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How to Value a Women's Apparel Store

Posted on April 29, 2013

A.         Nature of the Business

 

Home health care allows individuals to stay in their familiar surroundings while receiving one-on-one medical care.  In most cases, home care is for individuals who require ongoing care that cannot be adequately provided by family or friends.

 

IBISWorld reported in December of 2012 that there was over 297,000 home care providers in the United States with $70 billion in revenue, and the industry had annual growth at 4.6% from 2007-2012.  IBISWorld also reported that the industry’s growth has been fostered by a continued movement toward cost-efficient treatment options from public and private payers; the prevalence of chronic disease; an aging population; and strengthening physician acceptance of home care.

Generally, the two types of home care service providers are therapy and skilled nursing care and attendant/custodial care. Therapy and skilled nursing care typically only provides services to recipients that have been referred by a physician. Custodial and attendant care services have no eligibility requirements. The patient, family member or health care professional can arrange for custodial care services.

 

The services offered by Home Health Care businesses fall into five general categories:

  • Health Care Services can include taking vital signs, changing bandages and dressings, and assisting with medications.
  • Skilled Health and Therapy Care Services includes registered nurses, physical therapists, occupational therapists, and speech therapists to give skilled nursing care and rehabilitative therapies at home.
  • Meal Services provide meals to patients in their homes.
  • Homemaker Services provide home management assistance for the patient.  This may include grocery shopping, housekeeping, laundry, and other daily tasks.
  • Personal Care Services provide assistance with daily routines and personal tasks for the patient.  This may include bathing, dressing, eating, grooming, using the restroom, etc.

 

Home healthcare can be paid for either out-of-the-pocket or through the individual’s insurance provider.  Patients will generally have to be referred by physicians for those who intend to use Medicare, Medi-Cal, HMO, PPO, private insurance, and/or workers’ compensation insurance.

 

B.         Industry

 

In April of 2011, IBISWorld analyzed 236,741 home care providers and found industry costs had percentages equal to a profit of 6.8%, rent of 1.5%, utilities of 0.5%, depreciation of 3.0%, wages of 44%, purchases of 25%, and ‘other’ totally 19.2%

 

C.         Income and Expense Pro Forma – The following is general information regarding the        profit / loss of the business.

 

$2 million to $10 million – Home Health Care Services (NAICS #621610)1

 

1      Net Sales                        100%

2      Operating Expenses      94.8%

3      Operating Profit               5.2%

4      All Other Expense (net)   1.4%

5      Profit Before Taxes         3.8%

 

1 RMA Annual Statement Studies 2012-2013. (Philadelphia: RMA, 2012), p.1498-1499.

 

D.         Valuation (Not All Inclusive)

 

1      Cost Method:

a      Generally also known as the Asset-Based Approach, the Cost Approach values a company by determining what proceeds can be derived from selling off assets, less the cost of satisfying liabilities. This approach determines a company’s value by analyzing the market value of a company’s assets.  Many times this serves as a valuation floor since most companies have greater value as a going concern than they would if liquidated.

 

2      Income-Capitalization Method:

a      Discounted Cash Flow Method/Earnings Method/Capitalization Approach:     The worth of a company is based on the earnings or cash flow that the company can generate in the future for the benefit of its stockholders/owners. These protected earnings are discounted to present value, which includes the terminal value of the business.

b      Excess Earnings Plus Adjusted Book Value Approach: This method relies on the historical earnings performance of a company.  Generally, excess income is capitalized to determine Goodwill.  The Goodwill in addition to the adjusted book value of the net assets can be used to approximate the worth of a company.

c      EBITDA Approach / Value Over Costs’: This approach is short for ‘Earnings Before Interest, Taxes, Depreciation and Amortization’.  This method is used to determine how much money a company is making before taxes, depreciation, and amortization have been deducted.  Then, EBITDA is multiplied by the inverse of the appropriate capitalization rate to determine value of the company.

 

3      Market Method:

a      Guideline Company Approach : Under this approach, the fair market value of the business is determined by comparing the sales data of private companies sold, i.e. have the same standard industry classification code (SIC Code). This approach may be less effective for the valuation of a closely held business if adequate data is not available.

 

Rules of Thumb: The rules of thumb for home health care agencies vary based on numerous factors.  Please contact Zamucen & Curren at (949) 955-2522 for applicable rules of thumb.

 

E.         Associations

 

National Association for Home Care & Hospice

228Seventh Street, SE

Washington,DC20003

(202) 547-7424

Fax (202) 547-3540

www.nahc.org

 

Home Health Nurses Association (HNN)

228 7th Street, SE

Washington,DC20003

(202)547-7424

www.hhna.org

Zamucen & Curren (160 Posts)


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