A true story of the recent sale of a behavioral healthcare company from the initial valuation through creating value and closing the transaction.

Ever wondered why two seemingly similar companies sell at significantly different multiples? What are buyers considering in ostensibly comparable companies that cause sale price differences? Let's discuss five key secrets of market multiples.

Intriguingly, given the volatile healthcare industry, owners of a healthcare business/practice rarely seek to understand the value of their company unless they consider it a necessity, such as settling a shareholder/partner dispute, getting a divorce, or obtaining a bank loan. The problem with this way of thinking is that most owners of a healthcare business miss the opportunity to better understand the value of their company, how to strategically increase its value over time, and how to integrate a company/practice value with their personal financial planning.

Here are several key reasons why getting a valuation of your healthcare company might be the most important thing you do this year.

The measure of value for any healthcare company is obviously about results, financial and otherwise. It also refers to the clarity of presentation of value and, as Berman, Knight, and Case write in Financial Intelligence, “the art of using limited data to come as close as possible to an accurate description of how well a company is performing.” When “accurate” becomes “cloudy,” it usually translates into questions and doubt, whether for a funding source, buyer or a potential investor.

Here are some reasons why the quality of your financials is so important.

As we indicated in our recent article, “What’s The Value Of Your Independent Pharmacy (Part 1)?,” the market for independent pharmacies continues a very dynamic run. Private equity, strategic consolidators, and other investors are looking to add scale and locations, whether special needs/long-term care (LTC), retail, home infusion, compounding, nuclear, or hospice pharmacy.

Numerous factors have contributed to the strength of the “perfect storm” in the pharmacy marketplace and include...

Today, there are over 22,000 independent pharmacies out of a total of over 61,000 pharmacies nationwide. In addition, independent pharmacies drive over $73 billion of industry revenue with all signs pointing to continued growth. Customer demand is driven by our aging population, new forms of insurance reimbursement, increased awareness of health issues, advances in medical treatments, and longer lifespans. In the latter case, more and more people are seeking the very products and services that independent pharmacies provide.

Most owners of Durable Medical Equipment (DME) companies regularly attempt to estimate the value of their company. Unfortunately, their estimates can significantly differ from the marketplace “reality,” depending on a number of factors. “All healthcare related companies sell for 2 times annual revenue”, or “My DME should be worth the sum of all of the monies I invested into the company,” or “I wouldn’t consider selling my DME for less than 10 times annual profits” are common refrains among owners who may be in for a rude awakening when they attempt to sell their company.

The Substance Use Disorder (SUD) marketplace is dynamic and continues to be impacted by many factors. The valuation of SUD programs is also subject to change, ranging from in-network vs. out-of-network reimbursement and in-house labs to the increasing focus on outpatient services and longer-term social support. We can expect more flux that will affect how SUD companies are valued.

Healthcare business owners rarely seek a valuation for their company unless they consider it a necessity. They will get a valuation because they must settle a shareholder/partner dispute, it’s required to resolve a divorce, or it’s essential to obtain a loan or line of credit (LOC). The problem with this way of thinking is that most healthcare business owners miss the opportunity to better understand the value of their company, how to strategically increase value over time, and how to integrate a valuation with longer-term personal planning.

Here are several key reasons why securing a valuation of your healthcare company might be the most important thing you do this year.

Today’s turbulent healthcare industry offers many challenges for healthcare executives. Despite this, providers can create significant value that will help them to build their healthcare businesses, finance growth, and ultimately sell their companies for the best price. Seven key value drivers for healthcare owners in 2018 include the following

Specialty physicians typically have high-demand skills, possess great passion for their specialty, work ungodly hours, seek out the newest therapeutic developments, and do what they can to advance the standing of their profession in the minds of the public.

Specialty physicians also face unique challenges when preparing for a life transition, such as retirement. For many, their practice is a part of who they are, making it difficult to give up control. Many wonder: What will life be like without my professional identity?

The instability of the healthcare market and anticipated reimbursement changes under TrumpCare have created some challenging questions for specialty practice physicians who are planning for retirement:

How do I best prepare myself for a transition?
Will I be able to sell my practice to another physician or buyer?
What is my practice worth if sold today?