By Stephen Tweed
Over the past three years, we have seen a huge increase in the Mergers and Acquisitions activities in
Home Care. In a 20 month period, we had ten members of our Home Care Mastermind Groups be
acquired, and we had three members of our Top 5% Group acquire other companies.
As a Home Care company owner or CEO, you need to be paying attention to this major trend in our
industry, and develop an understanding of the factors the affect the valuation of your company.
Now is the Time To Develop Your Exit Plan
I always say to company owners, “The best time to start working on your exit plan is the day you start
your home care company. The second best time is today.”
While you may be young and excited about what you are doing in your company, and you are not
evening thinking about selling your business, now is the time to begin preparing your exit strategy.
There are things you can do today that will affect the valuation of your company when you decide to
Factors Affecting Valuation
As we have studied home care mergers and acquisitions, we have identified seven factors that will affect
how much your company is work when you decide to sell it:
- Size: The larger your home care company, the larger the value to a potential buyer. That means
is makes sense to have a strategy to scale your business into the top 10% of the industry.
- Momentum: Is your company growing in revenue and net income? Potential buyers will be
interested in the momentum of your company, and a growing company is worth more than a
company with flat revenue.
- Revenue Diversification: While most home care companies have a majority of their revenue
from private pay, buyers of home care companies are interested in buying companies that have
a diversified revenue stream that is more predictable.
- Systems for Client Acquisition: Buyers want a company that will continue to grow after the
current owner is gone. If your company is dependent on you as the primary marketer and
attractor of new clients, you company is worth less that if you have a system of sales and
marketing that brings in new clients.
- Systems for Caregiver Acquisition and Retention: Much like sales and marketing, your company
is worth more if you have in place systems for caregiver recruiting and retention that do not
depend on you as the owner to attract new caregivers.
- Office Team Disruption: Your company is worth more if you have a solid, stable office team who
will stay with the company when you sell it. Buyers want to acquire a business that will keep on
growing after the seller leaves.
- Threats to Profitability: Buyers will do their own due diligence to asses the value of the
company, and that includes looking at potential threats to future profitability. These treats
could be a range of factors from market saturation to client and referral source satisfaction, to potential employment law issues. Each buyer will have their own idea of the factors that at
threats to the future profitability of your company.
Now Is The Time to Address These Factors
As the owner or CEO of a growing home care company, now is the time to become familiar with these
factors, and build them into your strategic thinking. We’ve found that when you plan for the future with
like you are preparing your company for sale, you will grow a company that is profitable and
attractive to outside buyers. Even if your exit plan is to transfer ownership to the next generation of
your family, planning for these factors will make your company more valuable for your children and
Find Out What Your Company is Worth Today
Many of our Mastermind Members and clients ask us about the value of their company today. We
suggest they have a conversation with the M&A Advisors at Mertz-Taggart Inc. Mertz-Taggart is our
Resource Partner for M&A, and they have a process for valuing your company. They’ll work with you to
develop a valuation at no charge to you.
It’s well worth your time to have a conversation and find out what your company is worth to a potential
buyer. Click on the link below, call their office, and set up a conversation with Bruce Vanderlaan to get
your free home care company valuation. Tell Bruce that Stephen Tweed sent you.