About this episode
Jeffrey Hoff spent about 35 years in banking doing corporate finance and mergers before retiring in 2018, then screened small businesses against two filters, recession resistant and recurring revenue, and landed on Reliant Transport in Winston-Salem, North Carolina, closing in June 2019. He walks host Nirav Chheda through broker networking, a first NEMT deal in Raleigh that collapsed when the seller lost a key customer and refused to move on price, diligence with an outside accountant, and pricing off adjusted EBITDA. Trip volume has since roughly doubled from about 6,000 a year to about 11,000.
Key takeaways
- Hoff prices small NEMT deals off adjusted EBITDA, and says three to four times is a reasonable multiple for a smaller middle market company at this size.
- His first NEMT deal died at the letter of intent stage when the seller lost a key customer and refused to adjust price, and that broker then referred him to Reliant.
- He funded the purchase roughly half equity and half SBA debt, warning that 90 percent SBA financing leaves the cash flow working for the lender rather than the owner.
- Hoff used a ROBS structure to invest 401k money as the equity, so proceeds return to the plan on a pre tax basis whenever he eventually sells the company.
- Trip volume went from roughly 6,000 in 2020 to about 11,000 in 2023, with revenue per trip up 25 to 30 percent and the monthly fuel bill peaking near 6,000 dollars.
Chapters
- 0:00 Introduction
- 1:13 Why buy a business?
- 3:18 Figuring out what kind of business to buy
- 6:33 Finding an NEMT business to buy
- 8:51 Evaluating the NEMT business
- 12:13 Determining an offer price
- 13:57 Setting the takeover plan
- 15:43 What happened after taking over
- 18:37 How has the business grown since takeover?
- 20:41 Would you have done anything differently?
- 22:45 Financing structure for the takeover deal
- 25:37 Any regrets?
