Self-funding health insurance through a group medical captive can be a way for businesses of any size to better manage what is often their second greatest expense. And according to Roundstone Founder and President Mike Schroeder, it may also be a way for business owners to increase the company's value ahead of a sale.
On this episode of the Smart Business Dealmakers Podcast, Schroeder talks about the self funding model, as well as its impact on an M&A transaction. Here’s an excerpt.
“Employee benefit health care is a No. 2 expense. Industry average (cost per employee) is $16,700, so if you're selling your company and you're spending more than $16,700, you have an opportunity to reduce a No. 2 expense, increase your EBITDA and have a higher value. Anybody that's selling a business should be looking at that metric, should be looking at their health plan and making sure they're managing it in the most efficient way possible. In today's world of multiples, 10,15 times, a 100 employee firm can save half a million dollars by getting in an efficient-run health plan, as opposed to the industry average. Half a million dollars with those multiples, that's some real value. Any seller should be paying attention to that. And the buyers should be looking to see if there's opportunities for improvement there as well.”
