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Respiratory & Mobility DME - 2 NE Locations!

CASH FLOW
$274,656

Specifications

  • Price
    $420,000

  • Cash Flow
    $274,656

  • Revenue
    $1,031,220

  • Valuation
    $1,165,000

  • Equipment
    $165,431

  • Inventory
    $73,630

  • Account Receivable
    $125,087

  • Down Payment
    15%

  • Industry
    Retail

  • Location
    2 retail stores & 1 warehouse: one outside of Omaha and one outside of Lincoln to serve surrounding rural communities

  • Service Area
    Eastern NE

  • Reason for Sale
    Growing family & unable to devote 30-40 hours per week to running business

For over 30 years, this family-owned business has served Eastern and South Central Nebraska patients needing respiratory and mobility supplies, and durable medical equipment.  With 2 locations roughly 100 miles apart, both stores are outfitted with CPAP devices, scooters, TENS units, wheelchairs and much more.  Customers may choose from in-store pick-up or delivery, and many receive routine home service visits and equipment training. 

 

Each location has a Respiratory Therapist managing the store and 3 customer service reps. Other employees include a billing manager and a service/delivery tech who is on call alternating weeks to provide emergency delivery and service.  Current owners handle A/P, A/R, scheduling and oversight, but are not store managers as they are not licensed respiratory therapists.

 

ACHC accredited and part of the BBB Honor Roll, current owners have set up a Connect Program that allows for easy outreach to patients needing resupply. While there are local competitors, many are evolving to no longer carry Medicare or provide shipment, leaving a gap for this business to step in.  There is virtually no competition with Lincoln or Omaha markets, as this company is designed for rural populations unable or unwilling to travel to large cities for medical supplies. 

 

Due to a growing family, current owners are unable to devote the 30/40 hours per week for business management, so the business is priced to move!

Business Highlights

  • 30+ years in business
  • 2 retail stores & 1 warehouse; one store outside of Lincoln, the other outside of Omaha
  • ACHC Accreditation and BBB Honor Roll
  • 8 employees across both stores: Director of Respiratory Therapy, Respiratory Therapist, Billing Manager, 3 Customer Service Reps, & Service/Delivery Tech
    • Each store managed by a Respiratory Therapist who in turn manages customer service reps
  • Client Demographics: 55+
  • Provides products & equipment for:
    • Respiratory – CPAP, ventilators, nebulizers
    • Mobility – scooters, ramps, crutches
    • Durable Medical Equipment – lift chairs, braces, diabetic footwear
  • Hour of operation are Mon – Fri, 8:30am – 5pm with equipment delivery & emergency services available
  • Current Owner’s Responsibilities: AP, AR, scheduling and oversight, owner DOES NOT manage stores or have a respiratory therapist license
  • Growth potential in increased evening & weekend hours, and by marketing to potential referral sources

Financial Highlights

  • 2015 Gross Sales: $1,903,825                          
  • 2016 Cash Flow: $274,656
  • 2015 Cash Flow: $292,902
  • Profit Margin 26%
    • Assets Included in Purchase - $364,148
    • Equipment: $105,344
    • Vehicles: $60,087 (1 van, 2 cars)
    • Inventory: $73,630
    • A/R: $125,087

*amounts may vary

 

Cash Flow Analysis

Description of Financial StatementTax Return
January - December
Tax Return
Amdended
Tax ReturnTax ReturnNotes
2016201520142013
GROSS SALES$1,031,220$1,903,825$1,240,008$904,934Current owners bought in 2015
Net Income Shown on Financial Statement$127,396$64,901$3$18,221
ADDBACKS
Compensation to Owner$90,185$99,000$42,308$0
11% Tax on total W2 Salaries$9,920$10,890$4,654$0
Depreciation$9,810$3,455$12,580$7,008Non-cash item
Interest$889$3,475$8,589$5,177Non-onward going expense
Non-Business Telephone$1,800$1,800$1,800$1,8002 payments for 2 personal cell phones ($150/mo)
Retirement Plan$15,832$7,395$0$4,015Owner's retirement plan
Travel$0$5,221$15,405$13,995Travel unrelated to business
Meals & Entertainment$1,880$3,827$6,813$484Expenses unrelated to business
Auto-Personal Use$16,944$8,678$34,269$13,200Auto use unrelated to business
Bad Debt$0$84,260$0$0One-time write off for bad inventory adjustment
TOTAL ADDBACKS$147,260$228,001$126,418$45,679
Seller's Cash Flow = Total Addbacks + Net Income$274,656$292,902$126,421$63,900
Profit Margin26.63 %15.38 %10.20 %7.06 %

 

  • 26% profit margin in 2016
  • Net income increased 49% in 2016

 

Products

   
Respiratory  
CPAP Portable Oxygen Systems (HomeFill & POC)
BiPAP (ST/ASV) Overnight Pulse Oximetry
Auto CPAP/BiPAP Stationary Nebulizers
ApneaLink/Home Sleep Testing Portable Ultrasonic Nebulizers
Trilogy Ventilators Suction Machines & Supplies
Oxygen Concentrators  
   
Mobility  
Scooters Transport Chairs
Power Wheelchairs Canes/Crutches
Scooter/Power Chair Accessories Walkers/Rollators
Wheelchairs Knee Walkers
Ramps and Lifts Position Cushions/Backs
   
Durable Medical Equipment  
Diabetic Shoes & Socks Bathroom Safety
Lift Chairs Aids to Daily Living
Electric Beds Cushions
Bed Rails & Bed Canes (for current beds) Bracing (Back, Knee, Ankle)
TENS Units/SENSUS Pain Management System Edema Wear & Compression
Post-Surgery Hip Kits  

Services

  • Home delivery of medical equipment
  • Introduction & training on how to safely use medical equipment
  • Routine home service visits for all oxygen patients
  • Comprehensive follow-up program for PAP and Ventilator patients
  • Quality customer service & delivery personnel to help with home medical equipment needs
    • Repair & replacement of home medical equipment with accepting assignment for warranted products purchased through company
  • Competent billing staff to assist with reimbursement and questions regarding insurance coverage
  • 24/7 emergency service
  • Most all insurance accepted, including Medicare and Medicaid
     

Customer Demographics

  • Revenue Breakout
    • Medicare: 19%
    • Medicaid: 10%
    • Commercial: 35%
    • Private: 36%
  • Rental vs. Sales
    • Rental: 64%
    • Sales: 36%
  • Customer Numbers:
    • Location 1 - 2,740 active patients including:
      • CPAP/BiPAP/PAPSupply - 429
      • Oxygen - 138
      • Oxygen/CPAP - 24
      • Oxygen/BiPAP - 13
  • CPAP patients are eligible for supplies every 3 months
  • Oxygen patients rent every month for 36 months (on Medicare)
    • Location 2 - 1,570 active patients including:
      • CPAP/BiPAP/PAPSupply - 776
      • Oxygen - 96
      • Oxygen/CPAP - 21
      • Oxygen/BiPAP - 7
        • Bill for maintenance every 6 months for 2 years, and then they renew the rent
        • These patients never own their concentrators

Inventory Sample

  • Aircurve V Auto Machine - $952 (2)
  • Aircurve 10 ASV with climate line - $2,537 (2)
  • Aircurve 10 ST BiPAP with back-up rate - $1,773 (3)
  • Aircurve 10 VPAP - $877 (4)
  • Airsense CPAP - $300 (4)
  • Airsense Auto CPAP - $350 (5)
  • Triology Ventilator - $10,000 (4)
  • Invacare 10 Liter Concentrator - $1,025 (5)
  • Millennium HomeFill - $915 (3)

Suppliers

  • Invacare hospital beds, wheelchairs, power chairs, walkers, rollators
  • Respironics – CPAP supplies
  • Resmed – CPAP & CPAP supplies
  • Drive Medical – walkers, wheelchairs, power equipment
  • Pride Mobility – lift chairs, power equipment
  • Golden Technologies – lift chairs, power equipment
  • Dr. Comfort – diabetic shoes and compression garments
  • Dedicated Distribution – durable medical equipment items (bracing, bed rails, etc.)
  • Airgas – fill oxygen bottles
  • Airsep – provide concentrators
  • Bio Compression – lymphedema pumps
  • McKesson – incontinence products
  • Ossur – bracing
  • Precision Medical – oxygen concentrators, portable oxygen concentrators
  • The Comfort Company – custom seat and back cushions
  • The Roho Group – Roho Cushion (pressure-reducing support system)

Asset List

  • Location 1
    • 6 office desks/6 chairs
    • 6 laptop computers
    • 4 standard computers
    • 4 extra computer monitors
    • 3 printers
    • 1 delivery van & 1 company car
  • Location 2
    • 4 office desks
    • 4 standard computers
    • 4 extra computer monitors
    • 1 printer
    • 1 company car

Employee Salaries & Reimbursements

  • Director of Respiratory Therapy
    • Salaried (pay rate of $28.846)
    • Has company-paid cellphone and drive company vehicle
    • On-call schedule: available to answer questions
  • Respiratory Therapist 1
    • Hourly (pay rate of $23.875)
    • Health insurance reimbursement ($300/mo added to hourly wage)
    • Cell phone reimbursement
    • Reimbursed gas mileage of $0.50/mile if company car unavailable
    • On-call schedule: every other week
  • Respiratory Therapist 2
    • Hourly (pay rate of $21.000)
    • Cell phone reimbursement
    • Reimbursed gas mileage of $0.50/mile if company car unavailable
    • On-call schedule: every other week
  • Billing Manager
    • Salaried (pay rate of $19.231)
    • Company-paid cell phone
    • Not part of on-call schedule
  • Customer Service Reps (3)
    • Hourly (pay rates of $12.000, $14.875 and $13.000)
    • Reimbursed gas mileage of $0.50/mile if company car unavailable
    • Two on-call every other week, third is not part of on-call schedule
  • Service/Delivery Tech
    • Hourly (pay rate of $11.000)
    • Cell phone reimbursement
    • On-call schedule: every other week

** All employees receive PTO and IRA matching (if they choose to participate) **

 

Competitive Outlook

  • Most competition concentrated on the respiratory side
  • Some competitors are larger, but are evolving to not carry Medicare or to not ship supplies to patients
  • Competition also has smaller retail spaces or are not conveniently located
    • Business is ideally positioned to serve rural clients unable or unwilling to travel to Omaha or Lincoln for medical supplies and equipment
  • Current owners have begun a Connect Program to easily reach patients needing resupply
  • Unlike similar businesses, a new owner will be able to step in without any A/P
    • Sellers will pay off “floor plan” – meaning all equipment leased for display & purchase will be covered through signing date, and new owner will only inherit AR and inventory!

Marketing

  • Current Advertising:
    • Local newspapers/radios
    • Booths at home shows/health fairs
    • Social media (Facebook/Instagram/LinkedIn)
    • Mail out COPD newsletters
    • Sponsor events
      • Post proms
      • Chamber events
      • YMCA
      • Sports
      • Social events within assisted living facilities
    • Doctors Day

Word from the Sellers

  • Would you elaborate on your background and why you purchased this business?

My wife's background is in Business/Marketing, more specifically Senior Age Life Insurance.  She was a CNA many years ago, so has a little medical knowledge.  My background is in electrical and delivery.  We purchased the business after searching for roughly a year looking for the right fit, as we wanted something that was not a fly-by-night business, but had growth potential and a stable audience.

  • What are some of the aspects of this company that you are proudest of?

This business has a large audience with residual monthly revenue from CPAP and Oxygen patients.  We are most proud of our implementation of the Connect Program, which allows us to easily reach patients for resupply.  Recently we received better pricing from our respiratory vendors, allowing us to keep the CPAP supplies our patients have become accustomed to.  Additionally, we are proud of the retail space as this allows us to easily compete from a mobility standpoint.  We have reasonable prices in comparison to our competitors as disclosed to us by our patients, and we have great customer service, willing to go above and beyond to find the right product for a patient.

  • Can you describe your competitors and what makes your business different?

Competition for both locations is more on the respiratory side.  Some of the competitors are larger, but are changing their practices to not carry Medicare, and are not shipping supplies to patients or only shipping supplies to patients.  Some have smaller retail spaces and/or are not conveniently located.  Competition for one location is 45 miles away in both directions.  We accept all insurances but one, and allow patients to pick up supplies or have them shipped if they live out of the town in which we are located.  Additionally, we are family owned and operated and that's reflected in our service.

  • What is your reason for selling?

We are looking to sell as we would like to expand our family, and as much as we would love to keep the business, we want our family more.

  • What are your growth ideas for the next owner?

This business has so much potential and growth opportunities.  There are new products such as KT Tape (being implemented), athletic compression wear, uniforms and mastectomy products that could be stocked.  We are also looking to implement Strategic AR, which is an auto pay system that will improve accounts receivable.  Other opportunities are various marketing tactics, such as working with CPAP and mobility clinics to capitalize on those markets.

Growth Opportunities

  • Increase evening & weekend hours (currently only operate Monday through Friday from 8:30 - 5:00)
  • Increase marketing to potential referral sources
    • Market directly to doctors' offices, therapy centers, consumers at events
  • Offer CPAP, Pain Free and/or Mobility Clinics within the stores
  • Partner with local gyms to market braces, athletic tape, compression support socks
  • Create Facebook groups for COPS and Obstructive Sleep Apnea so people can converse with one another, providing intel on customer concerns

Pricing Details

The List Price for the business is set at $420,000.

With a $274,656 cash flow, the new owner will have a profit of $211,389 after expenses and loan payments. This is a three-fold return on investment on a 15% down payment of $63,000.

2016 Cash Flow – Loan Payments = Profit

$274,656 – $63,267 = $211,389

The Third Party Valuation sets a suggested price of $1,165,000.

Purchase Price:

$420,000

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Bank Loan Needed: $

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Funding Details

Business:

Offer Price: $

% Buyer Cash Down at Closing: $

% Seller Carry Back via Promissory Note: $

year term at a rate of %

% of Purchase Price secured by Buyer and Seller

Total Bank Loan Need: $

% of Purchase Price

Desired Loan Type:

Desired Bank Terms: year term at a rate of %

Total Business Assets, Inventory, and A/R: $

Total Undercollateralized Loan: $

Loan Payments

Monthly Payment to Bank: $
Yearly Payment to Bank: $
Monthly Payment to Seller: $
Yearly Payment to Seller: $
Total Monthly Debt Service: $
Total Yearly Debt Service: $

Conclusions

Fixed Charge Coverage Ratio

The bank will require a minimum ratio of 1.5 to be lendable.

Cash Flow:
2016 Cash Flow
$
Annual Debt Service: $
RATIO:

Buyer's Net Operating Income (NOI)

The amount of money the Buyer will retain as profit.

Cash Flow:
2016 Cash Flow
$
Annual Debt Service: -$
NOI:

Buyer's Return on Investment (ROI)

The rate of return on the Buyer's down payment.

Down Payment: $
NOI:
ROI: %

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