Home healthcare franchise

Hi! I did some searches in the DealStats database for home health comps between 500SDE and 1M SDE and came up with a average MVIC/EBITDA multiple of 4. I'm happy to discuss the database with you further if you have any questions.

It always gets down the the debt coverage ratio, how much you put down and bank loan metrics. If you are using an SBA, I always use 10% down, 10 yr. amort. SBA legal limit is 1.2 but never had a buy client pay more than 1.5X in debt coverage ratio. That is what I use for the highest that can be paid (and that is what the banks will look at as he who holds the Gold makes the rules). Then you have to look at all the soft factors as there is always a standard deviation of 25%+/-. Generally all businesses in almost every industry, the average SDE is 2.78 and EBTIDA is 3.81X (true EBITDA not what you see listed as most confuse SDE and EBITDA). Its all about cash flow. And as the business is bigger, then the multiples increase at a 45 degree angle. I have helped Buyers buy a few franchises as well as independents. It is a lot easier for someone not in the business to buy a franchise. Many independents are small, no marketing, owner is big part of the equation, etc. Negatives of Franchise is geographical growth, restrictions on doing skilled care and Medicare clients. But you look at the Cash Flow after franchise fees.

Some states are crazy in the approval process, in one deal in NY, because they accepted Medicaid, had to go through state approval and took 13 months AFTER the Purchase Agreement (not the LOI) to get approval. The old owner even had a heart attack during this time and thank god he didn't die. This was a franchise, and the new owner double sales and profitability in 24 months.