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36
BUYING A SMALL BUSINESS

Gold in Oldies
 

For sale: A small assisted living residence, near Atlanta, that the owner built for Mom.
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In 2000, a former banker and his wife, along with another couple, built this 30-bed assisted living facility on seven acres in Butts County, Georgia, 45 minutes outside Atlanta. The banker, who bought out the other couple in 2004, designed the 16,700-square-foot facility in part for his mother, who lived there until her death last year. The building is separated into three groups of 10 bedrooms, each with its own living area. With an eye on expansion, the co-founders built the kitchen to support as many as 100 residents. The banker says that if he were to expand, he would add a 24-bed Medicaid unit and a 30-bed Alzheimer's unit, which would cost a total of $650,000 to build, he says.

Unlike its three local competitors, this residence is a private-pay facility, meaning it doesn't take Medicaid patients and charges roughly $100 per month more than nearby facilities. Despite minimal marketing, the residence is full and has a six-person waiting list. The company employs 18 people, including shift supervisors, dietary aides, and nursing assistants.

The business has turned a profit in four of the past six years. This year, the owner began paying himself $5,000 a month in salary. He recently moved to Florida and hopes, with a sale, to take a step closer to retirement.

Price: $2.2 million, including the business and building, 6.69 acres of land, furniture and equipment, and the 34-bed state license. A contiguous two-acre lot is also for sale for $300,000.

Price rationale: This multiple is high, but probably justified by the opportunity for expansion, says Stephen M. Monroe, editor of SeniorCare Investor, a publication that studies the health care and senior living markets.

Pros: Families tend to prefer newer facilities, and this is the newest in the area. And the market is growing: Georgia's 65-plus population should reach 1.2 million by 2015, up from 852,000 in 2005.

Cons: For small facilities, the cost of capital will always be high, Monroe notes. And if a buyer expands, the marketing budget will probably jump noticeably as the center strives to fill additional beds.

Outlook: The larger kitchen and the unused land make expansion feasible, which is key. With the business at capacity, the only way to increase revenue is by expanding or by raising prices.

Gross
Revenue
EBITDA* Owners'
Comp
2004 $475,000 $85,000 $0
2005 $610,000 $228,000 $0
2006** $683,000 $250,000 $60,000

*Earnings before interest, taxes, depreciation, and amortization. **Projected

Inc. has no stake in the sale of the business featured. The magazine cannot confirm the accuracy of financial or other information offered by the seller. Inquiries should be directed to Tom MacPherson at Summit Acquisitions Group at (770) 753-4323 ext. 14 or TomM@SummitAcquisitions.com.

Last updated: Nov 1, 2006




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