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Respiratory, Mobility, & Sleep Therapy Equipment Rental--$2.8M in Revenue

With year-over-year growth in sales and 1,800+ active rentals!

CASH FLOW
$489,746

Specifications

  • Price
    $1,650,000

  • Revenue
    $3,164,940

  • Cash Flow
    $489,746

  • Equipment
    $312,638

  • Inventory
    $292,949

  • Location
    Northern California

  • Account Receivable
    $596,954

  • Reason for Sale
    Retirement Planning

  • Profit Margin
    15%

  • Employees
    18: 8 full-time and 10 part-time

With year-over-year growth in sales, this home medial & respiratory equipment rental company boasted over $2.8M in sales in 2020! There are 18 qualified and knowledgeable employees already in place; personnel includes 8 full-time and 10 part-time employees in customer service, billing, delivery, and respiratory; they qualify patients to receive equipment and products that will be covered by the client’s insurance plan. This company provides guidance to clinicians and other professional healthcare workers on how to request equipment and services for patients. With over $600,000 in assets and a 15% profit margin, sales and cash flow grew in 2020 even amidst COVID-19. This company’s primary value proposition is that they help patients and their families navigate the complex health care environment and obtain medical equipment and supplies. They currently have a 40,000+ customer base and 1,800+ active equipment rentals; rental income is approximately 72% of monthly revenue. They have long term relationships with the medical community are a preferred provider for local hospitals.

 

With limited marketing, clients come in from referrals, insurance, and contracting. Some areas of growth include implementing integrated web commerce and telephone systems and home fill oxygen solution for portable tanks, bringing the billing process in house or negotiate better rates for outsourced billing, and expanding wound vacuum referrals and lymphedema therapy referrals.

 

Priced at $1,650,000, a 12.5% down payment of $206,250 returns $278,739 in the first year after debt payments – a 135% return on investment! The two owners are planning for retirement and have set no specific time frame for involvement but anticipate some form of personal service agreements and/or W2 employment for undetermined length of time after the transaction. They want a successful transition to ensure clients remain with the company long term.

Business Highlights

  • Revenue: $2,814,311
  • Cash Flow: $432,448
  • Year Established: 30+ years
  • Location & Service Area: Northern California
  • Clients: Patients independently and from doctor and provider referrals 
  • Services: Provides home medical and respiratory equipment and knowledge on logistics
  • Employees: 18: 8 full-time and 10 part-time
  • Reason for Selling: Retirement Planning
  • Seller Training Period: 6 Months

Operations / Products

This company aims to help patients and their families navigate the complex health care environment and obtain medical equipment and supplies. They have long term relationships with the medical community and are a preferred provider for local hospitals. They are able to provide a solid understanding of the criteria required for the equipment based on insurance. 

This company provides medical and respiratory equipment, mainly sleep apnea related, while also providing the knowledge on logistics. Rental income is approximately 72% of monthly revenue. They comes across new job opportunities through insurance and contracting. In any given month, they have approximately 1,100 orders entered. There is hardly any travel associated with the business

They now have an online catalog from home medical and respiratory equipment from leading manufacturers.  In the online catalog, there is a wide assortment of portable oxygen concentrators, CPAP machines and CPAP masks, electric hospital beds, patient lifts for the home, low air loss mattresses, walkers and rollators, wheelchairs in a variety of styles, Golden Technologies lift chairs, TENS units for pain management, and so much more.

Some of the products offered:

  • Portable oxygen systems
  • CPAP machines and CPAP masks
  • Electric hospital beds
  • Bath safety equipment
  • Patient lifts for the home
  • Low air loss mattresses
  • Orthotic bracing (non-custom)
  • Walkers and rollators
  • Wheelchairs in a variety of styles
  • Golden Technologies lift chairs
  • Wheelchair seat cushions
  • Bed wedges
  • TENS units for pain management
  • Compression stockings
  • Aids to Daily Living (hip kits, reachers, etc.)

Financial Highlights

  • List Price: $1,650,000

 

  • 2020 Cash Flow: $432,448
  • A/R: $596,954
    • These are insurance claims that do not get written off until they are paid.
  • A/P: $167,827
  • Assets: $605,587
    • FF&E: $73,826
    • Vehicles: $238,812—4: 3 Trucks and 1 Utility
    • Inventory: $292,949
    • Leasehold Improvements: $95,985
    • Intangible: Strong relationships with patients and providers, knowledgeable staff of equipment and insurance practices

*See additional asset information in the attachments

*amounts may vary

Cash Flow Analysis

Description of Financial StatementP&L StatementTax ReturnTax ReturnNotes
2021 (Dec 2020-May2021)20202019
GROSS SALES$1,587,470$2,814,311$2,696,605Annualized
Annualized
Net Income Shown on Financial Statement$120,658$50,790$-150,501
ADDBACKS
Compensation to Owner$117,353$203,200$167,542Owner 1 and 2
11% Tax on total W2 Salaries$12,909$22,352$18,430
Depreciation - COGS$0$13,852$15,480
Interest$72,307$256,569$95,153
Officer Life Insurance$1,295$5,636$11,701
Depreciation & Amortization$0$87,609$9,039
Auto$9,000$18,000$18,000$1,500/month Personal
Owner 1 Replacement$-40,000$-70,000$-70,000
Owner 2 Replacement$-20,000$-30,000$-30,000
Contributions$0$1,364$0
Bad Debt / Recovery$0$-144,636$268,232
Software Conversion$0$0$0
PPP Income$0$0$0
Owner's Health Insurance $0$17,712$5,712
Adjustment$0$0$0
TOTAL ADDBACKS$152,864$381,658$509,289
Seller's Cash Flow = Total Addbacks + Net Income$273,522$432,448$358,788
Annualized
Profit Margin17.23 %15.37 %13.31 %

The jump in cash flow from 2019 to 2020 is a result of the cleaning of their record keeping and changing the software used. For a long time, they were using Bonafide Legacy Company, but were having a massive number of issues with record keeping and filing claims. They are now using Brightree, an industry standard.

Valuation

Funding Example

Purchase Price:

$1,650,000

$
%
OR
$
%
OR
$
Years
%

Bank Loan Needed: $

Years
%
$
$
$
$
$

Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
2-year average cash flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2-year average cash flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

Attachments

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210 N 78th St. 2nd Floor
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The Firm is not a real estate brokerage and therefore the staff will not handle any aspect of the lease, sale or purchase of real estate.