A quick note before we start: this is a real story one of you shared with me, but I’ve changed the specialty, the name, the state, and every other identifying detail. Treat it as a cautionary tale, not a profile of any specific person or deal.

One of you reached out with a story I couldn’t stop thinking about. You co-owned a practice — we’ll call it urology, though it wasn’t — and over four or five years you scaled it to multiple locations and sold it. Your share of that sale? Ten million dollars.

On paper, that’s a dream. Build something from nothing, grow the hell out of it, and walk away with eight figures in a handful of years. But that headline number is exactly where the trouble starts. Here’s how $10 million quietly became $2.5 million — and then got worse.

The “second bite” pitch

When private equity buys your practice, they usually don’t want you gone. They want boots on the ground — a man or woman in the clinic who keeps it running and keeps grinding, so things don’t slide after the sale. To make that happen, they offer you what they call a second bite of the apple.

Here’s the pitch: “Instead of buying 100%, we’ll take 60% in cash now. The other 40% rolls into equity in the new company you’ll co-own. When we sell again in five years, you get a second payday — and our goal is to sell it for 2x, 5x, even 10x what we paid. So you’ll make even more money down the road.”

And to be fair, this isn’t a pure fairy tale. It does happen. One of the large GI/urology groups in my area got a real second bite when they were later bought out by a major healthcare company. So PE isn’t lying when they say it’s possible. The problem is it’s far from guaranteed.

Watch the number shrink

Let’s walk the actual math on this deal.

Start: $10 million. But only 60% comes as cash. The other 40% — $4 million — rolls into the new company. So you walk away with $6 million, not $10. First gut punch.

The employment catch. You don’t just take your $6 million and ride off. You have to stay on for two to three years, and they pay you a lower salary than you made as an owner. They’re treating you like an employee now, and the pay cut is real.

The clawbacks. Buried in the contract are performance metrics. Miss them and they claw money back. In this deal, the requirement was opening one new clinic a year for three years. The expansion targets weren’t hit, and the clawback came to $1 million. Now you’re at $5 million.

The fees. Legal fees, broker fees, all the closing costs — call it another $500K off the top.

The taxes. In a state taking roughly 40%, that’s about $2 million gone to taxes.

When the dust settles, the $10 million headline turns into roughly $2.5 million in your pocket.

And then it got worse

Here’s the part that turns a disappointing deal into a painful one. Remember that $4 million rolled into the new company — the “second bite” that was supposed to 10x?

The expansion goals were missed. The new entity got loaded up with debt. Eventually it had to file for bankruptcy. That 40% stake — that $4 million — went to zero overnight. Poof. Never saw a dollar of it.

So does it always go this way?

No. It doesn’t always end like this, and I want to be fair about that. Do your due diligence and a sale can absolutely work out. But a lot of people hear “selling to private equity” and picture nothing but upside — and that’s the dangerous part.

Selling to PE can feel a little like booking an airline ticket: the sticker price is one thing, and then come the hundred little add-ons. Broker fees. This fee, that fee. Oh, and we’re clawing back a chunk because you didn’t hit X, Y, and Z. Each one chips away at the number you thought you agreed to.

Is walking away with $2.5 million for seven years of work the end of the world? No. But when you went in believing you’d clear $10 million — and you were quietly hoping that $4 million rollover would become $40 million — landing at $2.5 million with the rollover wiped out is a very different story than the one you were sold.

Why I’m not selling (and what it would take)

I’ll be honest about my own bias here. I think a lot of older physicians have, in my view, sold us out to private equity and venture capital — adding a layer between patient and physician and degrading that relationship. So I come in skeptical. But the bigger point isn’t ideology. It’s that you can genuinely get screwed going down this road.

That’s why I have no intention of selling. And if I ever do, mark my words: the check will have to be so enormous that everyone with shares in our company — because we plan to give equity to the great physicians who build this with us — looks at it and says, “It’s all yours. I’m walking away completely.” A clean break, no second bite, no strings. It’ll probably never get that big, and I’m having too much fun building this anyway.

To the person who shared this with you all — thank you. We did a coaching call and I didn’t charge for it, because the lesson was worth more passed along than kept private. If you’re ever thinking about selling, whether to divest or fund your retirement, you built something real, and you can still get screwed on the way out. Think twice. Then think again.