By David Coit Jr., DBA, MBA
Volume 3 Issue 8 April 12, 2016
In the last issue of SalientValue, we presented two of the four fundamental ways healthcare business owners can increase value: increase the growth rate for earnings and explore ways to extend a positive growth cycle. In this issue, we focus on how to enhance cash flow and how to reduce the cost of capital as strategies for maximizing value.
Enhance Cash Flow
Successful healthcare executives understand that the realities of today’s reimbursement environment can negatively impact cash flow. In short, an organization can be profitable, but also at death’s doorstep if cash flow is poor. Here are a few ways to effectively manage cash flow:
Reduce the Cost of Capital
Competent healthcare business owners must carefully study the cost of their business investments, including the cost of any debt used to fuel business operations. You can reduce the cost of capital if you take the following steps:
Many highly valuable healthcare companies employ one additional strategy: they create a culture where value creation is the responsibility of every employee. This philosophy is becoming increasingly popular for many good reasons, including the complexity of our healthcare marketplace. More than 20 years ago, Jack Stack wrote in The Great Game of Business that “people who invest their time in building a business are just as important as the people who invest their money.” Healthcare executives and owners who adopt this mindset are best prepared to build remarkable value in their organization because they maximize the use of all available resources, especially their fellow workers.
Note: A slideshow version of both “Primer” articles can be found by clicking here.
David is a seasoned commercial and corporate finance professional with over 30 years’ experience. As part of the VERTESS team, he provides clients with valuation, financial analysis, and consulting support. He has completed over 150 business valuations. Most of the valuation work he does at VERTESS is for healthcare companies such as behavioral healthcare, home healthcare, hospice care, substance use disorder treatment providers, physical therapy, physician practices, durable medical equipment companies, outpatient surgical centers, dental offices, and home sleep testing providers.
David holds certifications as a Certified Valuation Analyst (CVA), issued by the National Association of Certified Valuators and Analysts, Certified Value Growth Advisor (CVGA), issued by Corporate Value Metrics, and Certified Merger & Acquisition Advisor (CM&AA), issued by the Alliance of Merger & Acquisition Advisors. Moreover, the topic of his doctoral dissertation was business valuation.
He earned a Doctorate in Business Administration from Walden University with a specialization in Corporate Finance (4.0 GPA), an MBA from Keller Graduate School of Management, and a BS in Economics from Northern Illinois University. He is a member of the Golden Key International Honor Society and Delta Mu Delta Honor Society.
Before joining VERTESS, David spent approximately 20 years in commercial finance, having worked in senior-level management positions at two Fortune 500 companies. During my commercial finance career, he analyzed the financial condition of thousands of companies and had successfully placed over $2 billion in corporate debt.