Residential Care Facilities for the Elderly (RCFEs) in California are a great business model for meeting the needs of our aging population. It is estimated that by 2040, about one in five Americans will be age 65 or older (Urban.org) which means that there will continue to exist a need for senior care services. RCFEs are a non-skilled setting, meaning there are no requirements for licensed staff to be a part of the business model with the main focus being on providing a positive quality of life within a safe environment via non-skilled caregivers.
As business brokers, when we work with our RCFE sellers, we often are given the task of educating our owners for their sale. One the biggest mistakes that our sellers make is not being able to account for their financial position over the past three years and year to date. It is imperative that our RCFE sellers understand that keeping an efficient accounting – bookkeeping practice is essential. The profit and loss statement, the balance sheet and the cash flow report allow us as business brokers to be able to justify an accountable sell price.
Next, we need to understand the property and whether it is being leased from a third party or whether the RCFE seller is the property owner. When we have a landlord, one of the first things that the seller and the broker need to assess is the current landlord mindset when it comes a rental agreement. We need to be aware of the current rental agreement, the existing rental market and the landlord’s subjective standing on where they want to take their lease terms with our new RCFE buyer. This conversation should be had sooner than later and it will depend on the certain variables such as the seriousness of the seller to sell their business, the seriousness of the buyer and the landlord’s overall flexibility. If the RCFE seller is the property owner, addressing realistic market rental rates are essential. An unrealistic set of lease terms will only scare off potential buyers and are deal breakers.
License. We make it a practice of asking our buyers to procure their RCFE Administrator’s license ahead of time. We explain to the buyer’s that by having their license ahead of time that it adds credibility to them as buyers as well as to create a much smoother transition once the sale is consummated. The existing RCFE owner will also have their own licenses in place for both their facility and their own RCFE Administrator – both of which need to be part of the buyer’s due diligence.
Finally, a few other ideas for brokers to be mindful of: existing bed rents, employee turnover, current RCFE patient demographics, existing owner’s relationship with their Licensing Program Analyst (LPA) and their Ombudsman, current employee HR files, up to date resident file documents, and more.
Healthcare Biz Brokers, Inc. is a niche-based healthcare business brokerage located in Southern California with clients throughout the state of California. We assist our clients with formal valuations, selling strategies, lead generation, and more. If you have any questions, call us at (818) 731-7173 or email us at info@HealthcareBizBrokers.com.Read More
By Ralph Santos, Broker – Healthcare Biz Brokers
In of May of 2021 the California legislature closed the door on the creation of new hospice agencies commencing in January 1, 2022 with a six-year moratorium that shook up the day to day business model of the hospice industry. This legislation stems from fraud and abuse that has been reported in the industry and with the stoppage of new agencies, it would allow for the policing of any existing fraudulent behavior within the hospice community as well as to allow for the business market to recalibrate as to the market price.
The market for years has priced the hospice agencies based on various factors to include the agency’s location, the age of the agency, the financial valuation of the existing agency, the agencies goodwill to include a zero aggregate CAP, existing contracted insurance providers, existing clinical staff, existence of consistent referral sources, existence of a healthy billing infrastructure free from additional development requests (ADRs), a robust agency database, an up to date operational framework that would include an up to date Policy and Procedures, Emergency Plan, Quality Assessment and Performance Improvement (QAPI) and more.
The valuation for the hospice agencies has traditionally been approached by one of two manners: (1) market price versus (2) a valuation based on the agency historical and current financial standing. The market price will vary based on the geographic area which include the per capita of existing agencies in a given area. The legislative changes that will commence on January 1, 2022 will impact the market significantly. First, there will be a supply and demand issue where due to the fact that no new agencies will be available, those existing hospices in the market will command a higher market price as long as the aforementioned variables are healthy and regardless of the financial valuation since in essence the buyer will be acquiring a commodity, in this case a highly sought after license and or an accreditation to operate as a hospice agency. Secondly, the focus of the state and federal law enforcement in policing the industry to remove those agencies that are creating havoc and potentially fraud will further decrease the supply. Finally, the legislation will create a mandate for those that are operating within the hospice community to abide by the rules, thereby deterring further fraud.
Our brokerage’s opinion based on our experience in the hospice industry is that we will feel the immediate effects of the hospice agency valuation will increase the market valuation by $100,000.00 -$200,000.00 and possibly more as we get closer to the January 1, 2022 deadline. We further believe that the newer agencies, the agencies with a historically low census, the agencies that have focused more so on the Medi-Cal community, the agencies with a zero aggregate CAP will fare the best in this new hospice environment when it comes to valuation.Read More
You shouldn’t expect to sell your company overnight. For every company that sells quickly, there are a hundred that take many months or even years to sell. Having the correct mindset and understanding of what you must do ahead of time to prepare for the sale of your company will help you avoid a range of headaches and dramatically increase your overall chances of success.
First, and arguably most importantly, you must have the right frame of mind. Flexibility is a key attribute for any business owner looking to sell his or her business. There are many variables involved in selling a business, and that means much can go wrong. An inflexible owner can even irritate prospective buyers and inadvertently sabotage what could have otherwise been a workable deal.
Be Flexible on Price
A key part of being flexible is to be ready and willing to accept a lower price. There are many reasons why business owners may fail to achieve the price they want for their business. These factors range from lack of management depth and lack of geographical distribution to an overreliance on a handful of customers or key clients. Of course, one way to address this problem is to work with a business broker or M&A advisor in advance, so that such price issues are minimized or eliminated altogether.
Be Prepared to Compromise
In the process of selling your business, you may want to achieve confidentiality and sell your business quickly and for the price you want. However, the fact is that most sellers find that it is possible to have confidentiality, speed, and the price you want, but not all three. Ultimately, you’ll have to pick two of the three variables that are most important to you.
A third way in which business owner flexibility can boost the chances of success is to embrace the virtue of patience. By accepting the fact that businesses can “sit on the shelf” for a considerable period of time, you are shifting your expectations. This realization can help reduce your stress level. The fact is that stressed out owners are far more likely to make mistakes.
Sometimes Losing is Really Winning
A fourth way in which business owners should be flexible is realizing that you and your lawyer will not win every single fight. There will be many points of contention, and a smart dealmaker realizes that it is often better to have a good deal than a perfect deal. You may have to make sacrifices in order to sell your company. Simply stated, you shouldn’t expect the other side to lose every point.
At the end of the day, a savvy business owner is one that never loses sight of the final goal. Your goal is to sell your business. Seeing the situation from the buyer’s perspective will help you make better decisions on how you present your business and interact with prospective buyers. Maintaining a flexible attitude with prospective buyers helps to position you as a reasonable person who wants to make a deal. Goodwill can go a long way when obstacles do arise.
The post The Importance of Owner Flexibility appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
There is no doubt that the COVID-19 situation seems to change with each and every day. The disruption and chaos that the pandemic has injected into both daily life and business is obvious. Just as it is often difficult to keep track of the ebbs and flows of the pandemic, the same can be stated for keeping up to speed on the government’s response and what options exist to assist companies of all sizes.
In this article, we’ll turn our attention to an overlooked area of the government’s pandemic response and how businesses can use a whole new lending platform to navigate the choppy waters.
As the pandemic continues, you will want to be aware of the main street lending program, which is a whole new lending platform. It was designed for businesses that were financially sound prior to the pandemic. Authorized under the CARE Act, the main street lending program is quite attractive for an array of reasons. Let’s take a closer look at what makes this program almost too good to be true.
This lender delivered program is a commercial loan. Unlike the PPP, there is no forgivable component. However, the main street lending program does have one remarkable feature that will certainly grab the attention of all kinds of businesses. It can be used to refinance existing debt at a rate of around 3%. With that stated, it is also important to note that businesses cannot refinance existing debt with the current lender. Instead, a new lender must be found. Generally, loans are a minimum of a quarter million dollars and have a five-year term. In another piece of good news, there is a two-year payment deferment period.
The main street lending program can be used in a variety of ways. In short, the program is not simply for refinancing existing debt. Additionally, there is no penalty for prepayment. The way the program works is that lenders make the loans and then sell 95% of the loan value to the Fed. This of course means that the lender is only required to retain 5% of the loan on their balance sheet. The end result is that lenders can dramatically expand the amount of loans they can make.
Whether it is the PPP or a program like the main street lending program, there are solid options available to help you. Businesses looking to restructure debt or put an infusion of cash to good use may find that the main street lending program offers a very flexible loan with great interest rates.
The post The Main Street Lending Program appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
In today’s business climate, reviews are the differentiator. Years ago, people commonly asked for references when they were vetting a product or service. But these days when people are searching for a local business to work with, they are likely to conduct research on their own and read online reviews.
Google reviews can give businesses a big credibility boost without having to spend a dime. Let’s take a look at some of the key benefits.
Increased Credibility & Trust
According to statistics, approximately 91% of consumers read reviews to determine credibility of a local business. In fact, 84% of consumers say the positive reviews have helped them gain trust. Without the reviews, that level of trust would not have been established.
Needless to say, people trust Google. The fact that these reviews are on a 3rd party website increases transparency. These reviews have much higher value than testimonials posted on the actual business website.
Improved Business Conversions
Once a potential customer gains trust in your company through reading Google reviews, it is more likely the conversation will get converted to an actual business transaction.
Customer Feedback Loop
When your customers write reviews about your business and post them on Google, these reviews often clearly mention details about your product or service. Through this means, future customers become educated. These reviews can also serve as a feedback loop for you if things need improvement.
Increases Online Reputation & Visibility
The power of online marketing methods you might be using to promote your business will be amplified, as users will become more attracted to your business due to 5-star reviews. This factor increases online traffic to your website and an increase in leads and business.
Another fact to be conscious of is that your clients will review your products or services whether you want them to or not. If you fail to set up Google reviews, you’re missing out on the opportunity to gain a level of control and visibility.
How to Set Up Google Reviews
- Create a Google My Business account. – Visit https://business.google.com/ to sign in or create a Google account for a business. Complete the step by step process by filing required information like email, phone number, business details, etc.
- Ask clients to review your services. – Start sharing your Google My Business URL with clients and ask them to post a review about your services. When asking for reviews, you can mention to clients that their review will help everybody else make an informed decision when they are looking for help. It is important to ask about the review within a few days of closing your transaction. If more time goes by, the client may be less motivated to post a review for you.
- Remind clients. – Everybody is busy. Therefore, there is a chance that your client might forget to write a review. In this case, we recommend reminding them to do so. You can also politely inquire if they need any help posting the review that you discussed.
Through the above-mentioned process, you can begin generating reviews for your business. Of course, it goes without saying that you can only guarantee good reviews when you are providing excellent customer service along with a top-notch product or service.
The post Why Does Your Business Need Google Reviews? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.