Investing in an Existing Business within the Health Care Sector

by Paul Forrest on 17 Sep, 2012

When looking for a business investment, there are a number of opportunities that offer themselves as lucrative ventures. In uncertain financial times, much diligence must be exercised to protect one’s assets. Speculation in times of low economic confidence can lead to financial disaster.

Investing in an existing business within the health care sector offers a reasonable prospect of a profitable return. The UK government has recognised the value of domiciliary care for the elderly and long-term sick by financially supporting the industry. Phoenix BSC the business transfer agents, reported an allocation of an extra £150 million for people in need of home care by the Health Secretary in January 2012.

Domiciliary care, or home care, refers to giving personal care to people in their own homes. Care may consist of a daily visit to ensure that the patient, or client, is managing to take their medication; alternatively, home care may require a range of services through to full time ‘live in’ support.

Running a domiciliary care agency can be rewarding as well as profitable. The investor needs to be aware of potential pitfalls, however. Is the business as profitable as the owner claims? What regulation do care providers need to comply with? And how would one dispose of the business at the appropriate time?

Engaging the services of a recognised domiciliary care business sales agency is very important. A company with many years’ experience in buying and selling existing business in the health sector can offer vital support to the unwary investor. And when the time comes to sell up and retire, hiring exit strategy consultants with a high degree of expertise in selling successful businesses would give the seller a distinct advantage.

Operating a business in the home care sector is subject to regulation. The industry is governed by the Care Quality Commission (CQC). Regulation consists of Essential Standards that need to be followed and Regulated Activity for which business owners must register.

The Essential Standards are measured in sixteen Outcomes that relate to how the client is cared for. These outcomes include:
• Respecting and involving people who use services;
• Consent to care and treatment;
• Care and welfare of people who use services;
• Meeting nutritional needs;
• Cleanliness and infection control.

Domiciliary care providers must register through CQC before they can cater for home care clients. Guidance on how to register can also be found on the Business Link website.

The question could be asked, “Why do I need to hire an agency to buy or sell a business? Surely, I can do this by myself.”

Yes, anyone can buy or sell a business without hiring a third party. Using a professional business transfer agency will, however, help the buyer in answering various key questions.

Probably the most important question to consider when investing in an existing business is how much the business is really worth. The vendor will have put a value on the business, seeking to make as much profit as they can.

There are a number of ways to value a health care business. The buyer will want to pay what they consider a fair market value. Finding the true value of a business will consist of a number of complex calculations, including the sustainable profits, or EBITDA – Earnings before Tax Depreciation & Amortisation, and surplus net current assets.

Other factors will affect the true value of the business; these could include the type of care given, the age range of the clients, the geography of the clientele, the level and depth of management services by the previous owners, among others.

With all these factors to consider, engaging the services of a business transfer agency with experience in the domiciliary health care sector would seem to be a wise move; and has the potential to save the new owner thousands of pounds, not to mention the sustainability of their investment.

About the Author

Paul Forrest

Paul Forrest is an experienced writer in many fields of interest and we are delighted that he will now be a regular contributor to in 2012.