The Top Five Enablers of Top-Dollar Exits

Author imageScott Osborne
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Thinking of selling your home care agency eventually? Here’s what you need to start planning for now. 

The appetite among strategic investors seeking to expand their home care footprint through acquisitions and financial investors seeking a platform to enter the industry has never been stronger. It’s being fueled by durable, expanding demand by families steadfast in their intent to keep their elderly loved one safe and sound in the comfort of home. It’s also being fueled by the $2.8 trillion US health care system’s embrace of home care to improve continuity of care and reduce readmission rates.

Nonetheless, for many owners of home care companies, the question “What is your Exit Strategy?” is a source of angst. They have been so focused on building their care teams and serving others that they haven’t thought much about themselves in terms of how they will eventually monetize and maximize their home care investment when the time is right to sell.

For more than 15 years, we have been blessed to initiate confidential acquisitions across the country on behalf of our high achieving home care clients. In doing so, we noticed five commonalities among those owners that achieve excellent outcomes. These “Five Enablers of Top Dollar Exits” are the pillars of our Succession Planning & Sale Preparation Process. They are summarized as follows.

1. Get Your Exit Team In The Boat With You: As the saying goes, if you get others in the boat with you, they are less likely to shoot holes in it. Gaining alignment among the exit team is mission critical. Most teams consist of a Mergers & Acquisitions Intermediary that specializes in home care as well as a spouse, financial planner, Certified Public Accountant (CPA), and transaction attorney. For franchisees, the franchisor is a key team member. Beginning with the end in mind, the objective is to target a certain “exit payday” that is Specific, Measurable, Achievable, Relevant and Time bound (S.M.A.R.T.) This is accomplished in large part by the team being aligned around the knowledge of good timing and the key characteristics and attributes that make the business more valuable and appealing.

2. Know Your Exit Doors: The more you know about strategic and financial home care investors and what motivates them, the better. Each have their own set of acquisition objectives. An intermediary that specializes in the home care industry can take a micro look at your business through the eyes of these investors. For example, the top exit door for a high achieving franchisee is an investor-operator whose primary acquisition capital source is an SBA loan. The SBA lender will require an independent, certified business valuation and minimum debt service coverage ratios. Understanding what your business is likely to appraise for is key.

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3. Measure What Matters: An Investment Value Analysis (a.k.a. business valuation) is a mission critical planning tool. It provides a baseline deal structure on which the home care owner can build upon by implementing initiatives designed to improve the value and appeal of the business. Accurate Key Performance Indicator (KPI) tracking is also mission critical as it builds credibility with investors by getting them comfortable with the factors affecting financial performance. These include but are not limited to tracking certain non-operating expenses like those that are non-recurring or non-essential as well as tracking client/caregiver source data, intake calls, conversion rates, length of service and the like. It’s especially important to have data that shows you have your finger on the pulse of the satisfaction levels of your clients and caregivers such as is available from satisfaction management trackers like Home Care


4. Expand Your Time Horizon: As a rule of thumb, the wider your planning horizon the more time you’ll have to implement certain initiatives designed to improve the value and marketability of your business. As a rule of thumb, motivated sellers leave money on the table. Opportunistic sellers don’t. Timing is a mission critical component of top dollar exits. That’s especially true once the business is in market. Since home care revenues and earnings are notoriously volatile given the high client turnover nature of the beast, a wide sale initiation window allows the seller to cut bait when the wind is no longer at her back. Momentum matters.


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5. Solidify Your Foundation: What makes your home care business tick is its ROCK foundation. These are the key intangible assets including your Reputation, Office Team, Client Sources and Key Performance indicators. Looking at each through the eyes of an investor is a key part of the process of identifying and implementing initiatives designed to increase value and appeal. Is your online reputation presentable? Will a new owner likely retain your key office staff? Will the sources of your new clients continue to produce for a new owner? Do your Quick Book financial statements reconcile with your filed tax returns? These are some of the key Succession Planning & Sale Preparation questions.

At the end of your home care career, the final return on investment will be a combination of what you earned while you owned it and the capital gain you achieved upon selling it. For high achieving home care providers, the sale event often contributes between a third and a half of the total investment return. Therefore, investing in an effective Succession Planning & Sale Preparation process one to three years before exit can pay for itself many times over through an excellent outcome when the time is right to sell.

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