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September 25, 2015 By admin_united

July

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The Home Health Advisor
 
“Dedicated to Delivering Education for Building Value, Exit Planning and Mergers and Acquisitions”
Building Agency Value
How can I double the value of my Home Health Agency?  This is a question we are asked often United MedCare Capital.  We have done some research and would like to share what we have discovered.
This is an article written by Mark Wardell on Divestopedia.

Takeaway:A framework for increasing the value of any business by transforming it into a thriving, turn-key operation.

It’s a common adage that every business should be built so that it can be sold. One of the rare certainties in business is that an owner cannot stay at the helm forever. But few owners actually take this to heart. And those that do often leave it to the last minute… an afterthought as they head out the door to retirement.

Of course at this point it’s too late to do anything substantial about it, often causing sellers to leave millions of dollars on the table that should have been in their pocket.

But if this isn’t motivation enough, there are many more reasons why building a sellable business is worth the time and effort it takes up front. After all, a sellable business is also a growing, stable, profitable business that doesn’t rely on the owner for its daily operations. Something every business owner wants, regardless of when they plan on selling.

Simply put, a sellable business is a valuable business. So a daily focus on value creation is key to the achievement of almost any business goal. Whether an owner wants to buy their competitor, franchise their operation, or sell the company to their management team, they need to first build a highly valuable organization.

What is value?

Ultimately, every business draws its value from its intellectual capital, not from the size of its inventory. Products don’t have value, benefits have value, and benefits are intangible. For example, you don’t go to the store to buy a drill bit, you go to the store to buy a solution for making a hole. If someone gave you a better option than a drill bit for making a hole, you’d take it instead, because the product itself holds little value to you. It’s the solution you’re interested in. It’s the solution you’re willing to pay for. The same is true for your business. From a buyer’s perspective, your business is a money machine. And the more effectively it does its job, sitting in the corner pumping out hundred dollar bills, the more it is worth.

If the real value in a business is in its intellectual capital, how do you increase its value? You need to capture and maximize that intellectual capital in a way that is sustainable and sellable. The challenge is, in the majority of businesses, most of this value is stored inside the heads of a few key people. So we need a method for getting it out of those heads and bringing it to life within the business itself.

Maximize Goodwill, Maximize Value

In broad terms, your intellectual capital is reflected in your goodwill value. You can think of this as the “net value” of your business. In other words, it’s the value of your business, over and above its liquidation value (the amount you could sell your tangible assets for). A company’s goodwill value is where most of the opportunity for growth resides.

Because goodwill typically has minimal liquidity (meaning it’s hard to sell in and of itself), it represents a buyer’s greatest risk factor. Therefore, one of the chief concerns of a prospective buyer is how long it will take them to reimburse themselves for the goodwill they purchased, using profits (discretionary earnings) from the company. When all is said and done, the value of a business is usually based on two primary variables. The amount of its discretionary earnings and the length of time those earnings are likely to continue once the business has changed hands. The greater the certainty, the lower the risk. As with all investments, a buyer will typically look for a greater return on their investment when the risk is perceived to be higher. Conversely, all other factors being equal, a buyer will be willing to pay more for a business when the risk is perceived to be lower.

The good news is, given a little time, we can significantly improve these risk factors, increasing the value of nearly any business as a result, often by as much as two or even three times.

The Value Pyramid

The Value Pyramid is a model for increasing the value of any business by transforming it into a thriving, turn-key operation. It visually represents the four stages of operational maturity that a business must move through in order to increase its goodwill value, while simultaneously decreasing its operational dependence on the owner or key management.

Owner-Driven Business

A new business springs to life from the ideas and imagination of an individual, or a group of individuals. So naturally, at its inception, a business is like a young child that is dependent on its parents for absolutely everything. This can be described as an Owner-Driven Business, and it represents the lowest level of the four business maturity stages on the Value Pyramid (see image) because all of the goodwill of the business, that is all of the intangible value over and above the value of the assets, is tied directly to its owner. If you were to remove the owner from the business, it would have no value in and of itself, because the business is unsustainable. It’s ironic that the owner, who is the main reason the company exists in the first place, becomes the biggest limiting factor to its growth.

People-Driven Business

As a business grows and matures, it takes on key people who fill major roles and become part of the driving force of the business. This is called a People-Driven Business. On the Value Pyramid it is assessed a higher value than an Owner-Driven Business because the business is no longer dependent on one person. And yet the goodwill of this business is still tied up in a few key people. It only takes one of these key people to leave, and the business can regress, becoming an owner dependent once again. People-Driven Businesses are also exposed to a certain amount of risk. For example, if a key salesperson leaves, he may take his customer relationships with him, or at least give customers a reason to start looking around for other suppliers.

System-Driven Business

The next maturity stage is a System-Driven Business, wherein operating systems and metrics allow key people, even the business owner, to step away from the business while it continues to function successfully. A System-Driven Business is positioned to grow or sell, and is more attractive to investors because it can run on its own. For example, finding and hiring great people, generating new business leads, and building your products are all tasks that can be measured and maintained through documented systems.

Culture-Driven Business

At the top of the value pyramid is a Culture-Driven Business. A Culture-Driven Business has a strong team of people dedicated to continuous improvement. Not only are systems in place, but employees are encouraged to continuously improve those systems. With a Culture-Driven Business, at the end of each day, the business is better in some way than it was at the beginning of that day.

The outcome of all of this is an “investment grade” business. This is a business that is ready to sell for maximum value when the right buyer comes along, but not under any pressure to do so in the mean time.


Want to find out the current value of you agency and determine if there is a market to sell?  Click Here and we will provide create a report illustrating the current value of your agency and let you know if your agency meets any of the acquisition criteria of the buyer groups  work with.

Exit Planning Strategies
Having an exit plan in place is critical for every business owner.  At United, we work with business owners just like you every day.  Some are prepared and have written plans in place but the majority have nothing in place and we have seen first hand how detrimental this can be to the ongoing success of a business following an unplanned exit.  Even if your plan is to pass it down to children or other family members you must have a written plan in place.

The fact is, most business owners exit their business due to Health, Burn Out, Divorce/Partnership Disputes and Death.  Retirement is seldom the primary reason for an exit.   As you can see, the primary reasons for an exit are often sudden, life changing events.

When one of these events occur, and there is not a plan in place, the business typically suffers and the value can be greatly diminished in a short period of time.  A written exit plan is a necessity for every business owner.

At United we care about our clients and can provide guidance to help you develop an exit plan.  We even offer an ongoing service to help get you started.  It is by far the best value in the industry and offers ongoing annual updates at no charge…it really is an incredible value.

To learn more about this valuable service click here and provide the requested information.

Latest Merger and Acquisition Trends
 If you would like for us to contact you to discuss the latest trends and learn more about the sales process please CLICK HERE and provide the requested information.
The Home Health M & A Market continues to be steady with several small to mid-sized transactions closing last Month.  The trend is for continued consolidation in all areas of Home Health including skilled services, non-medical and hospice.  With more rules and regualations on the horizon and stagnating reimbursement rates for state community services waiver programs many smaller agencies are exploring opportunities to exit now while margins are still decent enough to be attractive for acquisition.
If you have been considering an exit and your revenues are in excess of $2 million now would be a good time to consider moving forward or at least explore your options.  CLICK HERE and provide the requested information.
We work with dozens of well qualified  buyers who will act quickly to transactions we represent.  The tables below illustrate current demand by Agency type and geographic area:
                        Key
 HIGH 5 or more buyer groups
 MEDIUM  3 to 4 buyer groups
 LOW  1 to 2 buyer groups
Home Health Agencies
State  Demand  State  Demand  State  Demand  State  Demand  State  Demand
AL  HIGH  HI  LOW  MA   HIGH  NM  MEDIUM  SD  LOW
AK  LOW  ID  MEDIUM  MI  MEDIUM  NY  HIGH  TN  HIGH
AZ  HIGH  IL  MEDIUM  MN  MEDIUM  NC  HIGH  TX  HIGH
AR  MEDIUM  IN  MEDIUM  MS  HIGH  ND  LOW  UT  MEDIUM
CA  HIGH  IA  MEDIUM  MO  MEDIUM  OH  MEDIUM  VT  MEDIUM
CO  MEDIUM  KS  MEDIUM  MT  LOW  OK  HIGH  VA  HIGH
CT  HIGH  KY  HIGH  NE  MEDIUM  OR  MEDIUM  WA  MEDIUM
DE  HIGH  LA  MEDIUM  NV MEDIUM  PA  HIGH  WV  HIGH
FL  HIGH  ME  MEDIUM  NH  MEDIUM  RI  MEDIUM WI  MEDIUM
GA HIGH  MD HIGH  NJ HIGH SC HIGH WY LOW
Home Care/Private Duty
State  Demand  State  Demand  State  Demand  State  Demand  State  Demand
AL  HIGH  HI  LOW  MA  MEDIUM  NM  MEDIUM  SD  LOW
AK  LOW  ID  MEDIUM  MI  MEDIUM  NY  HIGH  TN  HIGH
AZ  HIGH  IL  HIGH  MN  MEDIUM  NC  HIGH  TX   HIGH
AR  MEDIUM  IN  MEDIUM  MS  HIGH  ND  LOW  UT  MEDIUM
CA  HIGH  IA  MEDIUM  MO  MEDIUM  OH  HIGH  VT  MEDIUM
CO  HIGH  KS  MEDIUM  MT  LOW  OK   HIGH  VA  HIGH
CT  MEDIUM  KY  HIGH  NE  MEDIUM  OR  MEDIUM  WA  MEDIUM
DE  MEDIUM  LA MEDIUM  NV  HIGH  PA  HIGH  WV  MEDIUM
FL  HIGH  ME  MEDIUM  NH  MEDIUM  RI  MEDIUM WI  MEDIUM
GA HIGH  MD HIGH  NJ HIGH SC HIGH WY LOW
Hospice
State  Demand  State  Demand  State  Demand  State  Demand  State  Demand
AL  HIGH  HI  LOW  MA  HIGH  NM  MEDIUM  SD  LOW
AK LOW  ID  HIGH  MI  MEDIUM  NY  MEDIUM  TN  HIGH
AZ  HIGH  IL  HIGH  MN  MEDIUM  NC  HIGH  TX  HIGH
AR  MEDIUM  IN  MEDIUM  MS  HIGH  ND  LOW  UT  MEDIUM
CA  HIGH  IA  MEDIUM  MO  MEDIUM  OH  MEDIUM  VT  MEDIUM
CO  MEDIUM  KS  MEDIUM  MT  LOW  OK  MEDIUM  VA  HIGH
CT  HIGH  KY  HIGH  NE  MEDIUM  OR  HIGH  WA  HIGH
DE  HIGH  LA  MEDIUM  NV  MEDIUM  PA  HIGH  WV  HIGH
FL  HIGH  ME  HIGH  NH  HIGH  RI  HIGH WI  MEDIUM
GA HIGH  MD HIGH  NJ MEDIUM  SC MEDIUM WY LOW
If you would like for us to contact you to discuss the latest trends and learn more about the sales process please click here and provide the requested information.
Here is a snap shot of all the current home health related businesses listed for sale by price and by region.
Price  # For Sale  Percentage
Undisclosed 89 29%
Under 1 Million 184 60%
1 Million to 2.5 Million  27  9%
2.5 Million to 5 Million  4  1%
5 Million to 7.5 Million  1  .5%
7.5 Million to 10 Million  2  1%
10 Million to 15 Million  0  0%
15 million and up  0  0%
Total 307 100%
 Region  # for Sale  Percentage
 Undisclosed  27  9%
 Mid-Atlantic  10  3%
 Mid-South  25  8%
 Mid-West  48  16%
 Mountain  2  1%
 New England  6  2%
 Pacific  68  22%
 Plains  7  2%
 South East  47  15%
 South West 67 22%
Total 307 100%
If you would like for us to contact you to discuss the latest trends and learn more about the sales process please click here and provide the requested information.
United MedCare Capital
12600 Deerfield Pkwy
Atlanta, Georgia 30004
United States
(800) 581-5290

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