We have put together some great information this month to help you grow and solidify the future of your agency. As always, our commitment is to provide educational content surrounding the fundamentals of the business life cycle including building value, planning for an eventual exit, and recent Merger and Acquisition trends effecting the home health industry.
Two Tips to Build Value for Your Agency
1. Audit your Financials – On a quarterly basis (at a minimum…monthly is best) you should be internally auditing your financials. The first step is to print a Profit and Loss statement with a comparison of the current month and YTD (comparison to same period in the prior year is a good report as well). Be sure to include a “percentage of sales” column for each period on the report.
This will allow you to identify any outliers that are below or above your average percentage of sales when compared to your YTD report. When you find an outlier you will need to pull a “trail balance” or details from the general ledger for that particular account to determine what may have occurred. Sometimes it is as simple as posting to a wrong account and in other cases it could be a one time expense.
By performing this activity on a monthly basis, you will be better educated and in tune with your business financials which, in the long run, creates value as you continue the growth of your agency.
If your accounting software does not allow this type of reporting, we suggest making a change to software, such as quick books, that allows this and other great report options to help monitor the financial health of your agency.
2. Document your Policies and Procedures – Ask your self a quick question…Is it better to have written Policies and Procedure Manual versus not having one? I’m sure your answer to this question is YES. If not, then your chances of maximizing the value of your business will be diminished. If you already have a Policies and Procedure Manual, be sure to review it annually and update it with any changes that have been implemented. Best course of action is to update each time a new policy or procedure is changed or implemented.
If you do not currently have a Policies and Procedures Manual their are several resources available that will allow you to create a personalized manual. If you prefer, United offers this service through our consulting services department. Click Here and we will have someone contact you for more details.
Exit Planning Strategies Part 2
Last issue we discussed the importance of succession planning and delegating day to day activities to other key employees. This month we will discuss agency “value” and how to determine what your agency is worth.
Most agency owners have no idea how much their agency is worth or how to calculate the value. When it comes to Exit Planning, this is by far the most important element of your plan since more than likely your agency is the single most valuable asset you own. It is recommended that you determine value and how it is calculated AT LEAST 5 years prior to your exit. This will provide you ample time to grow your business and determine what needs to be done to obtain the value/purchase price you will need to support your retirement or next phase of business life. United offers exit planning services and we also have a FREE online service that will illustrate a rather broad range of value for your agency. In addition, we will include a comparable sales report agencies that have recently sold. Click Here and provide the requested information and we will deliver your FREE report directly to you.
Plus, we will let you know if your agency meets any of the criteria of the current buyers we typically engage with for our clients. This is a great planning tool and a great place to start.
Home Health Merger and Acquisition Activity
Activity continues to be brisk as buyers continue there plans for growth through acquisition. Several of the largest Home Health providers across the nation have in excess of $600 million earmarked for continued acquisitions.
One of the more recent transactions that has recently closed was the purchase of Encompass Home Health and Hospice for $750 million. Jay Grinney CEO of HealthSouth stated, “The deal is indicative of HealthSouth’s desire to expand its presence in the home healthcare industry. Encompass will add 140 home-health locations in 13 states to HealthSouth’s 25 existing home-health agencies across the United States. HealthSouth’s existing home-health agencies will be integrated into Encompass”.
Smaller transactions are closing monthly as all the larger providers continue to increase their market share.
Here is a look at what is currently available through out the country:
|Price||# For Sale||Percentage|
|Under 1 million||220||88%|
|1 million to 2.5 million||24||10%|
|2.5 million to 5 million||6||2%|
|5 million to 7.5 million||1||1%|
|7.5 million to 10 million||0||0%|
|10 million to 15 million||0||0%|
|15 million to 20 million||0||0%|
|20 million and up||0||0%|
|Region||# For Sale||Percentage|
If you have an interest in learning more about the sales process, and your agency is generating gross revenues in excess of $3 million, United can guarantee the sale of your agency.
Please Click Here and fill out the Complimentary Consultation form indicating your interest in selling or buying.