Jason Andrews·February 23, 2023

How I Bought & Sold a Healthcare Business for 8 Figures | Jason Andrews

Jason Andrews is a former 20-year medical device sales executive who used a buy-side advisor (DVS Group) to search for and acquire a Group Purchasing Organization (GPO) — a niche healthcare business services company that negotiates supply discounts for physician groups and non-acute care entities — in February 2016, for close to eight figures using a max SBA loan plus a large seller note. Over six and a half years, he grew spend under management roughly 50-60% (from ~$280-300m to ~$400-450m) by outsourcing non-core operations, building up the sales team to match his own background, and aggressively paying down debt. He was approached by a larger strategic acquirer — a natural consolidator in the fragmented GPO space — and sold in 2022 for somewhere between 50% and double his purchase price, with an 80/20 cash-to-earnout structure, netting roughly $13m after retiring remaining debt. The episode is a return appearance focused on the exit: Jason reflects on the limited buyer universe that comes with niche businesses, the complexity of running a business while simultaneously managing a sale, and why — at 49, with his father having died at 63 — he chose freedom and travel over a second acquisition.

Deal facts

purchase price: ~$7-9m (implied; 'close to eight figures', SBA max + large seller note)
financing structure: Max SBA loan + large seller note + minimal equity (essentially every liquid dollar the buyer had)
notes: Sale price was 'between 50% higher and double' the purchase price (implying roughly $10-16m exit, host estimates ~$13-15m net after ~$2m remaining debt). Approximately $6.5m in debt at acquisition, paid down to ~$2m by exit. Spend under management grew from ~$280-300m to ~$400-450m. Business employed ~10-11 people. Deal structure at exit: ~80% cash at close, ~20% earnout (mostly front-loaded into year one). Had previously appeared on the pod in June 2022.

Why this business

Andrews had spent 20 years in medical device sales and engaged a buy-side advisor (DVS Group) to run a search on his behalf. The search targeted a business he could grow and eventually sell to a strategic acquirer. He ended up in a Group Purchasing Organization (GPO) — a niche healthcare business that negotiates discounts on supplies for physician groups and non-acute care entities — which was larger than he originally anticipated but fit his background in healthcare sales. He wanted freedom, to be home with his kids, and to be his own boss.

What's working

Outsourcing non-core functions (HR, payroll, benefits, operations) to focus resources on sales and customer growth
Building and investing in the sales team, leveraging his own deep background in sales leadership
Aggressive debt paydown combined with maintaining a large cash reserve ('war chest') for operational stability
Building relationships with potential strategic acquirers early, positioning the business as an attractive consolidation target
Steady recurring revenue base from physician group customers who remained year over year even without contractual obligation
Grew spend under management ~50-60% over six and a half years (from ~$280-300m to ~$400-450m), with commensurate profitability growth
Using a peer business-owner group in Kansas City as a sounding board throughout operation and during the sale process

What's hard

Niche businesses have a very limited buyer universe — only a handful of potential strategic acquirers — making exit timing much less controllable than with a commodity business like HVAC
Industry consolidation created urgency to sell even though the timing was not personally ideal; feared the window of willing strategic buyers could close
Running the business simultaneously with managing a sale process added a significant layer of complexity and stress
Deal terms negotiation without a dedicated M&A advisor on the business side — had to rely on an attorney, accountant, and peer advisors rather than a banker or broker
The buy-side search itself was expensive (north of $200k) and took ~10 months, and the acquisition stretched every liquid dollar he had
At 49 on exit vs. 42 at acquisition, energy and appetite for the intensity of sole ownership had shifted — would not want to do it alone again

Notable quotes

I was in a very unsexy business. I mean, if you were sitting next to me at a dinner party you're probably looking for somebody else to talk to. But I loved it. The challenge of business and kind of the levers to pull and how do we do this and how can we do that better — that was very fun.

You need to be thinking generally about what an exit might look like probably not before you buy it, but as soon as you do. The goal of building a business that they would want puts you in a pretty good position.

Most small businesses don't fail — they run out of cash. So make sure you've got a war chest of cash.

I bought it for freedom. I wanted to be home. I wanted to be there with my kids. My dad passed away at 63. I'm 50, and so I want to do a lot of things over the next 10 years that don't involve anything about business.