How to Buy or Sell Your NEMT Business
If you are a non-emergency medical transportation (NEMT) provider looking to expand your business, this is a great time to do so. The NEMT industry is experiencing growth, slated to last well into the future, owing to the growing elderly population and the increasing need for transportation.
But it’s only natural to feel uncertain about the next steps. This article provides answers and guidance on selling and buying NEMT businesses to help you grow or pare down your NEMT venture.
Is the NEMT Marketplace Your Ticket to Growth?
The NEMT industry is experiencing significant growth driven by various factors. It is projected to reach a value of $15.58 billion by 2028, with an impressive annual growth rate of 9%. These figures represent significant opportunities for NEMT providers.
To put things into perspective, according to the World Health Organization (WHO), there were 9.3 million deaths due to cancer, 4.1 million due to respiratory diseases, and 1.5 million due to diabetes in 2021.
These statistics paint a grim picture of the increasing chronic healthcare needs of people, which also translates into a growing demand for NEMT services.
The Basics of Expanding Your NEMT Footprint
If you’re an NEMT provider trying to grow your business or are considering entering the industry from another background, there are some points you should consider. You will need to figure out the basics of your business model, whether you want to invest money lumpsum, and whether you want a partner.
Merging with Other Businesses
Transportation providers consider joining forces with another player in the field or acquiring a company that complements their services the most logical step.
In a merger, two or more companies unite to form a single, more formidable entity. Typically, these companies share similarities in their structure, and the merger aims to create a larger, stronger organization.
Acquiring Another Business
On the other hand, an acquisition involves one company purchasing another. Usually, the acquiring company has more resources and aims to gain access to the target company’s products, services, or customer base.
A notable example is when AMGH (Air Medical Group Holdings) and AMR (American Medical Response) came together to create Global Medical Response.
Their shared objective was to expand their services in the communities they serve. Edward Van Horne, the President and CEO of AMR, had stressed that this merger would enhance their ability to provide healthcare and transportation resources to their patients and customers.
This merger also allowed them to extend their services to underprivileged communities. As a result, Global Medical Response became a more operationally robust entity, with access to over 6,900 medical vehicles, 300 helicopters, 170 fixed-wing aircraft, and 110 fire protection vehicles.
Unlike mergers, partnerships are business arrangements between two or more parties collaborating to achieve a common goal.
In a partnership, the involved parties maintain separate legal identities and are not considered single entities.
Partnerships can take various forms, from formal agreements to informal collaborations. They may be established for specific projects or represent ongoing business relationships.
A prime example is the partnership between Uber Health and American Logistics, an NEMT broker. Their shared goal was to enhance patient access to care and facilitate more effective care management.
This collaboration expanded Uber Health and American Logistics’ services, with both entities working together to enhance access to transportation services for a broader spectrum of patients, including those with diverse health and equipment needs.
Securing the Right Financing for Expanding
NEMT business can finance mergers using various financial methods. Each has its own considerations and implications. Here are the standard procedures and financial instruments companies typically use.
Different companies prefer different funding sources depending on business size and other factors.
Cash on Hand
If your company has substantial liquid cash, you can fund your M&A activities internally without seeking external capital. This approach provides financial flexibility and a streamlined process, allowing you to execute transactions quickly.
Debt financing, a common capital-raising method, involves borrowing money with the commitment to repay, along with interest, over a specified period. Various forms of debt financing include:
- SBA Loans: Guaranteed by the Small Business Administration, these loans often come with lower interest rates and cater to various business needs, from working capital to real estate acquisitions.
- Bank Loans: Offered by traditional banks and credit unions, these loans can be secured or unsecured, depending on the borrower’s creditworthiness. Secured loans involve collateral, while unsecured loans do not.
- Asset-Backed Loans: Secured by assets like accounts receivable, inventory, or equipment, these loans, typically provided by banks and non-banking financial institutions, offer a secure financing option.
Many mergers find success through a blend of debt and equity financing. This option allows the acquiring company to balance ownership considerations and avoid excessive debt. It’s a strategic choice for those aiming to maintain control while accessing necessary funds.
Choosing the right financing option for your growth requires careful consideration. Consulting with a financial advisor can prove invaluable.
They can help assess your financial situation, evaluate various financing options, and guide you toward the possibility that aligns best with your specific needs and goals to execute a financially sound and strategically advantageous merger.
What’s the best time to sell your NEMT business?
There may be several reasons for selling your NEMT business. Losses or a fallout with co-founders are among the most common.
The ideal time to sell your NEMT business will vary depending on your goals.
Determining whether you want to build a business that generates a steady income or a business that you can sell at some point is the critical decision you must make.
Understanding your business goals will help you decide the optimal time to sell it.
How much time does it take to sell an NEMT business?
According to Synergy Business Broker, selling a healthcare transportation company takes around six to ten months. However, the exact duration can vary depending on several factors. It is common for the process to take longer.
How do you set the base price for your business?
Determining the base price of your medical transport business relies on various factors such as contracts, ongoing deliveries, and revenue generation.
As the value of your business is multifaceted, it can be challenging to assess its worth accurately. However, hiring a professional business broker can help you obtain a fair valuation, particularly as your business expands in scale.
How do you sell your NEMT business?
Not all NEMT business owners want to invest more in their business. Some markets can get saturated, and it might be time to exit a particular service area to focus your energy more on the more profitable areas of your business.
If you’re considering selling your NEMT business, there are quite a few points to consider, like the time it will take to sell and setting the base price for your business.
Value Your Business
The value of your business depends on various factors. This includes the contracts you hold with hospitals, ongoing deliveries, and the consistent revenue your company generates. Generally, the larger your client base and your cash flow, the higher its potential is worth.
Organize Your Documents
Make sure all financial and operational documents are organized and easily accessible. This includes your tax returns, financial statements, licenses, permits, and contracts. This will streamline the sales process and increase buyer confidence.
Seek Professional Guidance
Hiring an experienced business advisor or consultant with expertise in the NEMT domain can make selling your NEMT business smoother. Such professionals may include corporate finance attorneys, business brokers, personal tax accountants, and company auditors.
It is also essential to work closely with a competent legal team to finalize a comprehensive and well-structured sales agreement that addresses any outstanding issues or concerns to protect your rights and ensure a smooth business transition.
Create a Pitch and Market Strategically
Your business pitch should be clear and concise and highlight your business’s unique selling points and growth potential.
To expand your reach and attract potential buyers for your NEMT business, consider listing it on online marketplaces or specialized NEMT business acquisition platforms. These platforms can help you connect with a broader audience of potential buyers. Additionally, make the most of your industry connections and actively participate in relevant conferences or trade shows to network with potential buyers.
Opportunities for Growth
Various opportunities are available for those willing to take risks and expand their business.
Growth can manifest in numerous forms, including strategic mergers and impactful partnerships. To achieve this growth, it is crucial to understand the market, embrace technology, and manage financial complexities.
Expanding your NEMT business is easier with Tobi, an all-in-one NEMT operations management solution. Streamline operations, optimize routes, and enhance patient care with ease. You can start for free and see how Tobi can help your business with a 30-day trial.