Addiction-Rep’s Jim Peake To Speak on Ethical Marketing Practices in the Addiction Treatment Industry
There have been a number of changes in the addiction treatment industry in the past several years, both from an insurance standpoint — with the...
The addiction treatment space is white hot as for investors who are either private equity companies, high net worth individuals, real estate developers or just “regular entrepreneurs.”
Some of the groups that approach Addiction Rep have experience in the drug rehab space, while others do not. We recommend that if you are interested in building 20 drug rehab centers, then buy one first or invest in one and get to know the business. Find out what is involved and get to know people in the industry.
There are several moving parts in the drug rehab space, including:
This is just the tip of the iceberg. Managing 20 rehab facilities at a time is like playing 20 different chess matches against 20 grandmasters with time waiting to go off in the background!
The drug rehab space is very tight-knit. It seems like everyone knows everyone else. This can work to your advantage, and it can become difficult just the same. The bottom line is if you are in the drug rehab field to really help people (or help the treatment centers help their clients), then you are in it for right reasons.
We would much rather see a new investor or investor group either put money into an existing rehab or buy one outright rather than buy land, build and go to market. The amount of money required is usually a lot more than planned, and it will be even more if your insurance companies don’t give you the reimbursement rates you are expecting. Some insurance companies send a check to the insured. Imagine giving an addict a check for $20,000-plus after they are home from a 30-day stint in rehab. Have fun collecting on that.
Currently, Addiction Rep is witnessing more buyers than sellers in the drug rehab industry. We do know some sellers or people who can be bought, but it requires finesse and trust. Addiction Rep is connected to other industry players who can assist in transactions or help with writing drug rehab business plans and pro formas.
Some of the drug rehabs for sale have some serious baggage. It is easy to detect today with the internet. You can go to Yelp, BBB, Google, Rip Off Report and many other legitimate news sites to easily see what the public is saying about a rehab business online. Not all of the claims you’ll see are true. Actually, we would say that only a small percentage of them are true. However, if a particular rehab center has a lot of negative press it becomes really difficult to attract new clients. Keep this in mind if you are purchasing.
If you are selling a drug and alcohol rehab center or business, make sure your books are in order. The better organized you are financially, the more likely you will see success. However, with that said, keep your expectations realistic. Chances are your valuation is not going to be 30X EBITA.