Home Care / Home Health Diligence and Customer Concentration

July 01, 2024

by a searcher in New York, NY, USA

Hello! I am diligencing a home care deal with a focus on private pay. Total T12 EBITDA was ~$1.5M. What are typical multiples for similar businesses in the space? How do you think about customer concentration with 5-10 cases representing >50% of revenue in a given year?

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Reply by an intermediary
in Campbell, CA, USA

Can you please supply more accurate information? 5-10 is too wide a range for a specific discussion. How much more than 50% are the 5-10 clients? How many total clients do they have and what is the breakdown of their hours per week? If you have 15 8-hour clients, 10 12-hour clients, and 5 24-hour clients, you might not be so bad off because if you take good care of them, the 8-hour clients will become 12-hour clients, the 12-hour clients will become 24-hour clients, and yes, some of the 24-hour clients will drop off, but your revenue will naturally grow over time. What is the yearly revenue? I'm guessing $3.5MM-$4MM? How many caregivers do they have? How much caregiver coverage do they have per client? Do they have a pool of stand-by caregivers?

Reply by a searcher
from The University of Michigan in Denver, CO, USA

Echoing others, I would also want to understand where those high hour cases are coming from. It's very different if they all came from the same referral source vs all being word of mouth or coming from diverse referral sources. You should also dig into their general standards on the types of clients they onboard and minimums. At that level of EBITDA, if 5-10 cases represents 50% of revenue they are likely accepting very low hour clients, which can be a problem
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