Opportunities
DME Supplier Licensed in 5 States
Sold
Specifications
Drop ship orders, excellent reimbursement rates and absentee owners make this DME supplier a great investment business. Licensed in 5 states and located in Eastern Nebraska, the company is a preferred provider for all 3 major Nebraska insurance providers. The warehouse is managed by 2 employees who also handle sales, billing and accreditation.
Between $50,000 - $60,000 worth of inventory is kept in the warehouse, but most orders are direct ship. Much of the inventory is wheelchairs, held over from before the owners moved to drop shipping in 2016. Please note that the warehouse is set up for minimal walk-in traffic.
Products sold to caregivers and customers range from walkers to nutritional supplements and incontinence supplies. Respirators are sold, but oxygen is not. Employees keep in touch with customers to ensure that their supply needs are met, and fulfill prescription orders for equipment.
Growth exists in taking advantage of current licensing in Wyoming and Colorado, and marketing services there. Focusing on sales will increase revenue and cash flow, and creating a website will ease customer access.
Business Highlights
- Years in Business: 13
- Location: Eastern Nebraska
- Service Area: Licensed in NE, WY, IA, CO, KS
- Products: Walkers, wheelchairs, incontinence supplies, nutritional supplements, respirators (no oxygen is sold) and more!
- Building: Warehouse* – minimal walk-in traffic
- Reason for Selling: Health
- Employees: 2 – sales, billing, accreditation
- Hours: Mon – Fri 8am to 5pm
- Seller Training Period: Stock sale to ensure licensing is retained
- Growth Opportunities: Take advantage of licensing in WY & CO and market services there. Focus on sales. Nursing homes. Create website.
- Current Owner’s Responsibilities: Owners are passive to absentee and have moved out of state.
*warehouse is not included in the purchase – a buyer wanting to keep inventory and open a storefront would need about 3,000 sq. ft.
Financial Highlights
- List Price: $246,000
- 2016 Gross Sales: $413,265
- 2016 Cash Flow: $82,152
- Profit Margin: 20%
- Assets included in the purchase:
- Equipment: Shelving, forklift, laptop
- Intangible Assets: Excellent reimbursement rate, name recognition, accreditation
- Inventory: $50,000 - $60,000 – some inventory is on hand but most orders are drop ship
- A/R: Orders are fully reimbursed, usually within 1 week
*amounts may vary
Cash Flow Analysis
| Description of Financial Statement | Tax Return | P&L Statement | Notes |
| 2016 | 2015 | ||
| GROSS SALES | $413,265 | $524,586 | |
| Net Income Shown on Financial Statement | $19,424 | $20,926 | |
| ADDBACKS | |||
| Compensation to Owner | $53,061 | $48,353 | |
| 11% Tax on total W2 Salaries | $5,837 | $5,319 | |
| Depreciation | $3,830 | $2,314 | Non-cash item |
| TOTAL ADDBACKS | $62,728 | $55,986 | |
| Seller's Cash Flow = Total Addbacks + Net Income | $82,152 | $76,912 | |
| Profit Margin | 19.88 % | 14.66 % |
- Cash Flow was higher in 2016 due to the owners implementing drop shipping, which has cut down freight costs.
Licensing
Like other healthcare-based companies, DME suppliers fall subject to federal and state laws, especially those that participate in the Medicare/Medicaid program. Initially, a DME supplier must obtain an in-state license, which involves an extensive application, fees, proof of insurance and an inspection. To expand into other state, a non-resident license must be obtained.
The current owners have gone through this rigorous process already, and have licensing for 5 states:
- Nebraska
- Iowa
- Kansas
- Colorado
- Wyoming
Insurance
- Is a preferred provider for Nebraska’s 3 major insurance providers, which is a rare feat
- United HealthCare – 55%
- Nebraska WellCare – 35%
- Nebraska Total Care – 10%
- Is a preferred provider for many of Iowa’s major insurance providers
Medicare/Medicaid
- The company is set up to bill Medicare if Medicare chooses to sell certain items
- Currently, no billing is sent to Medicare
- Company used to bill Medicaid, but since the ACA, Medicaid has chosen to give bids to the lowest bidders
- This has occurred as of January
Rates
- The seller has worked hard to guarantee reimbursement rates, and currently receives full reimbursement
- When first working with United, company was only reimbursed 40% of what they were supposed to
- This was fixed 5 months into the relationship
- Now receiving full reimbursement that matches the state
Employee Information
- 2 Employees
- Both are part time
- 1 mostly handles calls to customers to see how they are doing on products
- The other oversees the other employee, and handles billing and accreditation
The seller used to be more heavily involved, but health issues and a move out of state have lessened that involvement to passive/absentee.
The seller does have a laptop with TeamDME! software installed to facilitate accurate billing.
Growth Opportunities
- Take advantage of licensing in Wyoming & Colorado
- Sellers have already secured the proper licensure to work with customers in Wyoming and Colorado, but have not actively pursued business
- Options are narrower in Wyoming for customers needing DME, allowing this company a great source of income, especially since they utilize drop shipping
- Focus on sales
- Health issues have slowed down the owners’ ability to grow the company through sales
- Advertising is not currently done, as the owners had previously been too aggressive in this area and grew faster than they could handle
- A steady increase in sales/advertising should curtail that issue
- Create a website
- A website will drive sales and name recognition
- Down the line, a buyer could implement online ordering
Valuation Details
The Firm Business Brokerage used a Cash Flow Valuation methodology to determine the Purchase Price of the business. The formula used is as follows:
Cash Flow x Multiplier = Price
Cash Flow is the sum of net income plus any owner perks and non-onward going expenses.
Multiplier is a prescribed number between 1 and 5 determined by a 100-point, 20-question rating system used to determine the business valuation. The average multiplier is 3.
The 2016 Cash Flow is $82,152, and the prescribed multiplier is 3.
With this information, the computation result as follows:
$82,152 x 3 = $246,456
The List Price for the business is $246,000.
Funding Example
Purchase Price: $246,000
10%Buyer Down Payment: $24,600
10%Seller Financing: $24,600
80%Bank Loan: $196,800
Seller Financing 5-year term at a rate of 4.50% equals a monthly loan payment of $459.
Bank Loan 7-year term at a rate of 5.25% equals a monthly loan payment of $2,805.
After business expenses and annual loan payments of $39,160, a buyer would retain a net operating income (profit) of $42,992. A 10% down payment of $24,600 results in a 174% return on investment in the first year.
Please note that the decision of whether to extend a loan on any sale belongs to the bank, and this document does not guarantee specific terms or verify that financing is available.
Print, sign and send to:
210 N 78th St. 2nd FloorOmaha, NE 68114
Or fax to:
f 402.939.0857