Exit Planning and Home Care Insider Transfers

business insiders shaking handsIn the complex world of home care mergers and acquisitions, our advisors at Partners31 have found that many owners overlook the risks of third-party sales and the benefits of insider transfers.  Of course, all sales and transfers are risky, especially without the benefit of brokers or advisors.  Business owners reduce their risk with careful exit planning and sound transfer strategies.

We will discuss some of the essentials here and in subsequent blog posts and our skilled mergers and acquisitions advisors at Partners31 are always available to answer your questions.

First, transferring to insiders takes time–typically 3-8 years–to plan, implement, and finance.  The more time you have for exit planning, the less risk you face and the more business valuation you will build.  If you don’t have the time, then don’t even consider this option!

Once you have the time, you can begin carefully defining your objectives:  financial security and independence; transfer or retirement time frames; protecting your family legacy or ensuring company culture; rewarding key employees; building home care valuations with outside investment.  You need to make sure the objectives are met BEFORE transferring control.

Obviously, healthy cash flow is critical.  No buyers will see value in a company with anemic cash flow.  And with insider transfers, this becomes even more important–cash flow will be your sole initial source of income.

Brokers and buyers also look for, and pay top dollar for, companies wherein business valuation will continue to grow.  And insider transfers won’t happen if value doesn’t grow.  It is vital to cultivate your business value drivers before beginning any transfer.

Having a capable and motivated management team to replace you is also extremely valuable to home health brokers and buyers.  Your management team must enthusiastically take over ownership and be willing to sign personally for any financing or current business debt.

As with exit planning and normal operations, careful attention must be paid to taxations.  No owner wishes to pay any more tax than absolutely required.  You and your advisors need to plan the sale or insider transfer to avoid double taxation–once when the new owner receives the business and again when you pay tax on your sale proceeds.  The time and effort you spend will more than pay off.

One of the biggest advantages of well-designed exit planning and insider transfers is that the owner regulates exactly when, how–and for how much–the ownership is transferred.  If company performance lags, employees struggle, or if you decide to sell to a third party, you remain in control.

As a home care owner, you take risks every day.  But you never wish to put your family’s future financial security at risk.  Insider transfer, along with sound exit planning, minimizes that risk.  Our advisors can help you develop strategies to maintain voting and operations control and to shift operations risk from you to the incoming owner.

We always stress the importance of a clearly-written plan to transfer ownership.  Otherwise, your exit planning is simply not credible and will not be taken seriously.  You will rely on this plan to coordinate your actions with your advisors, and it will include a precise timeline and ensure accountability.

Finally, we look at your education.  Unlike third party sales, insider transfers require more knowledge on your part because of how intimately you will be involved.  At Partners31, our advisors can help guide you through this process from beginning to end and help YOU stay in control.

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About Risa Baker

Risa is Managing Director of PARTNERS 31. Her natural enthusiasm and years of industry experience will successfully guide your business, whatever its size or specialty, through every aspect of exit planning, from strategy to sale.

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