1 Not Having Nursing Home Experienced Disposition Team.
Having people that are not experienced in nursing home sales transaction can be disastrous for you. They will be learning on your dime. They will delay getting things done while frustrating your staff and buyer.
Always Ask
“Have you been involved in a nursing home transaction before?”
2 Not Repairing/Replacing Capital Expenditure Items
All buyers are looking for major expenditures on the physical plant after they take over. Their lender will have an inspector looking over the building as well as the insurance company. If you know that you need to fix something, you need to expect that the buyer will find out too.They will either request a concession to replace that roof, parking lot and water heater. The lender might require the A/C condenser to be replaced or the floors might need to be replaced.in order to make the state inspector happy. You need to realize that all of your buildings flaws will be known and it will be cheaper for you to fix it ahead of time and it will also maintain and increase the value of your facility.
2 Not Repairing/Replacing Capital Expenditure Items
All buyers are looking for major expenditures on the physical plant after they take over. Their lender will have an inspector looking over the building as well as the insurance company. If you know that you need to fix something, you need to expect that the buyer will find out too.They will either request a concession to replace that roof, parking lot and water heater. The lender might require the A/C condenser to be replaced or the floors might need to be replaced.in order to make the state inspector happy. You need to realize that all of your buildings flaws will be known and it will be cheaper for you to fix it ahead of time and it will also maintain and increase the value of your facility.
3 Not Organizing and Preparing Your Financials
Above all, a buyer is purchasing your cash flow. The EBITDAR is why they are buying. No matter how pretty the building is, they are looking for a reasonable return. You need to make sure that you financials and ready for review. You want to have your extraordinary income and expenses itemized. You also want to itemize your owner’s discretionary expenses. The new owner won’t be paying for your cell phone and employing your wife to double-check the books.
You want your financial statements to be as ‘clean’ as you can so there are no questions on who much money your facility is making.
4 Having A Bad Full Book Survey
Buyer’s typically aren’t able to look at full book survey results until after the purchase sale agreement and operation transfer agreement have been executed and you are in the contractual due diligence period. With that said, you shouldn’t wait this late in the game to let them know that you had a horrible full book survey and your facility has the Rapid Response.Team trying to keep you from being close down. No one wants to hear that in the final hour.The buyer won’t trust you and won’t move forward in the close. The lender would probably pull their commitment as well.
“It is best to be upfront with your survey deficiencies & indicate your plan of corrections.”
5 Not Maintaining and Improving Your Census
Buyers are purchasing your cash flow. Cash Flow is a byproduct of your revenue and expenses. Your revenue is driven by your census. A SNF with stagnant or declining census will have stagnant or declining revenue and most likely cash flow.
“Improve your census in Medicaid and Medicare. Enough said.”
6 Having Senior Staff Vacancy
No one wants to buy a shiny new nursing home and spend your first few months interviewing for new employees. Exiting senior staff is horrible for morale and generally indicates a badly run facility. For the most part, buyers don’t like badly run facility. They want to buy positive cash flow. There are exceptions but the general rule is long-term, loyal staff demonstrates a well-run facility with well taken care of residents
“Improve your census in Medicaid and Medicare. Enough said.”
Finding the right buyer for the right price is the goal.
Reduce these issues so the objective of a positive cash out becomes a reality.
AVOID THESE 6 COMMON MISTAKES
That Result In Failed or Delayed Nursing Home Sales
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