March 02, 2020
Article
In our Winter 2019 Care Newsletter, Jonathon Coombs from Pinders gave a valuer’s perspective on getting a care business ready for sale. Julie Hopkins, care sector advisor and consultant, gives some practical tips for the next stage: succession and exit planning.
Now that we have left the EU and entered the transitional phase of BREXIT, some providers are turning their thoughts towards succession and exit planning. Here are some practical tips to do so, in a sector which is evolving and remains challenging.
Staffing
Carry out a full review of your staffing: where do your staff come from? Most care providers I speak with employ staff from within a 15 mile radius, so the effects of BREXIT are as yet unknown. Buyers prefer local staff, as it suggests consistency. Showing that you have low staff turnover points towards an established, well-led provider.
Ensure that you can demonstrate achievable training budgets, and progressive career and personal development plans. Show other ways in which staff are attracted to your business – pay, positive environment, innovation, and continuous improvement are all important factors.
Hands-on involvement by owners/directors
This is often seen as a matter which requires resolution before a business changes hands. Has a family member expressed a desire to take over? If so, ensure a 12 month lead-in time for them to shadow you before you step down. If you have a Registered Manager discuss the potential for a change in their role, perhaps taking on the role of Nominated Individual, and in turn assisting the deputy manager to become the Registered Manager.
This would demonstrate to current and potential management that your business offers real career progression; and shows potential buyers that the business can function effectively without the current owners.
Property
A prospective buyer is like a prospective resident and relative, so ensure that they have a good experience when shown around the home. Remember they may initially send in a secret shopper!
Consider the whole environment, so that prospective buyers see a homely, natural feeling environment which in turn creates happy staff. Can you see residents doing activities, as hearing laughter in a care home is always a pleasure. Even in a busy environment a relaxed atmosphere can shine through.
If you haven’t had a property capital allowance review, speak to a tax expert to arrange one; and it is always useful to have discussions with a valuer at the beginning of your succession planning.
Have you sustained a refurbishment programme, and is there potential to extend the home? Consider obtaining planning permission, because even if you do not intend to carry out the extension it will provide the buyer with a potential profit-enhancing project.
EBITDAR
Improving business performance should result in a greater value asset. You can read more about improving your EBITDAR in Benjamin Trought’s article here.
Inspections
Always be ready for your next CQC inspection and have evidence to demonstrate continuous improvement at the home. There is a clear link between high standards of care, reputation, and business performance.
Business Structure
Is the structure of the entity that you are selling or passing on to the next generation fit for purpose, or should you change it? For example you may wish to restructure a Limited Liability Partnership as a limited company; or incorporate your business if you are still operating as a sole trader.
Consider extracting the care home property from the trading subsidiary or partnership into a holding company.
Completion, and post-sale
If you have sold your share in the business, ensure that sufficient working capital has been maintained. Consider how any outstanding loans and mortgages will be satisfied, and remember to update the business website.
On a personal level, consider the tax implications of the sale and think about your own retirement and wealth planning when you have stepped away from the business.s
You can view our latest care newsletter in full here.