Proven Guidance to Follow When Divesting Treatment Center Facilities
Being the owner of addiction treatment centers is no different than owning any other business in the sense that for some, the end goal is often to sell the brand you’ve worked so hard to create.
In today’s business environment, investors are constantly looking for turnkey opportunities that are already profitable, and the addiction treatment space provides an advantage for would-be buyers.
But what are the particulars involved when selling a drug rehab?
As you might imagine, with something as regulated as the drug rehab industry, there exists a certain amount of regulatory compliance and other issues that deserve attention, particularly if the business is being turned over to new ownership.
If you’re in the behavioral health industry and you’re thinking about buying or selling, this short guide from our experts at Ads Up Marketing provides an excellent starting point. Keep reading to find out the pertinent information you must be aware of to make the transition as stress-free as possible.
Should I Hire a Consultant Who Specializes In the Purchase of Treatment Centers?
Before we get into any of the specifics or tips, there’s one thing you must be aware of: It’s strongly recommended that you hire a consultant who can help you navigate the requirements when purchasing or divesting from addiction treatment centers.
The addiction treatment space can be a very profitable and extremely rewarding industry to buy into. However, as stated above, there is a significant amount of regulatory compliance that comes with being an owner.
The Importance of Understanding the Behavioral Health Space
One cannot step into the addiction treatment industry without significant background knowledge of the inner workings of the field, legalities, and other critical matters.
As long as you’re aware of this, buying a substance abuse treatment center is a great way to add to your investment portfolio and help an often underserved demographic. It also presents an opportunity to build additional drug rehab centers if your initial purchase is a success.
Next, we will review several other “golden rules” that will help you tread water as a would-be drug rehab owner.
How Should I Prepare to Purchase a Drug Rehab Center?
If you’ve purchased businesses in the past, you’re aware of the fact that no two situations are identical. The same holds for the drug rehab center business, as there is no blanket procedure for potential buyers.
That said, the following tips will help you stay balanced and avoid some of the most common pitfalls of drug rehab investors.
Understanding the Market for Treatment Centers
This is something you should be acutely aware of from the start. No two markets are the same in the rehab center industry. As with any other business model, some will thrive more in specific locations.
The current epidemic has ravaged the United States and no state is free from the grips of fentanyl, crystal meth, and other drugs. That said, this doesn’t mean you can start up a drug rehab anywhere.
Certain nuances exist that can have an impact on the success of rehab centers:
- Proximity to travel centers like airports and bus stations
- Distance from certain city centers
- The average yearly climate
- The adjoining properties and neighborhoods
- The density of competitors
All of these can have a significant impact on the success of addiction treatment centers, and you should be mindful of these specifics and others. Look at these items in the context of why the buyer has put the rehab facility on the market.
Assessing Local Competition and Rival Buyers
Looking at facilities on the Substance Abuse and Mental Health Services Administration (SAMHSA) map of alcohol and drug rehab facilities nationwide can provide a helpful initial overview of whether the area is saturated with facilities, or offers a more ‘blue ocean’ environment in this regard.
Finally, considering other bids or buyers can provide insights into desirability as well as the market value, or perceived market value, of the facility. Be aware of private equity companies, venture capital firms, or other entities that could drive up the purchase price.
The Treatment Center Investment & Valuation Retreat, held twice annually, offers an opportunity to gain an insider’s understanding of behavioral health properties and the factors that contribute to their market prices.
If the density of competition or any of the factors listed above could potentially impact your census, you should take a closer look at whether you’re making the right decision or looking elsewhere.
Commercial Appeal
Look at the current state of the drug rehab in terms of commercial appeal. Does the current branding work for you and your target market? Do you have plans to go a different route concerning addiction treatment marketing?
Every substance abuse treatment center has a different marketing plan, and it’s important that the treatment facility’s location and current state at least somewhat align with your plans for the future. The easiest transition will be considering a high-quality addiction treatment center with a proven track record of success.
If you have plans of completely revamping the branding or doing an overhaul, think of how this could help or hinder the current business model. Your ideas might look great on paper, but it’s all about whether these ideas align with what’s already been proven to work in the particular area you’re targeting for purchase.
Keep Everything Private Regarding Your Treatment Center Purchase
One critical point to be mindful of is the fact that there are current clients who are actively enrolled in the facility. You potentially have inpatient and outpatient clients who have frequented the facility for a long time, and hopefully, the drug and alcohol treatment facility has a stellar reputation in the area.
Keep the plans for a transition of ownership as quiet as possible. In the business world, sometimes there can be a negative sentiment when it comes to long-established businesses changing hands. The last thing you want to do is shake up the positive atmosphere and tranquility for the current staff and clients.
The substance use disorder industry is a competitive one, and this could also present an opportunity for the competition to damage the reputation of the facility. Future and current clients mustn’t look at the transition in ownership as a negative element that’s going to impact the way that they receive care in the future.
The Bottom Line on Buying or Selling a Drug Rehab
This goes without saying, but do your due diligence when it comes to the financial history of the rehab facility. Look at how successful they’ve been as an inpatient rehab, how their outpatient treatment program has performed, and other areas of performance.
Do they have a reputation for treating alcohol addiction specifically, all substances, or in helping clients with dual diagnoses? How has their lead generation performance worked in the past?
Keep your eye on different key performance indicators to avoid future financial pitfalls that you could have avoided through more intense research.
Go back as far as possible in regards to record-keeping with the current ownership. The clearer picture you can get of their financial performance in every key area, the smoother the transition.
As stated before, don’t be afraid to ask why they’re selling their treatment center or centers. This can be very telling and a huge dynamic when it comes to your future success.
Prepare for Your Future Marketing Efforts for Your Treatment Center
Take a look at the current marketing efforts and how they advertise their treatment programs. How have they acquired new clients? How do they perform compared to other facilities in the area? Who are the closest competitors?
You want to prepare all of your marketing and advertising preparations before you make the transition. Be mindful of having a professional solution for:
- Email marketing
- Call center performance (and tracking)
- Communication with potential clients
The more you prepare or what your special focus is regarding your marketing plan, the more you set yourself up for better outcomes. Don’t hesitate to owners what worked for them in the past. In the beginning stages of a new business, even though you’re stepping in to fulfill a turnkey role, your money must be spent wisely.
Paperwork Preparation
All of the pertinent documentation related to the business should be ready well beforehand. All of the legal requirements such as:
- 3 years or more of financial records
- Mandatory license information
- Contract obligations
- Permits required to legally operate
You must review all of these items before finalizing the process. The last thing new owners want is to make the purchase only to find out they need re-licensing, or worse, the facility has been operating illegally. If you’re going to offer certain treatment options, be sure that the facility is already qualified to do so.
Looking at Addiction Treatment Center Success Rates
One of the areas of business to look into is the current success rate of the rehab. What has their track record been like regarding the amount of patients who have experienced recovery?
Generally, most successful facilities see about 65 to 70% of their patients complete their rehab program. You want to maintain and improve on that level of successful client outcomes for your business after you take over.
Ads Up Can Help You Navigate The Treatment Center Buying or Selling Process
If you’re buying or selling a rehab center, Ads Up Marketing can help. Not only can we assist would-be owners with the specifics of buying, but we can also help current owners market their businesses for sale.
For more information on our services and a confidential consultation, contact Ads Up Marketing today.
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