Sometimes the business you launch is not the one you end up with. This company, for example, was founded in 2001 to provide temporary IT help, but with the tech bust, it had a hard time finding business. When a potential customer asked the founder if he could provide registered nurses instead--and told him he'd hire as many as the company could supply--the business was reborn.
The company will gross more than $4 million in 2007, and the owner projects sales of more than $7 million in 2008. Half the business comes from filling per diem staffing gigs; the remainder comes from placements for travel nurses, who take high-paying three-month assignments in hospitals and nursing homes.
Today, the company's roster of nurses stands at 402, and it has long-term contracts with 100 customers, including most of the hospitals in New Jersey, which is facing a brutal shortage of RNs. Indeed, the company's biggest challenge is recruiting and retaining nurses in an intensely competitive industry. To keep its Nightingales in the fold, this company offers full health benefits and a 401(k) plan and sends workers cards on their birthdays and gifts on special occasions. The owner, who works about 24 hours a week, says he is selling to spend more time with his family.
|Gross Revenue||$3.4 million||$3.3 million||$4.2 million|
|Seller's Discretionary Cash Flow||$512,328||$484,344||$651,768|
|Nurses Under Contract||280||300||402|
The Asking Price: $4.25 million, which includes the nurse roster and the accounts. The company pays roughly $5,000 in monthly rent for two offices. For a full-price buyer, the owner will hold a $1 million note for two years. He will also provide transitional services for up to six months at a negotiable rate.
Price Rationale: Barry Asin, chief analyst at Staffing Industry Analysts, in Los Altos, California, says that most health care staffing firms sell for four to five times EBITDA. This owner is asking for a little more than six times projected 2007 cash flow, using the fact that the company is growing fast to justify the high price.
The Pros: After a blah 2006, revenue jumped almost 27 percent in 2007 with the opening of a second branch office. And the owner says his gross margins are 29 percent, which is about 5 percentage points above average, according to the data reported by large public companies in the industry.
The Bottom Line: This company is growing fast even by the standards of its booming market. To maintain that level of growth, Asin advises a buyer to focus on retention. In a business known for relationship-driven sales, a company is vulnerable to losing accounts if its reps walk in the period after an acquisition.
Inc. has no stake in the sale of the business featured. The magazine does not certify the accuracy of financial or other information provided by the seller. Inquiries should be directed to Mike Perica, Westminster Acquisition Partners (firstname.lastname@example.org or 866-967-0010)).
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