Medical Adult Day Care, 35-Year Baltimore County Provider

$7.0M

Revenue

$2.5M

SDE

8.0x

Multiple

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Full Editorial Writeup

This is a medical adult day care operation in Baltimore County, Maryland serving over 400 patients per day. The business provides psychiatric rehabilitation, case management, and daytime medical support for vulnerable adults, and it works in coordination with hospitals across the state of Maryland. With roughly $7M in revenue and $2.5M in owner cash flow, it runs a lean team of 22 (16 full-time, 6 part-time) out of a leased 20,000 SF facility.

The seller describes the business as having operated at capacity for its entire history, positioning itself as the dominant local provider in a category tied heavily to Medicaid and state health funding. Its referral relationships with every hospital in the state and its mission around homelessness and case management for at-risk adults give it a durable position in the local safety-net ecosystem.

What makes this notable is the combination of longevity, capacity utilization, and margin: a roughly 36% cash flow margin on $7M of revenue in a service that is largely non-discretionary. The owner is selling due to age and is offering generous seller financing, holding half the note at 6%, which signals confidence in the durability of the earnings.

Why we like it

Earnings quality is strong for a services business, with $2.5M of cash flow on $7M of revenue, roughly a 36% margin, sustained across 35 years at full capacity. A facility that has run at capacity for decades with only 22 employees suggests a genuinely efficient operating model rather than a fragile one.
The moat is built on referral density and regulatory positioning. The operator claims relationships with every hospital in Maryland and describes itself as the only facility at capacity, which in a Medicaid-funded, license-gated category creates real switching friction and referral inertia that a new entrant cannot easily replicate.
Demand is non-discretionary and tailwind-supported. Adult day care for vulnerable, aging, and psychiatrically fragile adults is funded largely by Medicaid and state programs, so it holds up in downturns, and the aging demographic wave points to structurally rising demand for exactly this service.
Revenue behaves recurring. Patients attend daily under ongoing care and case-management arrangements funded by government payers, so census and billing renew by default rather than requiring each sale to be re-won, which supports predictable cash flow for a leveraged buyer.

How to improve it

Nail down the payer mix and reimbursement structure in the first 90 days. Almost all revenue in adult day care is Medicaid or state-funded, so map the exact programs, billing codes, and rate schedules, then build a compliance calendar to protect the license and reimbursement rates that drive the whole P&L.
Formalize and diversify the referral pipeline. The seller's hospital relationships are described as personal, so convert them into documented agreements or memoranda of understanding and assign named staff to own each hospital relationship before the founder departs.
Pursue the stated expansion the seller could not tackle. Management is running at capacity and admits significant room for growth, so evaluate a second site or expanded hours to capture overflow demand that is currently being turned away, using the existing referral base as the anchor.
Professionalize the management layer to de-risk founder dependency. With only 22 employees and an owner who has personally run this for 35 years, install an executive director and clinical lead so the business can operate and grow without the seller, which also protects value at your eventual exit.
Extend or renegotiate the lease. The lease expires 11/14/2030 at $16,000 per month, so secure a long-term renewal or purchase option early, because a specialized 20,000 SF licensed facility is expensive and disruptive to relocate.
Tighten billing and collections operations. Government payers are slow and audit-prone, so invest in claims scrubbing, denial management, and days-sales-outstanding tracking to protect working capital and margin in a business where reimbursement timing is the main cash risk.
Build a data room around census and outcomes. Document daily attendance trends, patient retention, length of stay, and clinical outcomes to both justify the valuation and support future rate negotiations or program expansion with the state.

Diligence notes

Reconcile the founding date discrepancy. The narrative says 35 years in business but the listing lists Established 2008, which is roughly 17 years, so verify the actual operating history, license tenure, and which entity is being sold before underwriting the durability story.
Stress test the payer concentration and reimbursement risk. Confirm what share of the $7M comes from Medicaid or specific Maryland programs, historical rate changes, and any pending policy shifts, because a single state budget or rate decision could materially move earnings.
Validate the 8x multiple against founder dependency. At $20M for $2.5M of cash flow, you are paying a premium multiple for a services business heavily tied to one owner's hospital relationships, so quantify how much cash flow survives the founder's exit and price accordingly.
Audit licensing, certification, and compliance history. Adult day care with psychiatric rehabilitation is tightly regulated, so review state inspections, any citations, staffing ratio requirements, and the transferability of licenses and provider numbers to a new owner.
Scrutinize the SDE build and lease economics. Confirm the $2.5M cash flow figure includes market rent at $16,000 per month and a full management salary, since an owner-operator working full time may be understating the true cost to replace themselves.
Examine the seller financing terms carefully. The seller offers to hold half the balance at 6%, which is attractive, but confirm the note structure, personal guarantees, security interest, and any acceleration triggers, and treat the seller's willingness to finance as a positive signal on earnings quality.

Source

Originally listed on BizBuySell. View original listing →