Drug Rehabilitation Center, Two-Location Ohio Provider

$6.4M

Revenue

$2.3M

SDE

1.1x

Multiple

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Full Editorial Writeup

This is a two-location drug rehabilitation provider in Ohio generating roughly $6.4M in revenue and $2.3M in cash flow, a healthy 36% margin for a services business. It runs on a lean salaried core of 9 full-time staff supported by 64 part-time therapists paid hourly, which keeps fixed labor cost low and flexes capacity with patient volume. The business is positioned as the recognized "go-to place" for rehab in its market, with the seller citing very little local competition.

Addiction treatment is a clinically driven, often court-mandated service, which insulates demand from economic cycles. Patients are typically funded through insurance, Medicaid, and referral channels, and much of the census returns through ongoing treatment programs and legal-system referrals rather than one-off transactions. That referral and program structure gives the business a recurring, defensible revenue base.

The asking price of $13M implies a 5.66x multiple on cash flow, which sits at the top end for a single-market rehab operation. One location operates under a transferable lease. The seller separately owns the two-building property at the second location, but that real estate is offered at an additional cost outside the asking price, so a buyer must underwrite the operating business on its own merits and treat the real estate as a distinct decision.

Why we like it

Earnings quality is strong for a service business, with $2.3M of cash flow on $6.4M of revenue, a 36% margin. The variable labor model (64 part-time therapists paid hourly against just 9 salaried staff) means margins can flex with census rather than getting crushed by fixed payroll in slow periods.
Demand is durable and largely non-discretionary. Addiction treatment is clinically necessary and frequently court-ordered, so the revenue base is insulated from downturns in a way that elective or consumer-facing healthcare is not.
The business has a genuine local moat. Being the recognized "go-to place" with very little competition means referral sources (courts, hospitals, physicians) default here, and referral relationships are sticky and hard for a new entrant to replicate.
There is a clear, cheap growth lever. The seller notes the court network in surrounding counties is under-penetrated, giving a new owner an identifiable path to add census through referral channels the business already understands how to serve.

How to improve it

Map and formalize the court referral pipeline in adjacent counties within the first 90 days. The seller flagged this as the primary growth lever, so assign a dedicated liaison to build relationships with probation departments, drug courts, and public defenders to convert mandated cases into steady census.
Audit the payer mix and reimbursement rates. Understand exactly how much comes from private insurance versus Medicaid versus self-pay, then renegotiate or optimize contracts, since even small rate improvements on a $6.4M base drop straight to the bottom line.
Analyze capacity utilization across both locations and the part-time therapist pool. If beds or program slots are underused, the fixed cost is already covered and incremental patients carry very high margins, so filling capacity is the fastest profit unlock.
Add or expand outpatient and step-down programs (IOP, sober living, aftercare) to lengthen the patient lifecycle. This increases revenue per admission and creates recurring touchpoints that improve outcomes and referral reputation simultaneously.
Systematize referral tracking and outcomes reporting. Courts and payers increasingly reward documented outcomes, so building simple reporting that proves completion and sobriety rates strengthens the referral moat and supports higher reimbursement.
Reduce key-person risk before close by identifying and retaining a clinical director. With the owner retiring, locking in medical leadership and licensure continuity protects the census and the regulatory standing the whole business depends on.

Diligence notes

Verify all licensing, accreditation, and regulatory standing (state facility licenses, CARF/Joint Commission accreditation, DEA if applicable). In addiction treatment, a lapse or investigation can shut down census overnight, so confirm the licenses are clean, current, and transferable to a new owner.
Break down the payer mix and confirm reimbursement stability. Heavy Medicaid or a few large insurance contracts create concentration risk, and any pending rate changes or claw-back exposure needs to be quantified against that $2.3M cash flow.
Scrutinize the labor model and its true cost. Confirm the 64 part-time therapists are properly classified as employees versus contractors, that credentialing is current, and that hourly pay assumptions in the cash flow are sustainable rather than understating real staffing needs.
Pressure-test the referral concentration. If a single drug court, hospital, or physician group drives a disproportionate share of admissions, losing that relationship in a transition could gut revenue, so map the top referral sources and their durability.
Treat the real estate as a separate underwrite. The two-building owned property is offered at an additional cost outside the $13M, so get its price, appraised value, and lease terms for the second location, then decide whether buying or leasing produces the better return.
Confirm the 5.66x multiple against the cash flow definition. Clarify whether the $2.3M is pre- or post- owner compensation and normalize for any add-backs, since a rehab operation at the top of its comp range needs clean, verifiable earnings to justify the price.

Source

Originally listed on Synergy Business Brokers. View original listing →