Nik Hulewsky·October 24, 2024

2 Years to Buy, Double & Exit a Medical Billing Firm | Nik Hulewsky Interview

Nik Hulewsky is a healthcare administrator turned entrepreneur who spent years working his way up through home health and hospice companies, getting fired twice and losing a son to a terminal diagnosis before deciding in February 2020 — literally on the day his wife went into labor with their third child — that he would buy a business rather than depend on anyone else's generosity. He acquired a Boise, Idaho medical billing, coding, practice management, and staffing firm doing $5m in revenue for $3.2m (roughly 7x stated SDE of $450k, though he underwrote it to ~$700k SDE). He financed the deal with an SBA loan plus a seven-figure seller note accepted by SBA as equity, reducing his cash injection to ~$180k-$200k. He installed his brother-in-law as day-to-day operator while he co-founded a separate home health and hospice startup with another brother-in-law. In two years the billing company grew to $1.2m in trailing profit on ~$6m revenue, and Nik sold it in June 2022 for more than 2x but less than 3x the purchase price — a life-changing financial outcome on a very small equity check. He then sold the home health and hospice company (which had reached ~$10m run-rate revenue) to a publicly traded acquirer — which turned out to be the same company that had fired him years earlier — closing a full-circle arc. At recording, Nik was in an exploration phase, building an audience and a co-founder investment vehicle while subject to a three-year non-compete in medical billing.

Deal facts

purchase price: $3.2m
multiple: ~7x SDE (at stated SDE); ~4.6x SDE (at underwritten SDE of ~$700k)
sde ebitda: SDE $450k stated; underwritten to ~$700k
revenue: $5m at acquisition; ~$6m at sale
financing structure: SBA loan + seven-figure seller note on full standby (reducing effective equity injection to ~5% down, ~$180k-$200k cash) + friends-and-family equity
notes: Sold June 2022, ~2 years after acquisition, for more than 2x but less than 3x the $3.2m purchase price (~$6.4m-$9.6m implied). Profit at sale trailing 12 months was ~$1.2m; revenue ~$6m. Guest also co-founded a separate home health and hospice startup contemporaneously; sold that separately to a publicly traded company (the Pennant Group / former employer) at 6-10x revenue on ~$10m revenue, as a 1/5 partner with ~$2m debt on the business.

Why this business

Nik wanted to buy a healthcare-adjacent services business where he had direct or analogous experience, with 15%+ net margins, no physical-space capex requirements, and strong Tailwinds from both industry and geography (Boise, Idaho). He specifically sought a business where he could add operational value through efficiency improvements and where a post-covid revenue rebound was likely. Medical billing, coding, and practice management fit his background managing centralized billing and administrative functions across home health and hospice companies.

What's working

Operational efficiency gains: identified and realized cost improvements beyond simple owner add-backs, including renegotiated vendor contracts and right-sizing of staffing inherited from prior ownership
Post-covid revenue rebound: a backlog of elective surgeries and physician encounters that had been deferred from March-June 2020 drove a revenue bump in the second half of the first year, confirming the acquisition thesis
Installed a trusted family-member operator (brother-in-law, former search fund searcher with healthcare operations experience) as day-to-day manager, freeing Nik to focus on the concurrent home health and hospice startup
Strong seller relationship: negotiated a large seller note (seven figures, on full standby) that was accepted by SBA as equity injection, reducing cash required at close to ~5% down (~$180k-$200k)
Sticky customer base: physician clients are highly sticky once onboarded due to complexity and legal liability involved in switching billing vendors
Business grew SDE from $450k at acquisition to $1.2m at sale (trailing 12 months), with revenue growing from $5m to ~$6m

What's hard

Nik was not the day-to-day operator from the start, creating family and business dynamics that became sticky at times
The brother-in-law operator eventually wanted more equity and to acquire his own business, creating pressure to sell earlier than Nik might otherwise have chosen
Rising interest rates and anticipated economic headwinds in late 2022 contributed to the decision to sell, which Nik later second-guessed — he believes they sold a strong business prematurely out of fear
Managing two businesses simultaneously (the medical billing company and the home health and hospice startup) created significant mental load even as a non-operating owner of the billing company
The home health and hospice startup was ultimately sold (to the same company that had fired Nik years earlier) partly because his SNF-owner brother-in-law partners changed strategic direction and wanted capital returned, not because Nik wanted to exit

Notable quotes

I fundamentally believe that the major the minority of entrepreneurs are built like Chris — like there's like being an entrepreneur you're already in the minority but it's an even smaller subset of people who are like I'm going to start from scratch and build something.

I knew I wanted to buy a business that was important to me and so — I wanted to buy a company that was — important to me and so I wanted something with the highest level of probability of success and I just thought buying something outside of my sphere of influence or experience would have been dumb.

I am kind of grateful I got fired because what was I working in February of 2020 — I was working in healthcare — had they waited two weeks I probably would have been traveling a ton or dealing with outbreaks or just dealing with everything that was heavy during that period of covid and instead I got to spend time with my newborn son and look for a business.

The seller relationship is incredibly important and I would say that to anybody who's looking to buy a business — it's one of the reasons why I prefer to buy businesses off market — if you don't have a good relationship with the seller it makes things very difficult.