Niche medical billing service with stable, reliable government clients

Transcription

1 Niche medical billing service with stable, reliable government clients This 25+ year old company provides a narrow niche medical billing service that primarily serves city and county government agencies on a recurring basis. About 60% of its clients have been retained for 5+ years, and since they are primarily government agencies receivables are timely (the current owner has not had any write-offs of bad debt). Its top client represents less than 7% of revenue so there s limited risk associated with concentration of revenue from any given client. In addition to its stable and predictable pool of clients, this business has a well-trained staff with deep and broad industry experience. About 20% of staff have been with the company for more than 10 years. Being able to rely on such a high quality staff makes the owner s life easier as there are fewer personnel issues, staff make fewer mistakes (which leads to more satisfied clients), and the owner is able to focus on bigger-picture issues. The primary demographic that the business clients serve are elderly persons. As the bulging Baby Boomer demographic (birth years of ) enter old age, even without attracting new clients this business should see a demographically driven increase in business over the next 35 years. Furthermore, as a need-driven business, it is recession resistant since demand is not correlated to the economy. This business would be a good acquisition for an individual or for a strategic buyer such as: 1, a medical billing company that would like to grow through acquisition of a narrower niche focused company; 2, a medical billing company that doesn t have a presence in the Pacific Northwest; or 3, a company that sells other products or services to city and county governments and would benefit from being able to cross sell this business service. Listing Number Type of Business Location Year Founded FT Employees* PT Employees* Why Selling Price FF&E Seller Financing Seller Financing Details Months Niche medical billing service 2/28/2015 Greater Seattle Metro Relocation and other business interests Revenue Seller Disc Earnings EBITDA $767,264 $4,300,000 $120,044 included in sale price Possible depending on buyer, price, and deal terms Seller will carry up to 10% in a seller note

2 Benefits of This Business Long-term, repeat monthly clients generate high quality, low-risk, diversified revenue. Nearly 60% of clients have been with this business for 5+ years, and produce highly predictable repeat monthly revenue. Nearly all clients are municipal or county governments so receivables are timely and there have been no write-offs of bad debt under the current owner. Last year, no client represented more than 7% of revenue so there s a low level of risk from revenue concentration. Quality operations systems are in place that allow for significant future growth From the time the seller acquired the business in 2009 through 2013 he focused heavily on reengineering systems to make the business more efficient, effective, easier to manage, and more accurate. In 2010 Sales, General, & Administrative expenses were 96.4% of re-cast revenue, by 2014 they had dropped to 78.9% of revenue. This business is teed up for a buyer who wants to more aggressively focus on sales and marketing. Well-trained, long-term staff make an owner s life much easier Employee retention is excellent. Nearly 20% have been with the business for 10+ years, half have been employed 3+ years, and 75% have been employed 2+ years. It s a positive place for employees to work, and they feel like they are making a difference. For an owner this means that there are fewer personnel headaches, and staff make fewer mistakes than if there was higher turnover, which leads to more satisfied clients. A 25+ year reputation of excellence makes it easier to secure new clients The clients that this business serves are relationship oriented (with others in their occupation, as well as their key vendors). Given this business 25+ year reputation for exceptional service, if a prospective client wants to check references, most will already know people at one or more of this company s 132 highly satisfied clients, which makes securing new business easier. The business will be impacted by favorable demographics for at least the next 35 years The bulging Baby Boomer demographic (birth years of ) have started to enter old age. The majority of the consumers of this business clients services are elderly persons. Consequently, for about the next 35 years the large aging population is going to result in more business from current clients. Furthermore, it is a need-driven recession-resistant business. The business can likely grow 10-15% without additional staff or Capital Expenditures With the combination of excellent operational systems and the fact that the business is currently likely a bit over-staffed for the volume of work, the business should be able to grow 10-15% before additional staff and capital expenditures are needed. This may lead to higher profitability in the next couple of years as fixed expenses become a lower percentage of total revenue. A new owner can choose to be relatively passive or far more active With strong systems in place, and quality well-trained staff, a buyer could further delegate work and be a more passive owner, or, if preferred, take a more active role. An owner focused heavily on marketing and sales could likely significantly grow the business.

3 Opportunities Create a marketing department and hire sales people This business has relied on its reputation for stellar service and word of mouth to attract new referral business. Marketing activities are limited to responding to Requests for Proposals. The current owner has focused on improving the business operations. Now the business is ready for a leader who will focus on marketing to grow the business and take advantage of the business strong operating system. It is anticipated that the company could be grown significantly by establishing a marketing department and employing sales people to more proactively secure business. Pursue clients who are doing in-house billing or using a general medical billing company Many of the types of clients that this business targets have tried to do in-house billing, or use a more general medical billing company. Unfortunately, the traditional medical procedure billing systems that tend to be used when doing in-house billing or using a general medical billing company are not set up to deal with this niche and the corresponding unique issues. Because of this, prospective clients may be losing considerable money due to under-recovery of claims and as a result of extra personnel time associated with an inefficient system. This company has not made an effort to identify or aggressively pursue such clients. Profits should grow as revenue grows due to current over-staffing This business is currently a little over-staffed in anticipation of future growth. Consequently, revenue can likely grow substantially before additional staff need to be hired. It is anticipated that this will boost the net profit margin to around 30% before increases in labor will be necessary. Increase prices given that there hasn t been a price increase for six years The business is planning a price increase at the anniversary of the client contract (this will occur in December). This will likely add $50k-$75k in additional revenue, which will drop to the bottom line. Typically, the business charges a price per claim plus actual postage expense. About 80% of clients pay $ $24.00 per claim. Very small clients are on a sliding scale of $35/each for 1-10 claims; $30/each for claims; and $25/each for 21+ claims. For these smaller clients a price increase of $1/claim is planned for December 2015.

4 Financial Year Mos Ending 2/28/15 Sales $2,175,484 $2,465,371 $2,522,986 $2,775,036 Cost of Goods Sold Gross Profit $2,175,484 $2,465,371 $2,522,986 $2,775,036 Depreciation Amortization Sales General & Admin Net Operating Profit ($77,455) ($95,981) ($2,027,812) ($25,764) ($88,112) ($95,981) ($2,253,619) $27,659 ($54,538) ($95,981) ($2,125,825) $246,642 ($2,189,568) $585,468 ($2,228,193) Interest Expense Interest Income Other Financial Income ($68,090) $3,800 ($62,246) ($44,289) $4,696 ($25,136) ($24,091) Profit After Financial Items ($90,054) ($34,587) $207,049 $560,332 $593,773 Exceptional Expense Profit Before Tax ($90,054) ($34,587) $207,049 $560,332 $593,773 Tax Net Profit After Tax (NPAT) ($90,054) ($34,587) $207,049 $560,332 $593,773 EBITDA $147,672 $211,752 $397,161 $585,468 Capital Expenditures Estimated Fed & State Tax Operating Free Cash Flow $147,672 $211,752 $397,161 $585,468 EBITDA Market Rate of Owner Salary Seller Discretion. Earnings $147,672 $297,072 $211,752 $361,152 $397,161 $546,561 $585,468 $734,868 $767,264 Any financial or operating information relating to the company was prepared by, or from figures, documentation and information supplied by the Seller. Codiligent LLC, its principals, and employees can not guarantee the accuracy, completeness, quality, or reliability of information, financial data, or assumptions provided. A buyer should not rely on Codiligent LLC, its principals, or employees for any investigation, interpretation, or opinion as to the accuracy, completeness, quality, or reliability of said information. A buyer should conduct its own independent investigation and evaluation of this business opportunity, ascertain the accuracy, quality, reliability, and completeness of information provided, and assumptions used, and develop and rely on independently developed projections. Codiligent LLC, its principals, and employees shall neither be responsible for the accuracy, completeness,quality, or reliability of information, financial data, assumptions used, or projections provided, nor shall it be responsible for Buyer relying on said information and data.

5 Market Comparable Value Multiple Value Estimate Value Adjusted For Deal Structure* Weighting Weighted Value Revenue $3,159,123 $3,159,123 2% $63,182 Gross Profit $3,614,492 $3,614,492 3% $108,435 SDE $767, $4,196,934 $4,196,934 20% $839,387 EBITDA $4,887,304 $4,887,304 75% $3,665,478 Total weighed value $4,676,482 * Deal Structure Adjustments (as of 2/28/15) Cash & Deposits will be retained by Seller Marketable Securities will be retained by Seller Inventory is N/A Accounts Receivables will be retained by Seller FF&E will transfer to Buyer Real Property is N/A PrePaid Expenses will be Seller's property Current Liabilities are Seller's Obligation Total Deal Structure Adjustments

6 BUYER REGISTRATION FOR CODILIGENT LISTING # Thank you for inquiring about Codiligent listing # Confidentiality in this transaction is of utmost importance. A more comprehensive package of confidential information is available to qualified buyers who complete and submit the following forms to Codiligent LLC. You are welcome to submit an alternate certified personal financial statement in place of using the provided form. Please submit these forms by e@codiligent.com or Fax: Name: Phone: Mobile Phone: Company: Address: City, State, Zip: Website: Are you an owner, director, shareholder, manager, employee, advisor, or consultant to any other businesses in this business industry? YES or NO (please circle one) If you answered Yes to the last question, name the business(es) and describe your affiliation: Please describe your career background in 2-3 sentences: What s the source of your down payment: What is the minimum average annual return on equity that you require? % What are your top acquisition criteria? What is most appealing about this business based on information you have already reviewed? What concerns do you have about this business based on the information you have thus far? What businesses / industries or geographic locations are of interest for an acquisition? Businesses / Industries: Geographic Locations: FAX:

7 CONFIDENTIALITY AGREEMENT FOR CODILIGENT LISTING THIS IS NOT AN AGENCY AGREEMENT Neither this agreement nor any other communications between Codiligent LLC and you will establish a Principal-Agent Relationship, unless explicitly stated in writing. Codiligent LLC represents the Seller. Nothing in this agreement shall be construed to create a Principal-Agent Relationship between you and Codiligent LLC. You agree and acknowledge that you will engage professional advisors as you deem necessary and appropriate in connection with a potential acquisition, and that Codiligent LLC is only providing you with certain information. You agree and confirm that you have neither engaged Codiligent LLC to provide any advice to you about an acquisition, nor will you rely on information provided by Codiligent LLC in making a purchase decision. Codiligent LLC makes no representation or warranty, express or implied, as to the truth, accuracy, or completeness of any information provided to Codiligent LLC by the Seller. You further agree that you have not established a Principal-Agent relationship with Codiligent LLC. CONFIDENTIALITY This Agreement is made between the undersigned individually, and any business entity in which the individual is employed by, an officer of, or has a financial interest in, as well as any such entity s officers, directors, employees, agents and advisors ("The Buyer ) and Codiligent LLC for the benefit of Codiligent LLC and the owner ( The Seller ) of the number-designated business listed above ( The Business ) of which information is being requested. In consideration of the disclosure of confidential information regarding The Business by Codiligent LLC to Buyer, it is understood and agreed that: 1. Confidential Information is defined as: all information received by The Buyer from Codiligent LLC or The Seller now and in the course of future investigations or due diligence, which is not available to the general public. This confidential information includes all oral, written, or electronic data inclusive of, but not limited to, records, reports, analyses, photos, plans, financial statements, policies, procedures, ideas, customers, samples, notes, and studies. Anything prepared by Codiligent LLC, The Seller, or another party pertaining to The Business is to be considered Confidential Information unless explicitly stated in writing otherwise by Codiligent LLC or The Seller. If there is any reasonable doubt whether anything is, or may be Confidential Information, it is. 2. The Buyer will not disclose any Confidential Information or make known by confirmation, that this company, division, or product line is for sale or that financing is being sought, either before or after termination of investigations or negotiations to any person or organization not authorized in this agreement. 3. Without specific prior written approval of Codiligent LLC or The Seller, The Buyer shall not provide any Confidential Information to any broker, intermediary, lending institution, prospective equity partner, syndication member, investor, or other financing source. If disclosure to such parties is desired, Codiligent LLC may require the execution of a separate confidentiality agreement with those parties. 4. The Buyer will not contact the The Seller s employees, customers, suppliers, competitors, accountants, bankers, or attorneys to discuss The Business or seek information about it, without written permission from Codiligent LLC or The Seller. 5. The Buyer will not contact The Seller directly unless authorized by Codiligent LLC. 6. All Confidential Information provided by Codiligent LLC or The Seller to The Buyer shall be used solely for the evaluation of a potential acquisition or financing decision, and shall not be used for any other purpose. 7. All Confidential Information shall be promptly returned or destroyed, as directed by Codiligent LLC or The Seller. 8. The Buyer shall not enter into any agreement for the purchase of stock or assets of any companies about which Codiligent LLC furnished information to The Buyer, unless said agreement contains an acknowledgement that Codiligent LLC is the procuring cause of such agreement and Codiligent LLC is entitled to a commission as agreed upon by such company and Codiligent LLC. Dated at am/pm this day of 20. Name (printed): Phone: Address: Signature: FAX:

8 CERTIFIED STATEMENT OF PERSONAL WORTH AND INCOME Name (printed): Date: Address: Phone: I certify that the following information is true & accurate (please sign) ASSETS Cash on Hand US Government Securities Other Stocks & Bonds IRAs & Tax Deferred Retirement Accounts Accounts, Loans & Notes Receivables Cash Surrender Value of Life Insurance Real Estate Equity in Business Owned Automobiles Plane, Boat, RV, Motorcycle Household Furnishings and Personal Effects Other Assets AMOUNT IN US$ TOTAL ASSETS LIABILITIES & NET WORTH Credit Card Debt Line of Credit Balance Notes Payable Auto Loans Liens on Real Estate Plane, Boat, RV, Motorcycle Loan Other Liabilities AMOUNT IN US$ TOTAL LIABILITIES TOTAL NET WORTH (ASSETS - LIABILITIES) SOURCE OF INCOME Salary Bonus & Commissions Dividends & Interest Income Business Income Real Estate Income, Royalties Other Income AMOUNT IN US$ TOTAL INCOME FAX: