Understanding How Your Business Is Valued

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When it comes to valuing your caregiving agency, two factors carry the most weight: cash flow and risk.

At the core, buyers are purchasing future income — and that income is typically represented by one of two key metrics: Seller’s Discretionary Earnings (SDE) or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA). These figures reflect the true earning power of your business and are often the foundation for establishing a selling price. Simply put: the stronger and more reliable the cash flow, the higher the value your business can command.

But cash flow is only part of the equation. Risk plays a major role in how buyers evaluate what that income is worth. Risk factors include things like customer concentration, reliance on key staff, payer mix, regulatory exposure, market competition, and even how dependent the business is on you, the owner. The more risk a buyer perceives, the more they may discount the value to account for it.

As part of our valuation process, we look at both your financials and operational risk factors to give you a realistic picture of your business’s value, and what can be done to increase it before you sell.