How healthcare agencies are valued
Buyers price a healthcare agency on normalized earnings, then adjust the multiple for payer mix, compliance history, licensure, and how much of the business depends on the owner.
Start with the right earnings figure
Smaller agencies, usually those with an owner who works in the business, are priced on Seller's Discretionary Earnings (SDE). SDE is net profit plus the owner's salary, owner benefits, and other costs a new owner would not carry.
Larger agencies with a management team in place are priced on adjusted EBITDA. The buyer assumes they will pay someone to run the agency, so a market salary for that role stays in the expenses.
Pick the wrong figure and the price conversation starts in the wrong place. We decide which applies before any number is shared with a buyer.
Add-backs buyers accept, and ones they reject
Add-backs are expenses that will not continue under a new owner. Each one needs a document behind it. Buyers and lenders will test every line in diligence, and SBA lenders typically require a Quality of Earnings review on larger deals.
- Usually accepted: owner salary above market, owner health insurance and vehicle, one-time legal or consulting costs, family members paid but not working.
- Often challenged: deferred hiring, unpaid owner hours that a buyer would need to replace, recurring "one-time" expenses.
- Rejected: cash revenue not on the books, and any add-back without support.
What moves the multiple
Two agencies with the same earnings can sell for very different prices. The multiple reflects risk, and buyers price risk in a consistent order.
- Payer mix: Medicare and stable Medicaid waiver hours carry predictability. Private pay carries margin. Heavy concentration in one payer or one referral source lowers the multiple.
- Compliance history: survey results, condition-level findings, ADRs, UPIC or TPE activity, and hospice cap exposure all show up in diligence.
- Licensure and enrollment: active Medicare enrollment, accreditation, and where the agency sits relative to the CMS 36-month rule.
- Owner dependence: if referrals, staff, or billing run through the owner, buyers discount for transition risk.
- Staff retention and census trend over the last 24 months.
Zero-census and license-only sales
An agency with no patients is not priced on earnings. Buyers pay for time saved: the licensure, enrollment, and accreditation steps they would otherwise wait months to complete. Price depends on state, provider type, enrollment status, and how clean the record is.
Current ranges by provider type
We publish current ranges by provider type on our What Agencies Sell For page. For a number specific to your agency, request a confidential valuation. We deliver it in one business day.