In the dynamic and often complex world of behavioral health, success hinges on a combination of experience, relationships, and strategic timing. Nancy Weisling, a seasoned expert with years of experience running behavioral health programs, shares her insights on the intersection of personal and professional growth, business valuation, and the factors that shape the future of the industry.
Weisling’s journey in the behavioral health space has been marked by diverse experiences—from working directly in care services to holding leadership positions in special education. These roles have not only shaped her professional expertise but have also proven invaluable in her business dealings, particularly when it comes to her ability to connect with business owners and clients alike. Her deep-rooted experience lends her credibility and trust, which have been key to her success in the behavioral health business.
Drawing from Life and Career Experiences
In reflecting on her current role, Weisling credits her experience managing behavioral health programs and her various operational roles as crucial stepping stones in her career. Her early experiences as a special education teacher and working in direct care gave her the foundation necessary to build relationships with business owners and stakeholders in the industry. “Building solid relationships with my clients has been the key to my success,” she states, highlighting the importance of credibility and personal connection in her line of work.
Her background has not only shaped her approach to business but also allowed her to understand the intricacies of behavioral health needs from a firsthand perspective. “Understanding the challenges of direct care has helped me better navigate the business side of things,” Weisling explains. Whether working directly with clients or developing operational strategies, her career has given her a holistic understanding of the ecosystem, making her a trusted advisor and leader.
The Impact of Timing on Business Valuation
One of the most critical elements of business strategy, especially in the behavioral health industry, is understanding when to sell. The timing of a sale can significantly influence a company’s value, and Weisling offers a nuanced view of how market conditions and internal growth dynamics play a role in shaping a company’s worth.
When considering the timing of a sale, Weisling identifies two key factors that determine value: the business’s current growth stage and the sustainability of that growth. If a business is in decline, it’s generally not the right time to sell. “When a business is declining, it’s usually perceived as a distress sale,” Weisling says, noting that buyers may be hesitant to invest, which often leads to a lower valuation.
On the flip side, businesses experiencing hyper-growth, such as those growing at 100% per year, might seem like an ideal opportunity for a sale. However, Weisling points out that buyers often view this rapid growth with skepticism. “When growth is too fast, it raises questions about sustainability. Buyers may be concerned that the business can’t continue to grow at the same pace,” she explains.
According to Weisling, the optimal time to sell is when a business experiences steady, mature growth of around 15% to 30%. This growth rate is seen as sustainable and suggests to potential buyers that the business has a stable foundation. Selling during this phase allows owners to maximize their value, as the company’s growth is both consistent and sustainable.
Beyond Cash: The Multifaceted Components of Value
While cash is often seen as the king of any business transaction, Weisling emphasizes that value in a sale goes beyond just the financial exchange. “Cash plays a significant role because it’s tangible—what you walk away with when the deal closes,” she admits. However, she points out that there are intangible factors that can increase a business’s overall value.
One of the most important intangible assets is the concept of a “platform” business. These businesses have the right size, infrastructure, and management team to become an attractive entry point for private equity (PE) sponsors. “A platform business offers an opportunity for a PE sponsor to invest capital, and the business can continue to grow with their help,” Weisling notes. In some cases, the owner might retain a minority interest, which can provide significant additional value if the business thrives under the partnership.
Additionally, Weisling stresses that a business’s value isn’t just about the transaction itself; it also involves factors like employee retention, maintaining clinical integrity, and preserving the legacy of the company. “For many clients, it’s about how the business fits with their employees and the people they serve. Preserving clinical standards and maintaining a legacy is often just as important as the financial deal,” she explains.
Recasting Financials: A Critical Step in Business Valuation
Recasting financials is a critical process in ensuring a business is accurately valued when preparing for sale. Recasting involves adjusting financial statements to eliminate personal expenses or non-recurring costs that a buyer would not incur. “As a business owner, you may run some personal expenses through the business—like a car or a vacation home. Recasting ensures these are removed, allowing the business’s true profitability to be reflected,” Weisling clarifies.
This adjustment has a direct impact on EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), which is a key metric in business valuation. Recasting can materially increase a business’s value because each adjustment to expenses affects the EBITDA, which is then multiplied by a valuation multiple. Weisling offers an example: “An expense of $1,000 with an 8x multiple equals an $8,000 increase in business value.”
However, she cautions against being too aggressive in recasting. “It’s critical to be disciplined and not inflate the numbers too much. For instance, trying to eliminate essential management salaries or bonuses can lead to pushback from buyers,” Weisling warns. The key is balance—making sure that adjustments are justified and aligned with what buyers expect while maintaining credibility in the financials.
Involvement of the Owner in Day-to-Day Operations
As business owners prepare for a sale, one of the most important questions they face is how involved they should remain in day-to-day operations. Weisling stresses that owners should begin planning for their exit strategy early. “If a buyer perceives that a business can’t operate without its owner, that’s a major red flag,” she says. A business that is overly reliant on the owner for relationships, operations, or management can be seen as a risk.
To mitigate this, Weisling advises business owners to identify key personnel who can step into leadership roles. “By identifying capable leaders well in advance of a sale, you can show potential buyers that the business will continue to thrive even without the owner’s direct involvement,” she explains. The owner’s ability to step back and allow others to take charge will demonstrate to buyers that the business is self-sustaining and less dependent on one individual.
Sequential Presentation Process: Why It’s Not Always the Best Strategy
When it comes to selling a business, Weisling suggests that a sequential presentation process—a method where the seller approaches buyers one by one—can sometimes limit opportunities. “A sequential approach might seem like a way to limit exposure and maintain confidentiality, but it often doesn’t work in the seller’s favor,” she admits.
By only targeting a few specific buyers, sellers may miss out on other potential opportunities. Weisling shares a story where the best offer came from a buyer with a personal motive: “The winning bid came unexpectedly from someone who wanted the business because it was near his vacation home. You can never predict what will drive a buyer to offer the highest value,” she notes.
Instead, Weisling advises a more controlled process in which multiple qualified buyers are engaged simultaneously. This approach increases the chances of finding the right buyer at the right time, and it allows the seller to explore more opportunities to maximize value.
Looking Ahead: What 2024 Holds for the Behavioral Health Industry
As Weisling looks ahead to 2024, she sees continued growth and interest in mental health, with specific opportunities in autism services. “2024 will be defined by continued interest in mental health, new platform investments in autism services, and a market ready to soar once the Fed introduces a rate cut,” she predicts. This forecast highlights the potential for continued investment in behavioral health services, particularly in specialized areas like autism, as demand for these services continues to grow.
Conclusion
Nancy Weisling’s insights offer a comprehensive perspective on the behavioral health business, from the importance of personal experience and relationships to the complex factors that influence business valuation. Her advice emphasizes the need for strategic planning, disciplined financial adjustments, and a thoughtful approach to leadership transitions. As the behavioral health industry continues to evolve, Weisling’s experience and guidance remain invaluable for business owners navigating the challenges and opportunities of this ever-changing market.
