Turnaround Financial Model

Typical project requirement:
$2, 500, 000 investment, which includes the purchase price of the existing center.

Typical Financing:
$1, 400, 000 on a limited recourse basis (guarantees limited to each partner’s percentage interest).

Typical Equity/Capital:
$1, 100, 000 with partner cash contributions.

Individual contribution (for 10% ownership in the center):
Equity of $110, 000 (10% x $1, 100, 000). Limited guarantee of $140, 000 (10% x $1, 400, 000).

 

Typical cost breakdown (purchase price, equipment, existing debt, and working capital reserves).

The total cost has four main components:

  • The purchase price is dependent upon the past and current operating performance of an existing center and varies based on unique circumstances and the amount of liabilities assumed.
  • Updating an existing center’s equipment generally costs between $500, 000 and $1, 000, 000, depending on the number of new specialties that are added to the project.
  • Buyers are often required to accept a certain amount of the center’s outstanding debt. As more debt is assumed, the purchase price is adjusted downward.
  • A working capital injection of $300, 000 to $600, 000 is common. These funds are necessary to pay regular operating expenses–rent, staff salaries, utilities, etc.–until facility fee collection is sufficient to cover expenses (usually two to three months after the closing date of the acquisition).

Total cost: Between $1, 300, 000 and $3, 300, 000.