We establish a valuation range based on transaction data we have within our firm. The valuation metrics are based on EBITDA, Revenue, and certain components specific to your healthcare segment. For instance, census, geography, services, may all play a part in increasing or decreasing value.
In general, Income (financial) and 2) Operational Benefit will add to the value, whereas certain 3) Risks will detract from value.
- Income for the purposes of valuation starts with Revenue. In most cases, we know the revenue per patient. Profit is used for valuation in the form of cash flow, or adjusted EBITDA.
- Operational Benefit is based on quality of labor (caregivers), a differentiated product or service, or strong contracts. With one or more of these we can usually drive a higher multiple.
- Risk will reduce the multiple. Risk are usually based on patient concentration, high attrition, non-compliance, or pending litigation.