Selling a home care business can be an extremely personal and difficult experience. For most of the clients we serve, the home care agency they built represents a significant investment of capital, hours, effort, blood, sweat and tears.

Securing a positive return on investment is obviously top-of-mind for business owners, however, many are more interested in safeguarding the legacy they have worked so hard to create. In most cases, owners of home care agencies have poured their heart and soul into the business, and it’s not uncommon for me to hear they want to know the business will continue to match families with responsible, compassionate caregivers.

Passing the torch along to just anyone is not acceptable. It’s all about finding the right buyer, one that will work to ensure the business continues to enjoy a positive reputation. Of course, the numbers are always going to be important, and if the goal is selling for the highest possible price with the best possible terms and conditions, there are a variety of factors that should be considered, including:

  • Financial reports. This is an area where it is especially important to analyze your business from the buyer’s perspective. Are the books in order? The financials begin with tax returns. Buyers review the net income on the return and then add back expenses on the profit and loss (P&L) to figure out the Sellers’ Discretionary Earnings (SDE). It is easy to see how this can get complex, as there are many other metrics buyers will have to consider, including non-recurring expenses, owner expenses, and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA).
  • Systems and processes. Buyers will want to know the business is efficient in terms of operations. As an example, home care agencies that are fully staffed will generally produce around 10 to 20 percent SDE as a portion of revenue. It’s also important to point out that businesses with written descriptions of key workflow processes and systems will be more marketable to potential buyers.
  • Employees. In most cases, buyers will want to meet a few of the key employees. They will also want to know about the level of turnover, the amount of experience employees have, how much compensation they receive, their job role(s) and skill sets. Having a ready-made description of the specific role you play as an owner is also important. Understanding that the caregivers are the lifeblood of the business, and turnover in this segment is traditionally very high, buyers will want to review your recruitment/retention processes.
  • Sales process. An established process for nurturing leads and understanding key metrics should be in place. Buyers will need to know the percentage of leads that are converted into consultations, the percentage of consultations that convert to clients, and the sources that are used to capture leads.

There are many other items to consider and sellers should be aware that most buyers will likely have to obtain a small business loan prior to purchasing. To successfully obtain this type of loan, buyers will have to be able to provide a variety of information and paperwork.

Being proactive about preparing your business for sale is one of the most important steps to preserve your legacy and achieve your personal financial goals. Working with an experienced broker can help to ensure that small mistakes and/or oversights do not produce a ripple effect that negatively impacts the transaction. Some owners are successful selling their agency themselves, but many are not.  A broker can help you understand the prevailing market rates for your agency and negotiate a win for the seller, buyer, employees and clients.

As with many other things in life, it pays to work with a specialist. This can be the key to a positive experience, as there are many other factors a buyer will review and consider before moving forward. This is partially why I wrote a book on the subject, to provide a straight-forward, no-fluff blueprint of items for both sellers and buyers to consider.

Dallas Romanowski is managing partner with Homecare United, a home care business broker. He and transaction adviser Larry Blacker will present a free McKnight’s Home Care webinar next Wednesday, May 3, at 1 p.m. ET. The title is “When valuations fall: How to stay on top of trying home care market conditions.” Register here. If you’re interested in downloading a free copy of an e-book from Homecare United, visit www.homecareunited.com.