Business operations: Get perspective on valuation
There’s often a wide gap between what an HME provider thinks his business is worth and what an investor will actually pay, according to Craig Hittle of Somerset CPAs. At Medtrade Spring, Hittle will offer some perspective on what your company might be worth, and how to strengthen it for maximum valuation.
HME News: What are the factors most impacting valuations right now?
Craig Hittle: In this particular industry, valuations are built on future cash flows of the business. In the current environment, there is a lot of uncertainty that potential investors can’t get their arms around. When that happens, you have paralysis in terms of values and future cash flow.
HME: What do you expect to see in the future?
Hittle: With the cuts as deep as what they are expected to be, there are a lot of providers in a small cap category that aren’t going to be able to stay in business. In the next two to three years, I see significant consolidation in the industry. Once the investment market has seen that, the number of players has been reduced and reimbursement pressure has been factored in, I think it will see significant investment into this industry.
HME: What can a provider do to improve the value of his business?
Hittle: The economics are one thing. To me, that’s the easy part, looking at the cash flows of the business. But how clean will the transition be? How easy will it be for the acquiring company to integrate your business into theirs? That’s the make or break part of the transaction.
HME: What do you most hope providers take away from your session?
Hittle: To understand their business from a buyer’s perspective. Having a realistic expectation of what your business is worth will help you run it better.