Two Proven Ways to Guarantee Top Dollar For Your Home Care Business

Two proven ways to guarantee top dollar for your home care businessAccording to Inc. Magazine, approximately ten million business owners will attempt to sell their companies within the next decade.  This is a clear sign of a highly competitive marketplace, and most home care business owners understand the importance of assessing their business valuation.  And knowing what your business is worth to potential buyers is just as important.

So what can you do now to guarantee top dollar for your home health business?  Regardless of your specific goals, whether you wish to sell your business or pass it on to the next generation, your exit planning secret boils down to minimizing risk and increasing value.

But how, you ask, does one accomplish this?  Set aggressive goals for yourself and your business by focusing on these two key areas:

1.  Building a Management Team

2.  Increasing Cash Flow

Few things are certain.  One is that you will eventually leave your business.  But what will happen if your management team consists of just one person–you?  From the perspective of brokers, advisors, and potential buyers, that means high risk and minimal value.  Building a strong management team is your #1 value driver.

Your team should include a diverse selection of hardworking and high-performing employees–in other words, employees who know how to run your business effectively.  That is how you build value and minimize risk.

Next, we look at cash flow, without which those same brokers, advisors, and buyers will quickly lose interest.  Managing your margins is the key to increasing your cash flow and home care valuation.

*First, set gross margin standards.  For example, if you bill $20/hr and pay $10/hr, your gross margin would be 50%.  But if you ensure your pay rate includes all payroll charges, taxes, and other benefits, raising your pay rate to $12/hr, then your margin shrinks to 40%!

*Keep an eye on your bottom line.  Set expectations no lower than 15%.  Tracking your bottom line will keep your business healthy.

*Know your products and your customers:  which of them create value, which hurt value, and most importantly, why?  You may find it’s possible to drop some customers to focus on other customers who are more profitable over time.

One owner I assisted with exit planning and business valuation was shocked to discover her company was worth less than expected.  Profits had been consistently good, but lack of a strong management team hurt business value–the value was tied up solely on her experience and relationships.  Don’t make this same mistake in your business!

As her exit planning advisor, I suggested she divert a portion of profits to building a team to replace her, as well as adopting more formal systems and processes.  By foregoing short-term profits for long-term value generation, she was able to command a much higher sales price.

Because you will eventually leave your business, you need to put these proven tactics to work now.  You will minimize risk and increase valuations for the future.  And when it comes time to sell, you will reap the rewards.

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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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