Addiction Treatment Center

Asking Price:

$6,500,000

Financial Overview

Revenue:
$3,447,270
Income:
$1,114,567
Multiple:
5.83x

Business Description

Founded in 2016, this Arizona-based drug and alcohol treatment center has developed proprietary processes aimed to support long-term sobriety. They are a structured outpatient facility with a sober living program component (with almost 100% of patients choosing to stay in the licensed sober living housing while undergoing treatment), focusing on customized treatment plans and offering dual diagnosis (a program designed to treat those who have an addiction as well as any underlying psychological disorders).

The treatment center accepts most major health insurance plans. 25% of the patients are self-pay and the remainder use the benefits of health insurance. The owners are in a contracting process with a government insurance provider that will open up access to hundreds of thousands of potential patients. The contract is in the final stages and should be finalized in the next 30-45 days. Bringing in only 1 patient a month from this contract would equate to $50K/month revenue (or $600K annually) so the possibilities for scaling the business and growing profits are substantial.

The owners have established a solid operational structure that allows the staff to essentially run the day-to-day. The duties of the three owners could easily be absorbed by one replacement. There are no licenses required for a buyer as the requisite requirements lie with the treatment center, the Clinical Director and the Medical Director.

The average revenue for the past three years is $3.9M and the average EBITDA for the past three years is $1.6M. However, numbers dipped a bit in 2021 due to the pandemic. The business was unable to accept new patients at various times and did not have any out-of-state patients (who represent around 15% of their clientele) due to quarantine rules for a number of months. This circumstance hit hardest in November/December of 2020 (reflected in 2021 Q1 revenue) and March/April/May of 2021 (reflected in 2021 Q2 revenue). Considering their historical numbers, had they been operating at full capacity, the revenue for 2021 would have been around $700-$800K higher.

Additionally, their medical billing company had operational and staff changes that resulted in many more inaccurate reports and a failure to pro-actively negotiate better rates with insurance companies. The CEO has since replaced them with a different vendor (as of September 2021) and revenue is already back on the rise, but it’s believed that the billing errors cost them close to 25% in revenue (equating to around $800K).

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