[0:03] Nirav Chheda: got bored of hitting golf balls at the club.
[0:06] Nirav Chheda: It's [laughter] just like every time I think about it, it makes me It's it's it's not it's not your typical story.
[0:15] Nirav Chheda: [music] of Reliant Transport. Jeff, how are you?
[0:33] Jeffrey Hoff: I'm great, Nirav. How about you?
[0:35] Nirav Chheda: Doing wonderful. Thanks for being with us.
[0:38] Nirav Chheda: So, you bought an NEMT company not so long ago.
[0:44] Nirav Chheda: We'd love to hear your story.
[0:45] Nirav Chheda: How did you go about it?
[0:47] Nirav Chheda: Well, first of all, why did you do it?
[0:49] Nirav Chheda: How did you go about it and what were the factors you thought about in doing that deal and you know actually buying the company?
[0:59] Nirav Chheda: Got it. So, but the first part of course uh is the fun one.
[1:04] Nirav Chheda: I I'd love for you to share the story about you know why you did it which I already know but of course for the benefit of the Fair enough.
[1:14] Jeffrey Hoff: Fair enough. Well, thank you Nirav.
[1:15] Jeffrey Hoff: So um I was a banker um for probably 35 years and um I focused I did corporate finance and M&A primarily focused on the media and telecom industries and uh in 2018 I retired and you know after about
[1:37] Jeffrey Hoff: six months of getting up each morning and reading the paper for an hour or two and going to the fitness center hitting some golf balls.
[1:46] Jeffrey Hoff: Um I started to question question myself and say, is this all there is?
[1:52] Jeffrey Hoff: Is this what I've got for the next 20 or 30 years?
[1:55] Jeffrey Hoff: So I started to look around and try to figure out if I could do something, you know, on a part-time basis, something that wasn't going to require me to travel, do do a lot of the things that I
[2:05] Jeffrey Hoff: had done in my working life.
[2:07] Jeffrey Hoff: And uh so I I decided I'd start looking at the skills that I had developed during my career and actually be on the other side look to to buy a company.
[2:19] Jeffrey Hoff: So you a much much different scale um than uh what I had done on my working life because it was my own personal capital.
[2:29] Jeffrey Hoff: Um but just decided to look around see if there was an opportunity to buy and run and manage a small company.
[2:36] Jeffrey Hoff: So, so that was um that was what kind of led me led me down the path.
[2:42] Jeffrey Hoff: Um if you had asked me five years ago what NEMT stood for, I wouldn't have the the faintest clue.
[2:52] Jeffrey Hoff: Um so, you know, I went into the process um and really what I did was I had what I would call was deal filters.
[3:04] Jeffrey Hoff: So, you know, what what types of businesses would I look at?
[3:08] Jeffrey Hoff: What was my criteria? And there were two things that I looked for.
[3:11] Jeffrey Hoff: You know, one was going to be a business that was recession resistant.
[3:16] Jeffrey Hoff: Um, nothing nothing is recession proof, but back from my especially on the media side, I saw a lot of companies that, you know, were relying on advertising and were subject to the cyclicality of advertising and saw what it
[3:31] Jeffrey Hoff: did to those companies. So, I decided I wanted to stay away from uh anything that would uh be subject to characteristics from a recession.
[3:41] Jeffrey Hoff: Um the second thing I was looking for was something that had a recurring revenue or, you know, a repeat customer.
[3:49] Jeffrey Hoff: You know, I dealt with a lot of companies that were subscriptionbased.
[3:54] Jeffrey Hoff: Um and that, you know, that gives you a nice steady, you know, reliable cash flow.
[4:00] Jeffrey Hoff: So those are the two things that I look for.
[4:02] Jeffrey Hoff: And then you know kind of on a on a tertiary basis was um you know maybe something from a macro economic cycle you know that would that would tie into that and obviously you know uh not knowing anything
[4:17] Jeffrey Hoff: about healthcare, not knowing anything about transportation you know the demographics and aging population certainly you know were contributing factors.
[4:27] Jeffrey Hoff: Um so after I developed those um you know sort of deal filters if you will I started looking at companies um actually reaching out to you know business brokers and looking on the web and and everything else and
[4:43] Jeffrey Hoff: uh you know there there's there's a range of quality of of uh guys that are in the business broker role.
[4:52] Jeffrey Hoff: So, you know, you have to, you know, it's really it's a networking process where you find some that um you know, are credible and good and are good to interact with and then you kind of get them to
[5:07] Jeffrey Hoff: refer you others. So, you you gradually build a network and find your way in.
[5:12] Jeffrey Hoff: Um, interestingly enough, you know, so think about my deal filters, recession resistant and recurring revenue.
[5:20] Jeffrey Hoff: So, one of the first businesses that I looked at and got a little interested in was liquor stores.
[5:27] Jeffrey Hoff: Um, definitely something that's going to be recession resistant.
[5:32] Jeffrey Hoff: Um, you know, I kind of went to and in North Carolina all liquor stores are stateowned, but in South Carolina they're privately owned.
[5:41] Jeffrey Hoff: So, Charlotte is on the southern part of the state and it's not far from South Carolina.
[5:47] Jeffrey Hoff: So, so I looked at one or two of those and then when I when I went to my my my family board, my wife asked me if I was crazy and said, you know, hell no.
[5:59] Jeffrey Hoff: Um and so we took we took liquor stores off the board and I started looking at a bunch of um uh landscaping companies and I thought, oh, you know, guys mowing my lawn and stuff, but it was it
[6:12] Jeffrey Hoff: ended up being a lot more corporate accounts and doing more corporate work um than residential.
[6:20] Jeffrey Hoff: Um so, you know, that was interesting.
[6:22] Jeffrey Hoff: I got very close on one of those and and then kind of fell away.
[6:27] Jeffrey Hoff: Um, and then I then I found my first uh NEMT business.
[6:33] Jeffrey Hoff: Um, that was actually about an hour north of here.
[6:38] Jeffrey Hoff: Um, and it was [in another North Carolina market] and I got I got very interested um to the point where I made an offer on the company.
[6:45] Jeffrey Hoff: We got the company under a letter of intent and as we were starting to move towards close, the owner picked up the phone and called me and said, "Oh, you know, I just need to tell you that um
[6:59] Jeffrey Hoff: we just lost one of our key customers." And you know, I hesitated a little I went back and looked at some numbers and did some thinking and stuff and went back and said, "Listen, I I consider, you know,
[7:14] Jeffrey Hoff: still moving forward forward, but we're going to need to adjust the price." And and he was, "No, I don't want to adjust the price.
[7:23] Jeffrey Hoff: I'd rather go back and rebuild the business for a year or two and then go back to sell it." So, I said, "Fine." Um, and I think it was through that process that the broker on that deal knew
[7:36] Jeffrey Hoff: somebody else that had another NEMT business for sale um, in Winston Salem, which is how I came across this Jeff, I love your story because you bought an NEMT company because you got bored of hitting golf balls at
[7:54] Nirav Chheda: the club. It's just [laughter] like every time I think about it, it makes me It's it's it's not it's not your typical story.
[8:05] Jeffrey Hoff: And and I am a 10 handicap, by the way.
[8:14] Jeffrey Hoff: frustrating trying to get to an eight or a six.
[8:16] Jeffrey Hoff: So, I'd rather just do something else, [laughter] which is manage a non-emergency medical transportation business.
[8:24] Nirav Chheda: [laughter] So you come across Reliant Transport then or whatever it was called at the time.
[8:32] Nirav Chheda: Um and now you're approaching this company and you're evaluating hey do I want to buy this business?
[8:40] Nirav Chheda: How did you evaluate the business and decide these are the terms at which I'll buy this NEMT company?
[8:47] Jeffrey Hoff: Right. So again, this in this particular case, you know, there was a broker involved.
[8:53] Jeffrey Hoff: Um, she was she wasn't terribly knowledgeable about the company.
[8:59] Jeffrey Hoff: Um, so she gave me some initial financial information and and you know, I started going through and obviously I started having questions.
[9:08] Jeffrey Hoff: I went back to her a couple of times with questions and then finally she basically just turned me over to the owner of the company.
[9:16] Jeffrey Hoff: So I started asking my questions uh directly you know of the of the previous owner and um a lot of that you know it it's about the financials it's about um you know the customer base um it's about
[9:34] Jeffrey Hoff: you know how are you getting paid are are you getting you know paid you know within terms or are your receivables dragged out what are your key costs you know how you know tell about your insurance.
[9:47] Jeffrey Hoff: Um so you go through a whole, you know, diligence list that ultimately leads you to um meeting meeting with the previous owner and sitting down and having a conversation, coming and looking at the vehicles, looking at the assets,
[10:05] Jeffrey Hoff: um and then getting to a point where you're comfortable enough to make a written offer.
[10:11] Jeffrey Hoff: Um and you know um obviously that you know you know I I'm familiar with some of the legalese at that point you know a lot of people and you know I did too.
[10:22] Jeffrey Hoff: You get an attorney involved uh to help write the letter of intent.
[10:28] Jeffrey Hoff: Um, I also as I once I got a written letter of intent in terms of the do you know the diligence uh that I was doing before I got to close, I actually engaged uh an outside accountant to
[10:42] Jeffrey Hoff: just help me go through because you're dealing with um tax returns.
[10:47] Jeffrey Hoff: You know, it's not like you've got a large company with audited financials by a big four firm.
[10:52] Jeffrey Hoff: That's that's not the case. So, you know, you're you're looking at a lot of information that's, you know, sometimes it's compilations of financials that um, you know, and nobody's really looked at.
[11:04] Jeffrey Hoff: So, you make sure that, you know, I had an accountant that went back and ticked and tied back to, you know, bank statements to the financial information I was given to make sure everything just tied out and and
[11:18] Jeffrey Hoff: was uh verified. So that was that was the process that I went through.
[11:25] Jeffrey Hoff: Again, that was just um you know kind of how I was sort of trained to do it.
[11:32] Nirav Chheda: So what I want to dig into a little more if you can share is you know you evaluate the assets of the company you know the vehicles the contracts whatever it has and you ultimately have to come down
[11:45] Nirav Chheda: to a number and say hey this is how much I will pay you for this business based on all these factors I've evaluated about whatever assets the business had like what was sort of the trickiest part of that
[11:59] Nirav Chheda: or any insight you can share for some of our viewers who may be interested in buying an NEMT company at some point.
[12:08] Jeffrey Hoff: Sure. So, you know, everything um everything is measured on um what's called Ebida, earnings before depreciation, interest and taxes.
[12:19] Jeffrey Hoff: That's sort of the definition of of cash flow.
[12:23] Jeffrey Hoff: So, you get you know what you know is a good IBIDA.
[12:28] Jeffrey Hoff: There are always a um you know some current o owners are going to want to take out all you know they they've got certain things in there that aren't necessarily part of the company operations and there are other
[12:41] Jeffrey Hoff: things you know they may want to take out all of their time um which may or not be appropriate because you need to have somebody running the business.
[12:50] Jeffrey Hoff: So anyway you come to some sense of an agreeable adjusted IBIDA and then you look at what the appropriate industry multiple is you know for that IBIDA and again it depends upon what's in the IBIDA and what's excluded
[13:08] Jeffrey Hoff: from the IBIDA but you know typically for smaller middle market companies like this something in the three to four times IBIDA is a reasonable multiple and then you're going to be influenced by you mentioned before the assets the
[13:24] Jeffrey Hoff: vehicles you know do you have you know are I bought six vehicles um several of which were you know a few years old and a couple of which were newer so you look at the vehicles and the mileage
[13:37] Jeffrey Hoff: you know those are those are the assets that are going to generate that cash flow or ibida so you need to determine whether you need to reinvest in those assets in order to generate that evid on a go
[13:50] Nirav Chheda: forward basis. And were the existing employees like your dispatchers and drivers part of that equation?
[13:58] Jeffrey Hoff: So, so the way it uh the way it works is North Carolina is you know an at will state.
[14:06] Jeffrey Hoff: So we literally I didn't you know I b I only had feedback from the current owner about what she thought would happen.
[14:14] Jeffrey Hoff: in the description. You know, for me, the two key people were, you know, the dispatcher and then there was a a guy that was kind of more general operations and was keeping them and then having the staff of
[14:26] Jeffrey Hoff: drivers to begin with. And um so we literally um we closed the deal, let's say, on Monday.
[14:35] Jeffrey Hoff: I came up to the offices on Tuesday and she announced the deal to the employees.
[14:40] Jeffrey Hoff: They didn't technically know anything about it before.
[14:44] Jeffrey Hoff: And the way the deal was cut was that I would hire all all of the employees to be part of my company.
[14:52] Jeffrey Hoff: Um, and that released her of any obligations for their payment after the sale of the company.
[14:59] Nirav Chheda: Got it. So, it was pretty clean after you made the offer and decided, hey, this is the takeover date.
[15:07] Jeffrey Hoff: It it it was it was clean day one.
[15:10] Jeffrey Hoff: I wouldn't say it was clean down the road, but it was clean day one.
[15:14] Nirav Chheda: [laughter] you have a healthier mix now between hitting at the club and you know doing more engaging things.
[15:29] Jeffrey Hoff: So, you know, so in interesting um so I knew I knew um getting it, you know, that buying an NEMT business was not a match with my background and you know, I was putting capital in both uh personal
[15:45] Jeffrey Hoff: and borrowed. Um and I needed to learn the business.
[15:50] Jeffrey Hoff: So I knew it was going to be 12 or 18 months that I was going to be engaged in the business, you know, on a daily basis and for the first um six months I came up Monday morning,
[16:04] Jeffrey Hoff: went home Thursday night or Friday afternoon.
[16:07] Jeffrey Hoff: So I was here every day.
[16:09] Jeffrey Hoff: I mean, of course, everybody knows that NEMT businesses are great because you have a laptop and a phone, you can do it from anywhere.
[16:16] Jeffrey Hoff: you know, all of our not only we we've got a dispatch system that, you know, is now Bambi um but uh Bambi Run, but we also um but we also, you know, have uh cameras uh in every vehicle.
[16:33] Jeffrey Hoff: So, we can monitor everything um from anywhere.
[16:37] Jeffrey Hoff: So, so but also think about I closed on the acquisition of the company in June of 2019.
[16:44] Jeffrey Hoff: Um, so just as I was kind of getting to what I thought was going to be my ability to pull out, we went into a global pandemic.
[16:52] Jeffrey Hoff: So April, May, all of the doctor's offices here closed.
[16:56] Jeffrey Hoff: We were fortunate. We had about half of our volume was dialysis patients.
[17:01] Jeffrey Hoff: So, you know, we kind of uh ticked down during that period of time, but then quickly were able to bounce back up by August.
[17:09] Jeffrey Hoff: We were kind of back at our normal run rate.
[17:12] Jeffrey Hoff: Um, you know, I was I was fortunate.
[17:14] Jeffrey Hoff: I applied for and received some PPP money and I kept all of the drivers fully employed.
[17:21] Jeffrey Hoff: You know, in some cases I paid them for hours in those couple of months of April and May that they weren't actually working.
[17:28] Jeffrey Hoff: But, you know, I did, you know, I do say that I used the PPP money as it was intended to do to to keep people at work.
[17:36] Jeffrey Hoff: So, um, we did that. Um, so yeah.
[17:40] Jeffrey Hoff: So now, so fast forward today, I mean, I bought it in June of 19.
[17:44] Jeffrey Hoff: I'm coming up on my uh fifth fifth anniversary.
[17:48] Jeffrey Hoff: Um, so now I'm I'm uh I'm in, you know, I'm I I I'm watch the business daily.
[17:55] Jeffrey Hoff: You know, I'm not going to um say, but I'm here physically in the offices one to at most two days a week.
[18:03] Jeffrey Hoff: Um I've got a great operations manager that runs the day-to-day business as well as a dispatch manager.
[18:09] Jeffrey Hoff: and between the two of them, they do a great job.
[18:11] Jeffrey Hoff: I get in the way if I try to do too much.
[18:14] Jeffrey Hoff: Um, but you know, I do a lot of the invoicing and billing and handling relationships with a lot of our facilities and try to develop new business and those kinds of things.
[18:24] Jeffrey Hoff: So, that's a little bit of a different role.
[18:28] Nirav Chheda: How has the size of the business changed from when you bought it nearly five years ago to today?
[18:36] Jeffrey Hoff: So interesting you should ask and I don't know if I've got that handy.
[18:41] Jeffrey Hoff: Um but uh because I was actually uh doing a budget for 2024 last week.
[18:48] Jeffrey Hoff: um our trip um since uh I don't count 2019 because is really only a half year under our ownership, but 2020 to um the end of 2023, our trip volume has almost doubled.
[19:07] Jeffrey Hoff: We've gone from about 6,000 trips to this year we'll do about 11,000 Wow.
[19:14] Nirav Chheda: You've doubled the business since you bought it.
[19:16] Jeffrey Hoff: double the business from a a trip volume perspective.
[19:20] Jeffrey Hoff: Um you know we've um you know financially I think our revenue is probably close to doubled and probably our revenue per trip has gone up about 25 or 30%.
[19:34] Jeffrey Hoff: So there's a lot of moving parts in the last several years between COVID and um you know employment needing to increase uh wages uh you know due to market conditions, gas prices when I first came in um fuel
[19:55] Jeffrey Hoff: was two something and then it went to five you know it was five something.
[19:59] Jeffrey Hoff: So, you know, our monthly fuel bill was around 2,000 and I think last year, you know, has peaked at 6,000 a month at a time.
[20:07] Jeffrey Hoff: So, you know, it it's just there's just a lot of lot of moving there always are.
[20:14] Nirav Chheda: Let me ask you this, Jeff, like if you could go back to the time that you were actually buying the business, are there parts of it that you would do differently?
[20:25] Nirav Chheda: I mean, you mentioned that it all was pretty smooth, at least on day one, the transition, but in terms of the process of deciding to buy it, coming up with an offer, doing your diligence, and then doing the
[20:37] Nirav Chheda: handover, is there anything that, you know, hindsight sort of sort of tells you, oh, I should have done this or that So, so it's interesting, you know, kind of in in this the lower end of the market, um
[20:52] Jeffrey Hoff: the way transactions are done is that um there's a transition period built into the to the deal with the existing owner.
[21:02] Jeffrey Hoff: So, automatically the previous owner stays on for 30 days to kind of help get you to, you know, get you to know the systems and the people and the take you around to the customers and all that.
[22:30] Jeffrey Hoff: So, you know, those are those are the little things.
[22:34] Jeffrey Hoff: Um, well, one thing we didn't talk and the other thing to talk about is is um financing.
[22:43] Jeffrey Hoff: You know, how do you know you talk about how do you get a deal closed?
[22:48] Jeffrey Hoff: Um and so one thing I will mention that the structure the way I structured my transaction um I did what's called a ROBS, a Rollovers as Business Startups and and what it allows you to do
[23:06] Jeffrey Hoff: and there are advisors out there that help walk you through this wasn't anything that I'd ever heard of before in my corporate life but it allows you to take money in your 401k K and use that uh as
[23:20] Jeffrey Hoff: the equity to uh purchase the company.
[23:23] Jeffrey Hoff: So it and it's a very and again they can I use a company called Benetrends.
[23:29] Jeffrey Hoff: There are a couple others out there, but they go through and set up a set of legal documents.
[23:33] Jeffrey Hoff: You you really qual you set up a qualify 401k plan that the sole investment is in this company.
[23:41] Jeffrey Hoff: Um and uh the the key benefit is when you sell the company that money goes back into your 401k on a pre-tax basis.
[23:53] Jeffrey Hoff: So you you um everything is done on a tax deferred basis.
[23:59] Jeffrey Hoff: So I put money in uh on a pre-tax basis, it comes back out and doesn't gets taxed until I distribute it from my 401k.
[24:10] Jeffrey Hoff: I and I also I also used uh SBA financing um and uh don't be afraid to use SBA financing.
[24:20] Jeffrey Hoff: I went um you know with a company I knew I used Wells Fargo and got connected with an SBA or it's it's a thousand pieces of paper.
[24:32] Jeffrey Hoff: They they want everything and they want to um tie you up in 16 different ways and have you pledge all of your assets and personally guarantee and your wife and so you know it can be a little scary
[24:44] Jeffrey Hoff: from that perspective but you know if you do it um you know on a on a conservative basis it it's it's good capital to have um a lot of times the brokers will say hey you can get you
[25:00] Jeffrey Hoff: know 90% SBA financing. Well, you know, that means that a lot of your cash flow is tied up in in in repaying uh the SBA.
[25:11] Jeffrey Hoff: Um so basically, you're you're continue to work for the man.
[25:15] Jeffrey Hoff: You're not working for yourself. So, I did something that was about half and half, used half equity, half SBA debt.
[25:22] Jeffrey Hoff: I get to now, you know, pay myself something and I pay the SBA, but I'm not working for the SBA.
[25:28] Nirav Chheda: So any regrets, Jeff? Running an NEMT business is uh no piece of cake.
[25:37] Jeffrey Hoff: No, you know, um uh you know, learned learn, you know, there's it's a constant learning process, right?
[25:45] Jeffrey Hoff: Which which to me is the benefit.
[25:47] Jeffrey Hoff: It keeps me engaged and it keeps me growing.
[25:51] Jeffrey Hoff: Um Oh, yeah. You know, do I wish I known a couple of more things earlier than I did rather than have to learn them the hard way?
[26:00] Jeffrey Hoff: Absolutely. Um, but that's going to be true in most situations.
[26:06] Nirav Chheda: If anyone has any questions for Jeff, just write to us at contact@bambi.health.
[26:17] Jeffrey Hoff: or help in any way I can.
[26:20] Nirav Chheda: Run Bambi run.
