Caring Senior Service owner Brandyn Simmons has a unique background filled with experiences that pointed him to home care. He was interviewed on Franchise Findings podcast by Patrick Findaro to share his experience and tips for potential franchisees. Listen to the podcast or read the full transcript below.
Full Transcript
00:00 – Patrick
Patrick Findaro here co-founder of Vetted Biz and Visa franchise. Brandyn Simmons, welcome to Franchise Findings. Thanks for joining.
00:06 – Brandyn
Thanks Patrick. I’m glad to be here.
00:08 – Patrick
So you have a pretty extensive career — business brokerage, consulting, different entrepreneur ventures and now you own 2 Caring Senior Service franchises in 2 different states. How did you get here?
00:19 – Brandyn
Well I like to refer to myself as a vocational mutt because I have done quite a few things. So having said that, I was in geriatrics at one point, [I] was a consult in Japan, I worked in Hospice as a chaplain. I did a number of things. It all just kind of made sense for me to enter this industry. And I wanted, well I was already in the industry, but to enter home care in particular. And as I was helping people buy and sell businesses as a broker, I started saying to myself, "Well, why am I not buying myself a business?" I get how it works, whether you’re operating it, and, you know, the purchase process and whatnot, the acquisition process. So I said, "all right. Let’s start looking." So, I went out on BizBuySell like most people and found a franchise. And I was quite reticent to purchase a franchise. In my mind it was too constricting. I wanted to, had a bunch of ideas and I thought, "Well the franchise won’t let me add care management as a service or they won’t let me do this or do that." And eventually I realized that Caring, like probably most franchises, has a really good system. Everything is already built. I don’t have to reinvent the wheel, and just as long as I use it and accentuate on it at times that things could go really well, and so far it has.
01:35 – Patrick
How do you and the franchisor Caring kind of divide and conquer? Like what are you focused on, and what are you like, "Hey, please help me with this? I need your support here."
01:43 – Brandyn
Yeah. So the franchise is really good at letting us know what KPIs we should be looking at. Even though I have an MBA, it’s easy to get lost in the weeds and forget to go up into the balcony and look at the entire picture, so they are good at reminding us all of that. They have their software, the proprietary software called Tendio, that takes care of your log-ins, your log-outs, your notes, all of the client info, all of the caregiver info, your marketing information in terms of your calendar, who your top referral sources are, etc, etc. So everything is all in one place so I don’t have to have, for example, the home care software, and then I need my HR software, it’s all right there.
02:23 – Patrick
And it seems like they go a little above and beyond compared to some of the other franchise concepts in the home care space for sourcing and initial vetting of the caregivers.
02:33 – Brandyn
Yes, very much so. Trying to match caregivers with clients, the interview process, how we rank them, if you will, in the system during an interview. So that’s also in the software and we can kind of check the boxes as well go and the rankings in terms of experience or all the way down to 'how did they dress today, did they look professional? Do they have a demeanor of a caregiver that is going to show compassion to a client or patient?" So we look at all those things because it’s in the software to remember.
03:05 – Patrick
So compassion, empathy, these are words I hear a lot for the industry that you’re in. Can you talk a little bit about your time as a hospice chaplain and how you kind of really cultivated those skill sets?
03:15 – Brandyn
Yeah. Some of my most fruitful time was spent with the dying and their families. But those conversations with those who are nearing the veil, if you will, or preparing a transition, just amazing conversations. I had times where the person is, for example, a devout Catholic and didn’t want to see me because I wasn’t a priest, etc., etc. But by the time we reached the finish line together, they wanted me there and wanted me to do their funeral. Ad so I asked the spouse, "what do you mean, I’m not their priest." And they said, "He must have liked you."
And you know obviously it wasn’t all aging people who were in hospice unfortunately. But that translates directly to our clients who are at some point going to transition, and whether we’re catching them at the beginning of their Hospice phase or if we’re catching them long before that. It’s not only the client or the aging person that is reflecting on end-of-life issues and looking back and saying, "Did I do a good job or not? Was I a good father? a good mother?" All of these things, but also the family caregiver. I mean, you have this family caregiver who is often female. As I like to say the poster card of a family caregiver, who is this 40 to 60-year-old female who is at the height of her career and her earning potential. She is subject matter expert on everything, and she’s going to burn out, quit her job, back away from her relationships and her hobbies and all these things because she wants to make life perfect for mom or dad, and it doesn’t have to be that way. So my heart definitely goes out to those folks who are going through that.
04:55 – Patrick
And a lot of times, it’s like, at the same time you have kids that really need your support, preteens, teenage children, and kind of splitting the focus on your aging parents as well as your kids, I can imagine it can cause a lot of strain.
05:08 – Brandyn
Yeah, the sandwich generation. I mean, gee, I’m not dealing with that situation myself, but as an owner of a franchise in the aging industry, and I’ve got my own kids 22, 18 and 11, so, it’s like, I can’t only be focused on this group, I have to share my bandwidth.
05:25 – Patrick
And what other type of businesses did you look at exploring, and when did you make the decision that it was going to be a type of business like Caring Senior Service that you would acquire?
05:36 – Brandyn
Yeah. I had looked at senior relocation services. So helping people downsize and move and things like that. I had looked at an facility assisted living facility up here in Wisconsin, and that one, I found was just too hard to justify the valuation. The valuation was mostly based on real estate. So on one side, it looks like a great deal because I was just paying for real estate and not for the business, and that’s what you get when you have a real estate agent value your business. They just look at the real estate. So it seemed there was quite an allure there, but when I found this particular business, I could easily look at the financials and see that the valuation made sense. That and the intricacies were a lot more with assisted living in terms of licensure and the liability of it all. I mean you’re doing a lot of medical type stuff. We’re strictly non-medical so not only is the liability less but just understanding the process and the system and everything that I need to keep an eye on was much easier in this business than something with a million moving parts.
06:43 – Patrick
I would imagine, correct me if I‘m wrong, that client tenure is longer for in-home care versus assisted living.
06:59 – Brandyn
I wouldn’t say that’s always the case, but yeah. I mean the goal is to keep them at home with the quality of life and not have to go into a facility. So it’s not that all facilities are bad or anything like that, but if you can have your autonomy in your own home that you’ve lived in for who knows how long, we want to be able to help them to do that. And, we might be partnering with home health, hospice, whoever, receiving them coming out of a rehab facility, out of the hospital, but at whatever time we start care with them we want to make sure that we can keep an eye on their health and do everything that we can to keep them there at home and aging gracefully.
07:29 – Patrick
Can you talk a little bit about the financials of the business, I guess what appealed to you comparing some of those different options that you had?
07:36 – Brandyn
Yeah. So in terms of your fixed costs and your variable costs, I mean, the revenue is very much driven by hours. So there’s not a lot of question marks. The more hours you have, the more money you make. You have your fixed costs like your SBA loan and your rent and things like that, but most of it is driven by your merchants. What am I paying my caregivers versus what are we receiving from the clients? So that was much easier to look at and be able to look at those KPIs. What are my margins? What are my hours? What are my conversion rates for marketing? Am I getting more referrals from home health and hospice? If 70% of my referrals are coming from there, why am I spending 70% of my marketing efforts on assisted living facilities? So I can see that and quickly make the shift or talk to my marketer and have them make the shift. So I would say there are a lot less moving parts and you can pretty much get a good idea that if I get to here, here’s how much we’re going to have at the end of the year.
08:38 – Patrick
And, do you find the other franchisees in the Caring system are open to opening up their books and kind of sharing the numbers especially related to margin. Also I imagine scaling up where an organization has 50 caregivers is going to look a lot different than one that has 200 or 300 and kind of the key staff that you need each step along the cycle.
08:59 – Brandyn
Yeah. And that’s the neat thing about a franchise is because we have direct access to each other and we can have these conversations, and it runs the gamut. You’ve got your small ones that have just started out and are doing 200 hours a week, and you’ve got your well established ones that are doing in the 1000s every week for number of hours. So I think there is some reticence to open up like your PNL or your balance sheet or things like that by some parties. But we do have groups where we gather together, and we just started doing this, and mostly divided by geographical area or multi-location owners, they are divided into one group together. So there is a great openness to share those KPIs, right, to say, "Here’s where my margins are at. Here’s where we’re exerting our efforts on marketing." Things like that. People are very open and willing to share.
09:48 – Patrick
And then so you purchased this first location in Milwaukee. How many years back was that?
09:52 – Brandyn
Huh! No not years. It was September of last year.
09:56 – Patrick
And then Utah, was that an acquisition or a ground development?
10:02 – Brandyn
Yeah, acquisition in December so things...
10:05 – Patrick
You went back and back. Why not give it more runway and make sure that you were comfortable with the caring system? Playing devil’s advocate, why did you jump in on 2 different locations in 2 different states?
10:16 – Brandyn
Ah Patrick, that’s the question I ask myself every day.
10:20 – Patrick
Your wife probably too?
10:22 – Brandyn
Yeah. No it’s been a great experience. I didn’t intend to acquire again so quickly. I went to the previous owner and asked her, because I have family out in the Salt Lake area. I said, "If you ever think of selling, call me up." And about a month later she said, "So..." and I’m like oh wow this is moving fast. Ok but...
10:43 – Patrick
Your dad and your brother were happy. You seem them regularly a lot more.
10:46 – Brandyn
Yeah, they probably feel like we’re seeing them too much.
10:50 – Patrick
That’s one of my favorite areas of the country to visit.
10:52 - Brandyn
Oh yeah. I love it. I’m not a skier, but I love to hike out there. Getting up at those peaks and looking out over the Great Salt Lake and what-not, it’s just amazing.
11:00 – Patrick
Any advice for would-be business owners on the business acquisition side as opposed to just opening a franchise from zero? I guess taking a step back from what I’ve seen if you’ve never run a business before, it can be pretty daunting and might not be the best to just go in to acquiring a business. I’d be curious to hear your thoughts.
11:21 – Brandyn
I am a huge proponent of acquiring an existing business if somebody doesn’t have experience operating a business. Maybe they were a CFO and they have financial acumen but they’ve never dealt with operations. Surround yourself by people who do, lean on headquarters. And that’s a benefit of having franchise because you have those people that you can go to and seek advice from and say, "Hey I really don’t get this facet of my business, help me understand."
The reason I would always encourage people to acquire rather than to build, and there are books on this buy then build and stuff like that, is you are buying cash flow from day one. So the way I look at it is for example if you’re investing in stocks, say those stocks are traditionally trading at 15 to 17 times forward earnings eventually there’s going to be a correction, and you don’t know what they’re going or what they’re going to do. If you have a business that’s been operating say for 10 years and they have been throwing off cash flow, and they’re profitable, there’s a pretty good chance that your survival rate is going to be pretty good, and you purchased that business for 3 to 5 times your EBITDA or your seller’s discretionary earnings. So from a safety point or a risk stance, there’s a lot less risk. So, I think that’s one part of it. And like I said, from day one you have money coming in the door versus spending that first year or whatever just trying to get your licensing in place and your property and all that kind of stuff to even just bring a penny in the door.
12:49 – Patrick
Yeah and I think mentally it’s really nice to have like those easy wins right away. We’ve started multiple businesses. One consistently hitting cash flow positive in 2 months, and the other one over 2 years, and it can be really a mental struggle at times if you don’t have that money coming in. I’ve seen it with our clients that open up a physical location where they’re dealing with finding the site, negotiating the lease, construction costs, construction delays, permitting delays. And for me, you know, given the evaluations that you just mentioned and depending on the franchise system, we’ve seen less than that, just buy an existing one and be patient and wait for those opportunities to come out. Obviously you need to have the cash and if you just have 100K, 150K to invest, it’s going to be tough to buy an existing one or maybe you might be buying a problem business you could say.
13:40 – Brandyn
Yeah. Yeah, and that’s why some sense about the capital structure and things like that are very important. Are you going to take a working capital loan? Is that available? Are you going through SBA or you going through nontraditional lending, all those sorts of things. And I also think that a lot of acquirers will go in and, "Okay I just bought a business, welcome to millions here we go." But you have to keep your eye on so much because if you take your eye off of one thing, right, everything can just fall apart very quickly. So you have to stay very astute to keeping your eye on everything.
But the other thing that people do when they buy a business is think about their exit. All of those drivers that would increase your valuation at exit are all things that are going to drive more revenue right now. So, productizing your revenue. Having some form of recurring revenue. Building a moat around your business. What separates me from our competition? And all these different things that can really help you not having all your eggs in one basket. Are we getting all of our clients from VA? Are they all from community care? Are they all private pay? Are they all long-term care insurance? Spread it out because you never know when one is going to dry up for a period.
And, one huge thing to keep in mind because people would be like, "Yeah, but I’m not going to sell for a long time." Okay well let’s look at what causes people to sell. Retirement and financial reasons are few and far between. Mostly it’s death, divorce, disaster and burnout. And, you don’t know when those things are going to happen. So, you might as well be prepared that if you whether it’s you who dies or somebody else and you have to go and take your eye off of things for a while when you say, "I can’t run a business while I’m dealing with all of this." Be ready then. Be able to call up a broker and say, "Hey I need a valuation." And have the confidence that it’s going to be the best one you can get.
15:26 – Patrick
And Brandyn, what I’ve seen talking to franchisees is that if you’re going to sell to an existing franchisee or maybe someone like you that’s just coming in the system and you’ve talked to some owners. It could be like a 2 or 3 month process. But if you’re going to go the open market with a business broker listing it on BizBuySell or just relationships through the business broker it takes like 6 to 9 months. What do you see is that what you’re seeing in acting as a business broker and talking to your fellow franchisees?
15:52 - Brandyn
Yes, yes. I have a home care company that I’m selling in St. Louis. I’ve had it listed for about a year and we’ve gone back and forth between maybe 20 potential buyers and are finally entering due diligence. So yeah...
16:07 – Patrick
How many, if you don’t mind me asking like how many term sheets did you receive in that year?
16:12 – Brandyn
Oh gosh, probably 35, 40.
16:15 – Patrick
And how can, going through this process now, how can franchisees like you whether it’s in 5 years, 10 years, 15 years or whatever tenure, make sure that the business continues to grow top line as well as the earnings while you’re going through a sales process? Is that the job kind of for the business broker to help them or what do you recommend?
16:34 – Brandyn
No cause you never know after acquisition what’s going to happen, so I think that’s on the owner. It’s on the acquirer to, like I said, keep their eye on the ball and say okay what’s the opportunity cost? What’s the actual cost? What is finding this location going to do to this location?
16:50 – Patrick
I am saying from the seller perspective, when it is time to sell, how do you not get distracted on the sales process and making sure your business continues to run well. That’s a very valid...
17:02 – Brandyn
Yeah. Now that’s hugely common that people do that. They take their eyes off of things and they’re like, "Well I’m getting out anyway." And then they don’t focus on marketing. Marketing is the first thing to go and yeah. So I think mostly keeping in mind that this can and most likely will be a long process. So if you want this business to be valued a year from now when likely you’re really going to get the offer that you want compared to today, you’re going to have to stay on it. Whether it’s you operating it or your staff. Don’t start slipping. Don’t start losing care of your staff so that they jump ship or just develop apathy or burnout. So yeah, keep running it like just like it’s day one and you’ve got a lot more knowledge than you had at day one so it’s not as hard, right. You’re working smarter and not harder so stick with it.
17:48 – Patrick
What are some reasonable expectations in terms of increasing the dollar or increasing the top line revenue like did you model this out for your acquisitions?
17:58 – Brandyn
Yeah, and a lot of it goes back like I said to marketing and which referral sources or I should say pay sources you’re looking at because some are. For example, our private pay rates compared to our VA reimbursement rates are double. So the VA is double what our private pay is here. But in Utah that’s not the case at all. Actually our private pay is higher than our VA reimbursement rate. And then you’ve got VCC and other things like that. So knowing who will pay you what. You might get a ton of community care clients for example but their reimbursement rates are considerably lower which are going to kill your margins. At what point are you willing to keep taking them and at what point are you going to say, "I can’t let my margins get below this number." So yeah, I think all that modeling is very important.
18:44 – Patrick
And it seems like the net profit can be pretty wide. Like talking to franchisees in your space I’ve heard anywhere from 10 to 27% depending on how they are running the business, the brand, the life cycle, how large the organization is.
18:59 – Brandyn
Yeah, yeah, and I think part of that goes also to the acquisition process and your capital structure. Are you paying a loan every month for ever and ever and ever or have you structured it in a way to where that is going to go away fairly quickly, and you’re looking at your personnel margins more than anything else. And so, personnel margins, we try to stay about 47% to 52% so that’s great so you want to keep...
19:26 – Patrick
I hear 40% for your industry so that’s great.
19:30 – Brandyn
Yeah so we’re maintaining that both in Milwaukee and in Utah, but the fixed costs are the things that you just want to be very intentional about keeping down.
19:39 – Patrick
I understand seller financing is a lot easier if you’re already in the franchise system. If you’re already known, and you’re already known as a good operator, and that the other franchisee that you’re acquiring knows you’re good for it and that you’re going to pay back. Can you talk a little bit about that on the acquisition side? Just kind of the different ways to structure the deal?
19:58 – Brandyn
Yeah, yeah. If you’ve got rapport with the franchise and the other franchisees, then it’s a lot easier to find the business, right, because you’ve got the word out that, "hey I’m looking for my next acquisition." And they’re going to call you up and it’s done. And, they are more likely to offer owner financing not only because they know you but maybe that’s the only option. You know, if that particular location hasn’t been for whatever reason operating at a very good profit lately, then when the banks or whomever looks at those financials, they’re going to say, "I don’t see how this is bankable. I don’t see how what you’re earning is going to support the debt." So your only option is to get financing from a seller. I’m fine with that. I don’t mind a turnaround of debt. I’ve got just about that much gut for it. I’ll do it but I wouldn’t say it’s what I want. Well I guess if I find the magic bullet maybe I could make that a pattern, but most likely, you know, I want something that already has some solid cash flow.
20:58 – Patrick
And how do you decide between conventional or SBA loans as an acquirer? Could you comment a little bit about your process or your process going through the sell of so many businesses over years as a business broker?
21:11 – Brandyn
Yeah. There are so many different stipulations depending on which capital source you go to like SBA that might require a personal guarantee and people might be a little squeamish about that and say, "Yeah I don’t want to do that." And find a different route for their capital. But, one nice thing for example with SBA is that you can take out 5 million at a time. So if you do an acquisition say at a million, you’ve still got 4 million left that as long as they deem bankable, you can keep on doing acquisitions. Now obviously you don’t want to drive yourself crazy because you can’t walk 5 cats at the same time. But if you can and you want to accelerate your growth, then okay, you have that availability. Where say a nontraditional lender or just bank without SBA backing isn’t going to do that for you.
22:00 – Patrick
And then on the SBA side, you know you’re signing the personal guarantee. But compared to the people that do like a 401K rollover depending on the state, those assets should be shielded from the government, from the lender for that SBA loan, and that’s not going to go toward the personal guarantee where if you deplete your retirement savings but that’s kind of it. Like the business better work and especially if you’re in your 40s or 50s that can be a pretty precarious situation and your spouse needs to really be on board with that.
22:30 – Brandyn
Yeah, yeah absolutely. And we’ve seen that with people trying to use the ROBS program and different things and it’s getting those 2 partners whether they’re life partners or business partners to come to agreement on that and take that big of a risk. It is much better to go a more traditional route.
22:46 – Patrick
Yeah and I think there are exceptions. Like we have a client, 40s, single, and has a lot of funds and has funds in one of his 401K plans or one of his what is it now, one of his IRAs that he wanted to use that and it made sense. And he was fine with unwinding the transaction because it is kind of complicated to then sell it later on and that’s great. But I think not enough people really understand the different financing mechanism that are available to them.
23:17 – Brandyn
Exactly, and I don’t know, yeah I don’t think they understand and don’t think they have any awareness that such a thing even exists whether its ROBS or whether it’s rolling your 401K into an IRA and then the stipulations on that. Usually you can’t take from it for a business, but you can do it to buy your first home which might be a wink-wink way into a business depending on what you’re doing so there’s lots of ways to skin a cat.
23:42 – Patrick
Brandyn are there any items that we didn’t discuss today that would be relevant to a perspective franchisee?
23:50 – Brandyn
Well let’s see. Good question. I think trust the system, trust the system that the franchisor has created because they have been doing it for a long time and have hit their head against the wall plenty of times so you don’t have to go start finding the nearest wall and start smacking your head. And, keep your eyes open. I think the key to that process is asking the right questions, both of the franchisor and of yourself. What am I curious about right now? What am I seeing? What am I noticing about myself or those around me? Different things like that to keep that posture of curiosity and not get hardened into saying, "Oh yeah, I got it all. I know what’s going on" or "I don’t trust the franchisor because they just want me to make more money so they can steal my royalties." Or whatever, right? It’s like fine, if they make more money it means you’re making more money so it’s...
24:36 – Patrick
Growing and applying to it.
24:38 – Brandyn
Yeah.
24:39 – Patrick
Well thanks for all that you shared today. We went through a lot, whether it’s through an acquisition, the industries, what the Caring Senior Service particularly appealed to you. I really appreciate you opening up and if you don’t mind we will add your LinkedIn link to the show in case people have further questions to contact you directly as well as a link to Caring Senior Service in case people are interested in exploring the franchise that you’re a part of further.
25:05 – Brandyn
Sounds great. I appreciate it.
25:06 – Patrick
Thanks Brandyn.
25:08 – Brandyn
Thanks Patrick, take care.
25:09 – Patrick
Appreciate it.