How to Maximize the Value of Your ABA Therapy Business Before Sale

Thinking of selling your Applied Behavior Analysis (ABA) therapy business in 2024?

This year, ABA businesses are appealing to investors and providers as they look to serve more families and expand. Despite challenges like stagnant reimbursement rates and rising operational costs, the market presents a significant opportunity. With careful planning, we believe you can secure a favorable multiple for your company.

10 Steps for Selling Your ABA Therapy Business

Step 1: Improve Your Financial Performance

A company with strong financial performance has clear appeal to potential buyers.

Maintain accurate financial records, present consistent revenue growth and profitability, and work with your team to reduce costs and allocate financial resources efficiently. It’s important to show buyers that you’re on a path to future revenue and profit increases.

If you operate out of multiple locations or deliver in-home care in different states, keep your financials separated by location, operating company, and/or property holding company to provide a clearer picture.

Accrued Accounting

Use accrued financials over cash accounting - you’re required to by law when your revenue exceeds $25 million.

Accrual accounting paints a more realistic picture of your business’s financial health by tracking income and expenses when they occur, not when the money is received or paid. This gives buyers a clearer, long-term look at your business.

Value-Based Care

Document how ABA therapy leads to positive patient outcomes and boosts your company’s financial success. Consider a value-based care model, where you are reimbursed based on quality of care delivered and patient improvement.

This might look like engaging patients and families to be active participants in their care, emphasizing the role of ABA in providing individualized care and highlighting its benefits in early intervention, particularly for children at risk of not being verbal.

Sell-Side Quality of Earnings

In some cases, we recommend that you have an external accountant conduct a Quality of Earnings (QoE) review of your company.

A QoE report is typically done during due diligence by a buyer to analyze your business’s finances. It assesses past earnings and your company’s potential future performance.

In our experience, a sell-side QoE helps sellers spot accounting issues before going to market, validate core assumptions about their financial model, and gain the upper-hand in later negotiations.

A sell-side QoE can also identify addbacks to EBITDA that increase the selling price, like rent changes, personal expenses, and other discretionary costs.

Step 2: Streamline Operations, Enhance Efficiency

Is your intake process mainly on paper? How do you verify benefits? Where do your Board Certified Behavior Analysts (BCBAs) keep patient notes? Before a sale, review your operations with a critical eye to find areas to improve and increase efficiency. Efficient operations show potential for growth and appeal to buyers looking for well-run companies.

Streamline workflows, eliminate unnecessary steps, and automate where possible to enhance productivity and reduce your overhead. You could, for example, renegotiate with your liability insurance provider and research your state-specific requirements to make sure you’re not overspending on unnecessary coverage.

Step 3: Focus on Leadership

Your team is your most valuable asset in an ABA therapy business. Leaders who are BCBAs play a key role in maintaining high care standards and attracting board-certified clinicians for your business.

They should have the knowledge and experience to lead the company well. They should understand the ABA therapy business, know your workforce, and be familiar with what motivates them and how they want to be recognized.

A strong leadership team assures buyers of the company's future success and lessens dependence on any one person. Weak leadership can hurt your ABA therapy business's value in the buyer's eyes and may cause a deal to fail or be renegotiated for a lower price.

Key Performance Indicators (KPIs)

We suggest you track KPIs across your clinic, operations, financials, and stakeholder satisfaction.

Operational KPIs

• What is our intake timeline?

• How many accounts are 30, 60, or 90 days past due?

• How many Registered Behavior Technicians (RBTs) are our BCBAs supervising?

Clinical KPIs

• Are our patients making progress on their treatment goals?

• Are our patients' families and caregivers engaged in the treatment process?

• What are the rates of cancellation by patients or staff?

Financial KPIs

• What is our revenue growth rate?

• What is our operating cash flow?

• What is our revenue mix by payor source?

Step 4: Diversify and Expand Your Services

Consider diversifying your services by offering new lines of service, levels of care, or geographies.

For example, offer care for children with developmental delays, expand from center-based to school-based care, or start an early intensive behavioral intervention program. Broadening services to meet autistic children's diverse needs is not only key for their development and well-being, it can attract more patients and boost your company's value.

Specializing in a niche like Organizational Behavioral Management or Crisis Prevention comes with its own advantages, but you can increase value significantly by expanding your services, modalities of treatment, and locations.

Step 5: Enhance Branding and Marketing Strategies

When families look for ABA services for their loved ones, they want a reputable and reliable provider. Your "Why" should be evident to them. Invest in branding and marketing to boost your company's reputation and visibility in the ABA therapy field.

Create a strong brand, improve your online presence, and use effective marketing to attract new patients and build a referral network.

Using different sources and a complete marketing plan, including digital efforts, "boots on the ground", and referring providers, helps buyers trust that they can replicate and grow your revenue in the future.

A strong brand reputation increases your company's market value. Knowing your cost to acquire a patient is helpful, as some buyers keep metrics on patient acquisition costs.

We know you became a BCBA to help people. Your messaging should show that.

Be careful about testimonials, even from past patients (e.g., Section 5 of the BACB’s (Behavioral Analyst Certification Board) Ethics Code). You could use certifications from trusted organizations like the Behavioral Health Center of Excellence® (BHCOE) to support your message. Consider joining associations like The Association for Behavior Analysis International (ABAI) or Council of Autism Service Providers (CASP) to improve your standing.

Step 6: Establish Strong Referral Networks and Partnerships

Build strong relationships with referring professionals, healthcare providers, and organizations that value ABA therapy. It’s important community mental health organizations, local paediatrician offices, and local testing psychologists have your information – your name, credentials, and what types of services you offer. Building partnerships and referral networks grows your patient base and proves your value as a trusted provider.

These connections can boost your company's perceived value during a sale and suggest other providers respect the quality of care you provide.

If you can, use a business development team and outreach staff to foster connections. Encourage them to explore non-traditional avenues to build relationships, like partnering with universities and colleges to support children with autism as they transition to higher education.

Step 7: Enhance Compliance and Risk Management

Compliance with the Behavior Analyst Certification Board (BACB) standards is essential.

BACB Ethics Standard 2.06 requires BCBAs to provide accurate services and include all necessary information on reports, bills, and requests for reimbursement. They must correct any errors and notify relevant parties. Non-compliance can lead to training, penalties, or other legal actions.

BCBAs must also follow HIPAA standards for any patient information related to health care. This broadly includes any part of a patient's medical record or payment history.

Keep up to date on state regulations, as ABA therapy is becoming more regulated. As of 2024, 37 US states and one Canadian province regulate the profession.

If you're under investigation, disclose it—don't hide issues. Resolve them or reveal them. If you don't have a compliance program in place, set one up along with strong risk management and quality assurance measures. A designated Compliance Officer helps.

Buyers value compliance, and a well-managed, low-risk company is more attractive and valuable. Hiding issues can kill a deal or cause problems after the sale.

Step 8: Protect Your Intellectual Property

Identify any intellectual property (IP) assets, proprietary treatment methodologies, or tech platforms that set your company apart.

Engage the help of patent lawyers to protect and leverage these assets to demonstrate a competitive advantage and draw in buyers looking for unique and innovative ABA therapy providers.

The use of proprietary ABA therapy methods, like specific behavior analysis techniques, or the development of your own practice management software can be a significant boost to your company's value and help you stand out in the market.

Step 9: Prepare Comprehensive Documentation

Gather comprehensive documentation about your company, including financial statements, contracts, licenses, insurance policies, compliance records, operational processes, growth projections, patient censuses, staff information, opportunities, real estate, and your current negotiated rates.

Organize these documents in a financial model to provide potential buyers with a clear understanding of your company’s value and growth potential.

If you have a hired a sell-side advisor, your information will be organized into a Confidential Information Memorandum (CIM) and reviewed for weak spots and highlights.

All your information should be kept confidential in a secure location to be accessed by vetted, qualified, interested buyers.

Step 10: Engage Professional Advisors

Get advice from experts like M&A advisors, investment bankers, brokers, healthcare attorneys, and accountants who know the ABA therapy industry.

They can help you with strategy, valuing your company, preparing documents, finding potential buyers, and negotiating favorable terms during the sale.

Meet with a few advisors and choose someone you trust and who has experience in the field.

Conclusion

Selling your ABA therapy business can be a significant decision with substantial potential for growth and opportunity. By following these key steps, you can maximize the value of your company and prepare for a successful sale:

• Enhance financial performance and streamline operations.

• Focus on leadership and diversify services to meet patients' needs.

• Invest in branding and marketing strategies to boost reputation and visibility.

• Establish strong referral networks and partnerships to grow your patient base.

• Ensure compliance with healthcare regulations and risk management measures.

• Protect your IP and document your company's patents and trademarks.

• Engage experienced professional advisors to guide you through the sale process.

Are you considering selling your business? Healthcare Capital Advisors can help. Learn more about our sell-side services.