt’s career spans construction, real estate, working with PE (private equity), and starting/selling a business in Hawaii.
- Motivation: Burnout from repeated business building made him seek a new approach: “I liked the idea of saying, I'm going to skip five to 10 years by buying somebody else's business.” (06:17)
- Discovery: Kurt stumbled on the business via bizbuysell.com, despite browsing ‘the wrong places’ (Craigslist, KSL.com).
- Why Not Start from Scratch? He wanted to bypass exhaustive early-stage hustle: “It’s a stretch for what I thought I could manage…and get financed... it’s gotta be something you’re excited about, especially if you’re saying, I’m going to roll the dice because if this thing fails, I’m going to be paying on an SBA loan for a long time.” (08:23)
2. Why Medical Billing? (08:58–11:39)
- Industry Appeal: Medical billing is behind-the-scenes, with less competition for buyers and steady need; not “sexy,” but functional and valuable.
- “It doesn't need to be sexy. The less attractive that it is to the everyday person or college grad, it's great for me.” (07:34)
- Altruistic Element: Their firm primarily supports substance abuse and mental health providers: “Our clients...are fixing lives... and what we do can actually be a problem for them... we're helping make the world a better place upside.” (09:59)
- Multiples: Looked for solid financials: “I was looking for something in a two to three times multiple of earnings. And it fit that.” (09:13)
3. Deal Structure and Financials (11:39–17:34)
- Deal Size: Revenue of ~$1M (low seven figures), purchased at ~3x earnings.
- Financing: Used the classic ‘80/10/10’ model:
- “We did a 80% SBA note, 10% seller note, and a 10% equity injection.” (13:57)
- Working Capital:
- Separate SBA Express line for working capital to preserve future cash flexibility: “With a line of credit, you can treat your line of credit like reserves…it's available when you need it.” (15:24)
- Due Diligence Hiccup: Had to reconcile accrual basis books with cash-basis taxes—a major learning point.
Notable quote: “One of the issues… was keeping their books on an accrual basis, but paying their taxes on a cash basis. So...during due diligence...that turned out to be kind of a nightmare because they didn’t line up.” (16:17)
- Emergent Partnership: Brought on CPA Mike Hansen after presenting the numbers and due diligence.
4. Partnership and Team (17:34–19:44)
- Accidental Partnership: Mike Hansen, a trusted ex-CFO colleague, volunteered to join after reviewing diligence.
- “It was his idea...he and I had worked together in the private equity business...so we had a big track record of working together.” (18:16)
- Both founders are full-time and see this as a platform for roll-ups: “The current business is not the end game. We would like to grow it.” (19:04)
5. Medical Billing Business Model Details (20:02–24:33)
- Operations & Hiring: Team is mostly remote and the industry has a wide variance in quality—no official licensure required, only certifications.
- Recurring Revenue: Revenue is based on a percentage of what is collected for clients (mostly through insurance reimbursements).
- Industry Nuances: Unlike some billers, their firm doesn’t chase patients for payments, only insurance.
6. Overcoming the Learning Curve (24:33–26:22)
- Getting Up to Speed: Kurt became a certified professional biller during due diligence for hands-on understanding: “...I actually became a certified professional biller. So I went through all the training to kind of get familiar...” (24:33)
- Buy-and-Hold vs. Value-Add: Operated conservatively, not banking on growth but aiming for downside protection.
7. Operational Improvements Post-Acquisition (26:22–29:34)
- Key Win: Standardized and operationalized claim tracking for zero leakage: “...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...” (26:22)
- Impact: Resulted in lower team stress, higher efficiency, and greater client transparency.
8. Growth, Challenges, and Future Plans (29:34–38:27)
- Looking for Acquisition #2: Now searching for more “bolt-ons” but finding competition stiff and deal flow challenging.
- “It's a competitive marketplace...those types of acquisitions are something that we're attracted to. Have had multiple conversations with potential sellers...it's very competitive.” (33:05)
- Deal Sourcing: Landed Illuminate at a fair price because it was “unrepresented—not being pushed by a broker.” (34:39)
- Flexible Future: Considering both industry consolidation and entirely different businesses.
On future ownership structure:
“Potentially down the road, that could represent a really meaningful opportunity [for employees] to recognize some upside.” (37:58)
9. Exit Options and the Role of the Founders (38:27–40:46)
- Not Just ‘Buying a Job’: The business can potentially run with less direct founder input, but neither plans to exit immediately.
- “We certainly would still like to stay involved, but have more bandwidth, I think, than kind of your typical...sole proprietor.” (39:23)
- Advantage of Existing Business: Kurt highlights the E-Myth dilemma and the benefits of being a second-owner: “When you come in secondarily, it’s a lot easier to do that...You’re not emotionally attached to some of the roles or details...” (40:09)
10. Lessons Learned and Advice for New Acquirers (41:07–43:22)
- Banking Is Key: Find multiple, specialized SBA bankers early—“every bank has a different appetite...find a bank [that] specializes in SBA acquisition loans, because it’s even different within the 7A world.” (41:54)
- Shout out to CIBC Bank and their contact Colin for proper guidance.
- Due Diligence: Be wary of accounting/tax mismatches.
Notable Quotes & Memorable Moments
- On jumping ahead by buying:
“I liked the idea of saying, I'm going to skip five to 10 years by buying somebody else's business.” (06:17) - On medical billing’s unglamorous appeal:
“It doesn’t need to be sexy. The less attractive it is to the everyday person or college grad, it’s great for me.” (07:34) - On the responsibility of accurate billing:
“Every single one of these claims...is almost like a sacred responsibility to make sure it doesn't disappear.” (26:22) - On partnership:
“It was his idea...he was willing to look past my weaknesses, so that worked out well.” (18:16) - On learning the industry:
“I actually became a certified professional biller. So I went through all the training to kind of get familiar…” (24:33) - On acquisition vs. building from scratch:
“When you come in secondarily, it’s a lot easier to do that...You’re not emotionally attached to some of the roles...” (40:09) - Closing thoughts on opportunity:
“There’s huge opportunities out there, and...the amount of wealth that needs to change hands...in the next 10, 15, 20 years...is insane.” (44:56)
Highlight Timestamps
| Time | Segment | Key Topics | |--------|--------------------------------------|--------------------------------------------| | 01:00 | Guest intro & background | Motivation for acquisition | | 08:55 | Why medical billing? | Industry fit, multiples, altruism | | 13:35 | Deal size & structure | SBA 80/10/10, working capital, diligence | | 17:34 | Partnership formation | Working with CPA Mike Hansen | | 20:02 | Industry operations | Remote/admin, hiring, revenue model | | 24:33 | Learning the business | Kurt gets certified, knowledge ramp | | 26:22 | Ops improvements post-acquisition | Claim tracking, process overhaul | | 29:34 | Plans for growth | Rollups, sourcing challenges, deal flow | | 38:27 | Exit potential & founder roles | Business self-operation, E-Myth dynamics | | 41:07 | Lessons for searchers | Banking strategy, tips for new buyers | | 44:13 | Closing reflections | Opportunity in business acquisition |
Conclusion
Kurt Nider’s story exemplifies the promise and pragmatism of acquisition entrepreneurship. With diligence, the right financial structure, and a collaborative approach, he’s transitioned from building businesses from scratch to buying, improving, and leveraging existing ones—with clear operational wins and optimism for further growth. The episode is rich in tactical detail and practical lessons for anyone considering acquiring a business, especially in niche service sectors like medical billing.
Contact Kurt Nider:
- LinkedIn: Cort Nider
- SearchFunder: Cort Nider
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