But is Your DME Business Ready to Sell?
What an exciting time selling a business is. You have worked hard to build a business that provides value and is ready to sell… but is it truly ready to sell?
Have you taken the appropriate steps to MAXIMIZE your value?
Fifty percent of all business offers fall through and do not culminate in a sale. The top reasons are as follows:
1. Initial numbers do not line up
2. Poor accounting
3. Buyer changes the terms of the agreement
Now imagine all that euphoria that you felt in the beginning of the process leaving in an instant now that the offer falls through and you either need to start the process over again or go back to the table, make improvements to your business, and then relist the business for sale.
Would you like to avoid that level of frustration and pain? Of course, you would!
As someone who has been intimately involved in a number of acquisitions and sales, allow me to help you avoid the pain and understand how to get your business ready to sell and how to have the confidence that the offer will withstand the buyer’s due diligence.
Most people are never fortunate enough to be a business owner, nonetheless, be in a position to sell a business. You need to make your best impression the first time and then be able to withstand due diligence.
Here are the top five areas that I would focus on prior to listing my business for sale:
1. Financial & Operational Excellence
a. Are your financials accurate? When were they last audited? Are there any skeletons in the closet?
b. What percentage of outstanding AR is likely to be collected? Based on what? What are your historical bad debts rates? Are they improving, worsening, staying the same?
c. Do you have documented SOP’s? Do you follow them? How often do you update them? For call center type businesses, do you have scripting? What do you do to ensure quality and compliance?
d. Training programs, corrective action policies, and accountability tools?
e. HR files compliant and up to date?
f. Accreditation records, NPI numbers, payor contracts ready and up to date?
2. Growth & Retention
a. What has the growth rate been? Why has it been growing? How can you prove it will continue to grow? Why is it different from other businesses for sale on the market? What is your patient retention? How does it compare to other similar companies? Is it good? Can it be improved? Patient order repeat rates?
3. Compliance & Quality
a. Are there any outstanding compliance issues or lawsuits? What is your corporate compliance program? HIPAA processes? Outstanding payor audits? Historical win rate in payor audits? HR issues? Payor contract issues? IT security documented and up to requirements?
4. Documentation & Medical Records
a. What is the quality of your medical records? Do your documentation processes drive compliance and payment quality? What is your aging of claims? Do you follow payor guidelines? What documents do you require before shipping? Billing? What education has your team received to ensure compliance.
b. AOB’s, ABN’s, CMN’s, Verbal orders, medical records to cover medical justification, certified refill requests (consumables), POD’s, etc.
c. Aging of documents and impacts on unbilled revenue
d. I am beating on medical records a bit, but this is the number one reason why I have backed out of previous Letters of Intent. If documents are not good then revenue, cash flow, bad debt cannot be good.
e. Solid documentation breeds confidence in the quality of earnings. Confidence in the quality of earnings is the foundation to larger multiples and larger profits for you
5. Due Diligence Prep
a. Are you ready for due diligence? Do you have all documentation that most likely will be requested easily available, or better yet, easily downloadable so you can still drive your business while the due diligence process rages on? Do you know what documentation your buyer will request?
I hope you can check every box, list your business for sale, and secure a large multiple for your business. If you have any questions or concerns please feel free to reach out to us at Boost Advisory Group for a free consult and we will be more than happy to advise you in regards to where your business stands today, what action items you can take to improve your multiple, and how to get ready for a smooth due diligence process.
Here’s to your Success,
Michael
About the Author:
Michael Breslin is a proven business leader who is known for performance improvement, due diligence, coaching, and operational excellence. Michael is the Executive Vice-President of Boost Advisory Group, a company dedicated to helping others maximize their success through coaching, consulting, and outsourcing solutions. Michael can be reached at:Michael.Breslin@boost-llc.com/888-304-2480, ext. 1011 / www.boost-llc.com