Valuation Multiples for an Urgent Care

Valuation Multiples for an Urgent Care

The urgent care industry includes facilities that provide medical care on an unscheduled, walk-in basis. Urgent care facilities main purpose is to treat injuries or illnesses requiring immediate attention without warranting emergency room care. In the Untied States, there are a little over 7,400 urgent care centers. These facilities generate nearly $28 billion in revenue. This industry is highly fragmented with no business having greater than 5% market share.  Because of the high fragmentation, there are dozens of urgent care transactions each year. As such, it is a great time to consider selling or buying an urgent care. The first step of that process is understanding the value of an urgent care.

Valuing an Urgent Care Clinic

If you are selling an urgent care, obtaining a business valuation can help you maximize the value. It can also aid in negotiations with potential buyers. If you are considering buying an urgent care, a business valuation can help you feel confident in the purchase price. Get started today, by scheduling your free consultation with Peak Business Valuation, business appraiser Utah.

Many individuals wonder how a valuation expert determines the fair market value of an urgent care center. One of the ways, a valuation expert values an urgent care is by using valuation multiples.  Here is a quick summary of what valuation multiples look like for an urgent care. Be sure to also check out our articles on Valuing an Urgent Care and Value Drivers for an Urgent Care.

Valuation Multiples for an Urgent Care

 

Disclaimer: These multiples have been provided for educational purposes only. As such, the information provided does not constitute valuation advice and should not be acted as such. These multiples do not represent the valuation opinion of Peak Business Valuation or any of its valuation professionals. Instead, you should seek the guidance and advice of a qualified business valuation professional with respect to any matter contained in this article.

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What is a Valuation Multiple?

One of the ways a valuation expert values an urgent care is using valuation multiples. A valuation multiple is like a ratio. A ratio compares two things to each other. For instance, one of the more common ratios in valuation is an SDE multiple. The SDE multiple compares the seller’s discretionary earnings of the business, with the implied value of the company. A valuation expert uses the multiples of other similar urgent care centers that have recently sold on the open market. They then apply the multiple to your urgent care to get a range of value.

For example, if a company has $560,000 in SDE, and receives a 3.2x SDE multiple, then the business’s implied value would be $1,792,000. ($560,000 times 3.2) On the contrary, a 4.0x multiple would imply the value of the company would be $2,240,000. ($560,000 times 4.0)

Peak Business Valuation, business appraiser Utah, has worked with numerous urgent care clinics that were looking to sell or expand their business. As such, we have come to recognize some of the common valuation multiples an urgent care transacts at and are valued at. The two most common multiples to look at for an urgent care include SDE and EBITDA or cash flow multiples.

SDE Multiple

Average SDE Multiple range: 2.4x – 4.22x

According to our data, urgent care centers transact between a 2.4x-4.22x average SDE multiple.  To derive an implied value of the urgent care, apply the multiple by the most recent 12-month period of revenue. The calculation is as follows:

SDE X Multiple = Value of the Business

For instance, if an urgent care generates $450,000 in sellers’ discretionary earnings and transacts at a 3.7x multiple, then the business value is worth approximately $1,665,000.

$450,000 X 3.7x = $1,665,000

Seller’s discretionary earnings is a common cash flow multiple used in valuing small business transactions. It starts by computing the company’s operating profit and adding back potential expenses that may not be incurred by a new owner. These expenses may include the owner’s compensation, the owner’s personal expenses, and other expenses such as non-recurring or non-related business items.

EBITDA Multiple

Average EBITDA Multiple range: 3.0x – 5.58x

The average EBITDA multiples for an urgent care clinic range between 3.0x – 5.58x. This multiple is applied to EBITDA of a business to derive an implied value of the business. The calculation is as follows:

EBITDA X Multiple = Value of the Business

For example, an urgent care clinic has an EBITDA of $770,000 and transacts at an EBITDA multiple of 4.2x. Using the above metrics, the urgent care is worth approximately $3,234,000.

$770,000 X 4.2x = $3,234,000

The EBITDA multiple measures a company’s return on investment (ROI). This multiple is preferred as it is normalized for differences in capital structure, taxation, and fixed assets. Normalized ratios allow for comparisons to similar businesses. Normalized ratios also more accurately represent the future earnings capacity a buyer expects from the business.

REV Multiple

Average REV Multiple range: 0.6x – 0.9x

According to our data, urgent cares sell for an average of 0.6-0.9x revenue multiple. You can calculate the implied value of the business by multiplying the amount of revenue or sales an urgent care makes by the valuation multiple.

Revenue X Multiple = Value of the Business

For instance, if an urgent care makes $700,000 in revenue and transacts at a 0.85x multiple, then the business is worth approximately $595,000.

$700,000 X 0.85x = $595,000

A revenue multiple does not consider the operations of the business. As such, a valuation expert may rely less frequently on this multiple. Therefore, it is important to look at cash flow multiples. Cash flow multiples – SDE and EBITDA – consider expenses that impact the cash flow. For instance, COGS, salaries, rent, among others.

Summary

When looking at valuation multiples, keep in mind there are many factors that may impact the business and the multiple used to value that business. As such, Peak Business Valuation, business appraiser Utah, would love to talk with you more about the factors that may impact the value of your urgent care.

Peak Business Valuation, business appraiser Utah, loves working with small business owners to maximize the value of an urgent care. We focus on providing valuable information to help you grow, sell, or buy an urgent care. Peak works on valuations for urgent care clinics monthly. Questions are always welcome! Get started today by scheduling your free consultation below!

 

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