6 Lessons on Selling a Recruiting Firm: # 2 valuation

Posted by Tim Teague on Mon, Jun 29, 2015 @ 10:41 AM

In the first lesson, we examined understanding why an owner would sell.  In this post, I will open the door to the question of valuation: what is my company truly worth? It is helpful to know this information when a potential buyer comes calling.14561581102_0d18f22699_o

One of the first things a buyer will do is examine the benefits that the owner is taking from the company. On first glance, many owners look at their salary, or owner draws and insurance, and then stop. In most cases, this is a long way from the true benefits that the owner receives.

Why does a buyer care what benefits the staffing agency gives the owner? You must remember that every benefit that is over and above an amount that would normally be paid to an “employee” is potential earnings that are currently going into the owner’s pocket. It’s important to take a closer look at these benefits because they should become a part of your negotiation arsenal.

From a pure investment perspective, let’s assume there is $50,000 in benefits being pulled from the healthcare staffing company by the owner that would not have to be paid to a new manager, owner, or partner. Where do you think an investor could pick up $50,000 a year as a return on investment? That’s exactly what they will get if they replace you with someone on straight salary, or salary and commission, and that’s just for starters! This must be figured into the sales price.

As a bargaining chip, it is crucial that you strip out all benefits that would not have to be paid to a regular employee. How do you do this? The easiest way is to start with pencil and paper and make a list of all things that you receive that is not received by your employees. You might as well do this before selling because any prudent investor will always do this. I have seen such a wide range of benefits it’s difficult to include them all. I have seen such extravagant benefits taken by owners as to include their “nanny” on the company payroll. I’m not sure how that would be explained in an IRS audit, but who should be and not be on payroll is a definite question during a purchaser’s due diligence. Automobiles, family or otherwise, family insurance coverage, eating out for those questionable “business purposes”, or even redecorating your “home” office could be other benefits.  

It is not unusual for potential sellers to take a close look at their “true” benefit from ownership and have second thoughts about their decision to sell. Remember, the potential purchaser is going to look at those items as a benefit as well, this will be their return on investment, and so it’s critical you as a seller look at these benefits in the same manner.  

Tags: best practices, Selling your firm

Supreme Court Health Care Ruling: What businesses need to know

Posted by Tim Teague on Fri, Jun 26, 2015 @ 09:25 AM

King v. Burwell: Follow the money to Healthcare Staffing AgenciesSupreme_Court_Health_Care

The historic ruling concerning Obamacare this week has left constitutional scholars scratching their collective heads.  A mentor of mine was told me; “you can study the roots…or you can enjoy the fruits” take your pick! 

Despite the interest in the reasoning behind the ruling (the roots), today I would rather look at the outcome (fruits). 

To summarize, the complaint was that states should not be required to accept the insured that were being subsidized via the minimum standards set forth under the Affordable Care Act. The ruling effectively forces states to comply with the availability standards to all state residents. Striking down this portion of the law would have negated insurance benefits for millions. Upholding the law promises that these individuals, and those that follow will have coverage, and will be subsidized if they meet the criterion, no matter what state they reside in. 

The immediate impact is that individuals that would have been denied coverage will now be insured, providing additional reimbursements for the healthcare providers. For those that carefully watch the markets, nearly every publicly traded healthcare company’s stock surged. (i.e. Aetna, United Health Group, Cigna, Corp., Humana, Anthem, HCA, Community Health, etc. …….) 

In short, there will be more reimbursed dollars in the healthcare system, greater capacity for profitable census growth, and continued increased demand for healthcare workers. The future looks good for the healthcare staffing industry. 

Tags: Obamacare, Affordable Care Act, ACA

6 Lessons on Selling your Recruiting Firm: # 1 the why

Posted by Tim Teague on Wed, Jun 24, 2015 @ 09:58 AM



Ever wanted to sell your healthcare staffing agency?

There are many reasons why owners come to a point that the thought of selling their medical recruiting firm is on the table: retirement, exhaustion, debt and change of career are just a few of the reasons.

If you have never sold a business before, there are several aspects of the process that may surprise you, or may even make you take a harder look at the reasons for selling. In many cases it can be a nice payday for years of hard work. In other cases the reality doesn’t come close to meeting the perception.  

Having been on both sides of the table, I will share some of my experiences in upcoming blogs, and give you the details of some real-life scenarios to show you exactly what you will face when going through the process.  I will also touch on some financial and legal hurdles to watch out for.

In the meantime, if you haven’t taken a hard look at the reasons why you want to sell, do the work of putting it on paper. 

Tags: Selling your firm

Is your low-hanging fruit killing your healthcare staffing agency?

Posted by Tim Teague on Thu, Jun 18, 2015 @ 02:00 PM

Working Hard-1When I started my first healthcare staffing agency over two decades ago, it began in a tiny office with payroll that was funded by my prior company stock options. In our hurry to generate revenue, we were anxious to earn business from anyone that would listen to us, and populate our database with candidates as quickly as possible.  Some of the hard lessons I learned was about the “true cost” of revenue.

Competing against well-established medical staffing recruiting firms, our first foray into the market faced two two familiar obstacles. How to attract clients (Demand), and how to attract candidates (Supply) We found that many clients had annual agreements with their staffing firms, and were reluctant to let a newcomer break their contract cycle. Despite this hesitance, we did find some that seemed to be more than happy to open their doors to us.

The second problem was building a database of candidates to provide services. Once again, it was difficult to attract applicants that were comfortable in their environment of known contracts and contact personnel. Again, despite this obstacle, through the law of large numbers, we were able to begin building our database.

Now, for the bad news. Without adequately checking the credit worthiness of the original clients signed, we found that they WERE low hanging fruit because their payment history was ROTTEN! We learned the hard way that some accounts are just not worth the continual exasperation of trying to collect long past due invoices.

This mistake alone was enough to sink a lot of companies, but the reality quickly became worse! Without extreme measures in place to adequately qualify candidates, we found we had our hands full of no-call, no-shows, and DNRs! The candidates we had released to the market had already had their issues with other firms, and we became the last resort!

It was largely the result of those original EXPENSIVE mistakes in 1994 that my partner and I determined to build a healthcare staffing and scheduling application that would automate and investigate everything we were doing , and prevent us from being our own worst enemy. The product has seen more than 40 major revisions since then and we continually challenge our 12 developers and project managers to keep making the software product better and better to help our clients hire the best.

Tags: healthcare recruiting, Health Care Staffing, best practices

Upward Drivers in Healthcare Temporary Staffing

Posted by Tim Teague on Mon, Jun 15, 2015 @ 08:42 AM

Despite the debate that still simmers regarding the Affordable Care Act, a couple of factors will escalate the need for temporary healthcare workers over the next decade.

An enormous driver of healthcare expenditures is the aging population. As the graphic below shows, the over-65 population is exploding with no abatement for years to come. Seasonal trends in census behaviors will continue to be erratic with a definite upward moving trend line. Despite the growth in geriatric outpatient options, the admissions will still continue to grow.

US Bureau of Census

Another driver are the Value Based Purchasing Programs. These programs will reward quality outcomes from hospitals, and penalize those that are doing poorly. These programs will have a dramatic impact on the true cost of patient care as staffing ratios will be more closely monitored. The following programs are already in effect.


Tags: healthcare industry, Affordable Care Act, Health Care Staffing, Medicare

The latest challenge to the Affordable Care Act

Posted by Tim Teague on Fri, Jan 16, 2015 @ 02:21 PM

Silly Photos-3Late last year the Supreme Court decided to hear the latest legal challenge to the Affordable Care Act. One item at issue is the Act’s provision to pay health insurance companies subsidies to help offset the cost of out-of-pocket expenses for low income policyholders that purchase insurance through a government exchange.

In short, the suit claims that paying these subsidies out of an account that has not been appropriated by Congress is a breach of the separation of powers, and by passes Congress’ authority to hold the purse strings.

The anti-ACA activists see this as a means to dismantle the Act in piecemeal fashion, whereas the supporters believe it nothing more than a partisan move to curry favor with a certain segment of the population.

From an objective view, the likely outcome of the suit will create some language changes in how the law is executed, but will have minimal impact on the intended delivery of service.  The Supreme Court has already facilitated continuance of the law despite similar challenges, and it is unlikely to render a decision that would cripple the program. Love it or hate it, it’s here to stay.

Tags: Affordable Care Act

Manage The Margin Killers in Healthcare Staffing!

Posted by Tim Teague on Wed, Jan 07, 2015 @ 09:21 AM

dollar_on_fireIn a prior post we discussed two areas that can greatly affect margins in the healthcare staffing world; unemployment and workers compensation. These two components of the cost of labor are directly applied to actual payroll amounts, thus decreasing the gross margin.

Both premiums are calculated based on historic figures, and proper tracking for both items is the key to managing cost. Proper tracking is required for auditing purposes, but the real work in managing these figures pro-actively is to have your system set up beforehand to mitigate unnecessary costs.

The workers compensation premium is largely a component of three variables;

  1. Claims History
  2. Type of worker
  3. Location of worker

Workers Compensation

It’s too late to consider last year’s claims history, but moving forward, it is important to take the other two items into consideration. Assuming you have in place sufficient health and safety education and protocol, the only other two variables are the type of worker placed, and where this worker is placed.  There are standard rates that most insurance companies employ to assign degree of risk for what type of worker you have sent, and where they are performing their duties.

You should be able to address both of these factors in your staffing software.  Considering there are hundreds of potential rate groups based on the job type, and location, it is imperative that both of these factors are inputted as templates for all possible scenarios.  As an example, it would not be impossible for a registered nurse to work in an acute care hospital, a doctor’s office, in a nursing home, or even in home healthcare in any given year.  The typical rates for each of these scenarios is likely to be quite different, with location of greatest risk to be assigned the highest premium per payroll dollar. Accuracy in reporting these locations along with the applicable type of worker can save thousands in premiums after an audit.

Unemployment Insurance

The unemployment insurance rate is also calculated based on historical claims, and is typically a charged percentage on total payroll dollars. Again, it is done on an historical basis, but moving forward you should have tools to more effectively manage these claims. Payments for unemployment claims are a necessary safety net for millions of displaced workers, but unfortunately there are those that will try to “play” the system.  In the event you believe a claim has been made under false pretenses, there should be tools within your software platform that can identify many of these. Upon the receipt of a claim, you should be able to immediately generate a report with time and date stamp that;

  • Verifies the last time the claimant was notified of work
  • Verifies the response received from the claimant 

This tool should be available in a simple report to eliminate wasted time looking through memos, emails, or personal notes. This won’t eliminate valid claims, but will certainly cut down on the number of fraudulent requests.

Tags: margins in healthcare staffing

Two of The Leading Reasons for Gross Margin Erosion

Posted by Tim Teague on Wed, Dec 10, 2014 @ 10:45 AM

permafrost-erosionAs discussed previously, gross margins are the fuel that drives the healthcare staffing industry. Cash flow, growth, and debt financing are all greatly impacted by the slightest change in basis points. Assuming you are in the ballpark of industry standards for pricing and pay rates, there are two items that can seriously erode the margins you have worked so hard to maintain.

These two items are rates for the unemployment tax and worker’s compensation. From our earlier example of chasing better margins, these two items can easily rob you of hundreds of basis points.

The first item, the unemployment insurance rate, is a historical figure based on claims paid through identified quarters of payroll.  Poor administration of these claims is the number one reason for unnecessary rate increases. The effective management of these claims does not mean attempting to deny a worker benefits that are rightfully due, but to protest claims that may not be valid. 

The second margin killer is the rate for worker’s compensation. Aside from safety measures that include both mandatory and internally generated policies and procedures, proper classification of workers and their work location are critical for these annual audits. It is not unusual for one classification of worker to carry a premium percentage that is several multiples of other employees with slightly different job descriptions.  If safety policies are in place and followed, the only variable that a staffing firm has control over is the proper classification of what theh employees to on their job, and where they do it.

In our next blog, we will discuss methods to keep both of these figures as low a possible.

Tags: Gross Margin

Why margins are so important in healthcare staffing

Posted by Julie Moore on Wed, Dec 03, 2014 @ 03:24 PM

piggybankMany healthcare staffing company owners tend to focus on the rounded number for gross margins in their business. There are important reasons for firms of any size to carefully examine and “chase the basis points”.  A basis point is one hundredth of one percent, and to many, may seem too minor to track. After all, why micro-manage those tiny one-hundredth percentage points when whole numbers are much easier to work with?

The most important reason for chasing small margin increments is the ability to fund future growth. The healthcare staffing industry, unlike many industries, does not have the luxury of 30-day terms on most payables. Employees have to be paid in a continuous 1 to 2 week cycle and depending on contract terms, payment from clients may occur as much as 45 days AFTER the cash has been expended for the payroll period billed.

Two ways these basis points affect growth are cash flow and debt financing. Say, for instance, you are able to add 10 basis points, or 1/10th of one percent to your margin. Suppose you are running $1M a month in billing, this tiny percentage adds $12,000 per year to your cash flow. If debt financing is your choice, an additional $12,000 in interest over a year would provide close to an additional $200,000 for payroll funding.  Next blog we will talk about ways to chase those basis points

Tags: margins in healthcare staffing

7 Apps Travel Nurses Can Use for Scanning Timesheets

Posted by Julie Moore on Tue, Dec 02, 2014 @ 06:30 AM

Managing payroll for hundreds of healthcare professionals all over the country can be a huge headache.  This is especially the case if you are waiting for a nurse to reach a fax machine to send in a paper timesheet or the quality of the picture of the timesheet is not good enough to decipher a 3 from an 8.

You all know what I am talking about, don’t you!

Statistically over 58% of adults in the United States (Jan 2014) have smartphones and I bet the statistics are higher for travelers. This means that you should be getting more than half of your timesheets via email from a “scanned in” timesheet. 

Here are 7 great apps you can have your travelers use that should increase the quality of the timesheet turning any mobile device into a scanner.  This might even make a good holiday present for them!

Genius_Scan_IconGenius Scan

What I love about Genius Scan?

The app will let you choose what file type to save it in and with a quick email optioni.  It also has a great way to store scanned documents and search for them later.          

What I don’t love about Genius Scan?

You will have to fork out the cashola if you want to integrate with any other apps like Dropbox.

Plus Version - $6.99 



What do I love about TinyScan?

It is a quick and easy app to use. It allows you to view the document in black and white, grey scale and the original photograph to choose the best option.

What I don’t love about TinyScan?

Lite version only lets you have so many scans stored before you need to upgrade to the pro version.  But everyone needs to make money too, right?

Pro $4.99



What I love about Scanbot?

Its an all in one app.   Not only is it a document scanning app but it is also scans QR codes.  And I love the OCR option for the pro-version


What I don’t love about Scanbot?

Its not quite as intuitive as some of the other apps there.



What we love about CamScanner?

Easy to use and optimizes the scan quality automatically.  It is also jam packed with TONS of features including OCR, advanced document editing, quick search and syncs seamlessly with multiple applications.

What we would change about CamScanner?

There is a watermark on the free version so I would think this would not fly with most of the facilities that need the scanned timesheets.  Most likely this app would need to be upgraded to use it.

Full Version - $4.99


turboscaniconTurbo Scan

What I love about TurboScan? 

You can take up to three pictures of the same image and combine them into the best possible scan.

What I would change about TurboScan? 

There aren’t many integrations if your travelers like to organize their timesheets for future reference so they would have to quickly email it off to save it.

Full Version - $2.99



What I love about BlueSkyMSS? 

It integrates with your time and attendance for BlueSky Medical Staffing Software so the nurse punches in the time and uploads a picture of their signed timesheet.  This is a HUGE timesaver for the traveler and the payroll team plus it is included in your BlueSkyMSS subscription.  No fee to your nurse!

What I would change about BlueSkyMSS?

BlueSkyMSS would integrate with any of these scanning apps or allow the traveler to choose from one of their “scanned” timesheets to upload into they BlueSky system.


myscansMy Scans

What I love about My Scans?

It’s one of the easiest apps to use on the market and great for people who have a hard time with technology. It is also FREE! The text also is crisp and clean out of the box with little extra work to clean it up manually.

What I would change about My Scans?

Because it is so simple it is missing a lot of big features that some of your travelers may want.  I would definitely choose this app though for people who are afraid of more than just the basic scanning features.


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