How to Sell an Assisted Living Facility for Maximum Value
Selling an assisted living facility, or any business for that matter, is a difficult undertaking. Factors such as market conditions, timing, and regulation, all play significant parts in whether or not a business is sold for fair market value. That’s why it’s critical to plan ahead before taking your company to the market.
It takes time, planning, and the right marketing strategy to maximize the value of an assisted living facility. Everything from tidying up your books, tax records, and diversifying your client base is necessary to make your business more valuable and attract the right kind of buyers. If your goal is to sell your facility for the highest price possible, here are a few tips to guide you:
Assess Your Company’s Valuation
One of the first things investors will look at during a sale process is EBITDA (earnings before interest, taxes depreciation, and amortization), which helps them understand the viability and profitability of a company.
Most buyers will take into account how much a business can make in profits for the next two to five years after acquisition. That’s why it’s important to ensure that your business is generating strong revenue and profits before listing it for sale. Many valuation methods rely on a multiple of EBITDA to determine a company's value. For instance, if your annual revenue is between $500,000 to $700,000, your company should fetch a price of $1 million or more according to some estimates. For businesses looking to sell for maximum value, the importance of driving a robust growth and revenue cannot be overstated.
Time Your Exit
Depending on personal, market, and economic conditions, you may be able to time the sale of your company accurately. If you have the opportunity, sell when your business is at its prime. Declining profits can have a significant negative impact on your company’s value. A growing business is attractive and will generate far more value than a shrinking one. It can be tempting to want to hold off selling when things are going well, but you need to sell when the value of your company is at its peak. If you have just landed some great clients or launched a set of new services that is the best time to take your company to market.
Diversify Your Revenue Sources
Most assisted living facilities specialize in a certain type of service. If a service fails to generate enough revenue, it can weaken a company that relies on that service alone for its income. Having only one-revenue generating service is a risky strategy, and buyers will take that into account when making an offer. No matter how much research you conducted before listing your business, economic conditions can change at any time, which has the potential to hurt a business with only one income stream. If you have diversified services and income streams, you’ll be better positioned to maximize the value of your business when you decide to sell. If one income source is lost, another can offset that loss. That matters a lot to buyers.
Enhance Your Processes
Running your business more efficiently should be a priority. A well-run company is both competitive in its space and attractive to long-term investors. Can you improve how things are done in your facility? If you can make a few changes to enhance your services, do it. Deploy technologies to optimize your customers’ experiences and ensure your employees are working optimally. This does not necessarily mean you should make a major change or invest a large sum. However, you should investigate what’s not working. By optimizing your processes and nurturing your customer base, you’ll be better able to maximize the value of your business.
Maintain Accurate Books and Records
Most buyers expect sellers to maintain accurate financial accounting records. Ensure that your books are up-to-date before granting access to potential buyers. Clean up your finances and sort out your taxes. If you are behind on your loans, pay them current before listing your business. Follow the standard bookkeeping system to make it easier for buyers to understand your financials. It’s also advisable to hire a certified accountant if you’ve been working with a nonstandard system. This is critical because every serious buyer requires accurate financial data to make an informed buying decision.
Enlist The Services of a Brokerage
As a business owner, you’re great at what you do; however, selling a business requires different types of expertise. Without experience, it can be difficult to attract great buyers. That’s one of the reasons to enlist the services of an expert. If your assisted living facility is worth between $1 and $15 million, you will definitely benefit from the services of a brokerage firm.
A leading brokerage firm like Raincatcher can help with business valuation, marketing plans, contract negotiation, and finding suitable buyers for your business. With over three decades of experience in dealmaking and helping assisted living facility owners like yours maximize profits; you can’t go wrong working with us. Connect with one of our assisted living brokers today to find out more.