Acquisitions Anonymous - #1 for business buying, selling and operating - You DON'T Want to Buy This $15M Healthcare Call Center Business

Episode Date: September 19, 2025

In this episode, the hosts dissect a fast-growing healthcare call center business with $4M EBITDA—and major risks around customer concentration, compliance, and workforce churn.Business Listing – https://view.generational.deals/?qs=8a49d003d042ac87b1f83ac25a5e010857481ce24a855bec1732a67b0123f8fbca2acbb8b52a738808cc8dbae51ca8ba778b09622a79bce1a3c73329b056f81b73624ce434606bfc3f23118059290a12Welcome to Acquisitions Anonymous – the #1 podcast for small business M&A. Every week, we break down businesses for sale and talk about buying, operating, and growing them.💰 Sponsored by:💸 This episode is sponsored by Capital Pad — the go-to marketplace for connecting acquisition entrepreneurs with investors. Whether you're buying a business or want to back someone who is, Capital Pad streamlines the entire process. Check them out at https://www.capitalpad.comFranchise Help with Connor Groce – Curious about franchising? Connor Groce, franchise expert and operator, helps people navigate the franchise world. He owns multiple franchises and now helps others find the right fit. https://www.connorgroce.comThe hosts explore a Midwest-based healthcare contact center business generating $15M in revenue and $4M in EBITDA. Serving mainly insurance companies and hospitals, the company helps with member enrollment, invoicing, and premium processing, offering high-trust and SOC 2 Type II certified services.Key Highlights:- Asking price likely ~$25M for $4M EBITDA on $15M revenue- 92% of business comes from insurance companies—major concentration risk- HIPAA, High Trust, and SOC 2 Type II certified—good compliance, limited moat- High employee churn risk with 160 non-union call center employees- Working capital red flag: $2.9M in receivables ties up nearly a full year of EBITDASubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Welcome to Acquisitions Anonymous. Today's episode is a cool deal that we did from a generational equity as the name of the broker. And I think I'll enjoy what we figured out with it. It's a super fast growing, super highly profitable but questionable call center business located the Midwest. So digging with us and the whole thing, I also gave a rant about my experience with call centers, which I felt like couldn't be missed. It helps a bit later on. And then stuck around to the end, we will tell you what we thought of the deal. and you can figure out if you want to call in on this one or not. All right, here's the episode. All right, here's the episode Acquisition Anonymous. Hello, another episode of Acquisition's Anonymous.

We don't have 100% beers anymore. And thumbs downing on just the plus inventory line. Hey, everyone, it's Bill. And I want to tell you about maybe the most exciting sponsor we've had in a long time on the pod. It's called CapitalPad. And it is the thing that I wish existed when I started my journey of operating an investment. in small businesses. So CapitalPad is a marketplace for acquisition entrepreneurs. That is people who want to buy a business and need capital to list their deals and solicit capital from other people

who want to invest in acquisition deals. So if you want to back somebody buying a small business, CapitalPad is a place to do it. And if you want to buy a business and need capital, you can go on CapitalPad to be introduced to investors. So the really great thing, too, from the investor side is that CapitalPad takes care of all of the details that can get hairy with small business acquisitions. They handle standardized terms, standardized governance, standardized distributions all up front in black and white. Basically, CapitalPad professionalizes investing in small businesses. And the returns can be really, really good. I'm so stoked they exist.

It's founded by my friend Travis, who is a phenomenal entrepreneur in his own right. So if this sounds like something that's appealing to you, if you want to buy a small business and need capital, or if you want to invest in small businesses, go check out Capitalpad.com and tell them that Acquisition's Anonymous sent you. Mills, happy Friday. Yes, sir. Did you watch my most recent YouTube video about Quiznos? No, I didn't. I'm sorry. I highly recommend checking out.

I did some live reporting, which meant I went over and ate us out. Would you Quiznos? You were a secret shopper? You were like the unit economics of Quiznos as you're eating. Well, there's only one Quiznos left in all of San Antonio, which kind of surprised me, down from there being thousands of stores. But it's basically a case study and how a franchisor can just totally take a great concept and kill themselves.

What happened? Did they over-regulate the franchisees? There was kind of a combination of thing. number one is from the beginning they set up Quiznos to not make as much money on other typical ways of franchise or makes money like owning the land like a McDonald's does. Instead, what they did was they created a captive food service company and forced everybody to use that one. So a typical Quiznos would have 40% of its basically like food, like food, Whereas a subway would have 30%. Yeah. And in a super low margin thing, like a Quiznos or a salmon shop, like 10% matters a ton. So they did that.

And then number two, the franchisor went out and overpopulated stores. Like they just would build franchises right next to franchises. Yeah. Cannibalize there. Number three, which is usually the thing that kills these businesses. After they alienated all the franchisees and they said, started leaving and started causing them not to make money for these reasons. They put a bunch of debt on the business and then eventually like they couldn't keep up. And as more and more of the franchisees

started to close, then eventually there's not enough money to do any marketing. And most people are like you and me, which is like, yeah, what happened of Quiznos? Well, the reason you think that is because they don't advertise anymore because they don't have scale. Or you know what? You could invest 12 minutes and watch your friend's video. I will. I promise I will at this point. I'm committed now. You have a Quiznos, Heather? I have a Quiznos with trivia. Just because what stuck out in my mind many years ago when they were kind of in their growth mode, they actually bought, there are several non-bank SBA licenses, allow you to make SBA loans

and not be a depository bank. And they bought one. And they were going to use it like just to drive their own franchisee loans. It was kind of crazy, you know? That's an interesting concept. Yeah. Like we'll be the bank to open more locations. Hmm. It didn't work.

You have some amazing fresh flowers in the background. Did you have like a birthday or an anniversary? I did have a birthday. And these are from what will now be known as our favorite lender. Amazing. Well, what, what birthday was it for you? I mean, you're what, 27, 28 years old? Yes, I was going to say, are you really asking this question?

I was like, oh gosh, Michael. How dare you? Yes, I am 27. What day was it, Heather? It was Monday. Oh, happy birthday. Thank you. Thank you.

My wife had a great line the other day. You know, she's 52, 53. You shouldn't be telling us. You're telling me. She goes, I said something. She goes, I'm a 53-year-old woman. I don't give a crap. Yes, this is great.

There is a funny video going around, and it's like the, we don't care anymore, a club. And it's just super funny. I get it. Well, since we're talking about my wife's age, we brought, I brought a deal today that I came across my desk. It's from our favorite brokerage deal force by generational group. Mills, I know you're there. Did you see that they just got the naming rights to professional sports stadium, maybe Tampa, I think is where they're based. It's like called the generational equity arena or something like that.

So M&A world must be gone great for them. There is a fireworks company that has an arena naming thing in Youngstown, Youngstown, Ohio. It's the Phantom Fireworks is there. They're the biggest business in Youngstown, I think. Those are expensive deals. Wow. Well, this is minor league hockey in Youngstown. All right.

Yeah. Price point is a little lower than the discount version. NFL. So Mills and I like this, when we, we're talking about in the chat for a couple of reasons, Heather. It's not something we've done before, and it's actually a pretty big business. So let me pitch you guys on this deal from generational equity. And it's a healthcare contact and enrollment center. And the company is a leading healthcare contact center that specializes a member and patient engagement for both the payee and provider markets.

The company assists clients with helping their members navigate complex health plan enrollments as well as other services that include invoicing premium payment processing services and member-centric call center solutions. It's located in the Midwestern U.S. EBITDA is $4 million estimate this year and revenue is $15 million. So they are doing pretty good. That's what, like 26%, something like that? Bill GPT is not here today. Usually he's got the calculator out.

So here's the investment appeal, high earnings growth. EBIT has consistently increased over the last several years and expected to increase from 3.2 million to 2024 to 4 million this year. Historical sales have grown from 5.8 million in 2022 to nearly triple $14 million in 2024, representing a compound annual growth rate of 56% per year. They have significant barrier to entry with high trust and SOC type 2 certifications that allows the company to meet a wider range of customer and prospect security requirements. The high trust certification and SOC2 type 2 at a station provide processes, provide a strong third-party validation and are required for major health care systems and insurance groups.

They have blue chip health care clients and the customer base includes major surge carriers and hospital systems. They have strong networking capital. As of December 31st, 2024, the current assets totaled $4.1 million and current liabilities of $1.2 million, representing a networking capital surplus of $2.9 million. And it is listed by Lisa Lippey Smith, who is the director of M&A marketing for generational. Michael, if you click on that C more, they usually have a good, like, one-page PDF, too. Yeah, I'll pull that up. So do you understand what this does?

Mills, can you, like, gist it for us? I'm trying to figure it out. So it says that they are a contact center that specializes in member and patient engagement. but it's for the payer and the provider. So I'm thinking that's Blue Cross Blue Shield or Aetna or, you know, any of the major unum, those are the payers. The provider is the health care system, the doctor's office, the hospital. And it's member and patient engagement.

They say they help them navigate complex health plan enrollments as well as other services invoicing premium premium. So I'm thinking that this is, I don't know if it's on the group health side or the individual health side, but if I am looking for insurance, this is going to help me go from not being a customer to being a customer. I think this is an enrollment. That's the only kind of tagline that they mentioned. But who's paying them? You know, that's where I'm confused. Like I was actually going to go with big work, they do this for big employers. And it's like an outsource, like a BPO, but, you know, maybe I'm wrong about that. This may help.

I just pulled up the one-pageer per your suggestion. Generational does do nice PDFs. I'll get to them there. The 92% of their business is the insurance companies, and 8% is hospitals. So the providers are not like doctors' offices. These are like big. It sounds like what they're doing is specialized contact and call center for, these insurance companies and hospitals.

Okay. So they're an individual. The insurance companies is as I guess how I would package it up. Yeah. Yeah. And, you know, they're really good at getting people from, you know, first phone call, kind of first outreach. Maybe it's on the website or maybe it's through like a referral source and getting them

through the, you know, the phone call and the enrollment process. You know, payment processing services is also a big part of it. that, which they mentioned. But yes, I mean, this is a, this is a volume game. It's probably a very, very, very low cost per kind of tasks, so to speak. Blue Cross Blue Shield pays us, you know, a dollar and 87 cents for every, you know, phone call we receive and we get to this step. There's probably some kind of hurdles, right? They say they have 160 non-union employees. The big thing to me about this that, like, could get lost in the weeds is it's a call center. call centers are notorious for like nosebleed levels of employee churn.

So like the attrition rate is, I knew somebody who owned a healthcare-related call center business, actually in Texas, Michael, in the FW area. And like I think the industry average attrition for call centers is like high 80s to low 90s per year. It's unbelievable. Right. And I think the growth has probably represents a. pretty big customer concentration. That's how you get 56% growth. You pick up a big new insurance company or two, but it's probably one or two big companies. And overall, this has probably got,

you know, just a few clients in that blue part of the pie chart that we're looking at here that shows most of the revenue coming from insurance companies. It's probably not very many. So you've got concentration risk. You know, they're big companies, but you can't have that many clients when you're doing something like this. Well, and there are certain industries like this, mainly automotive manufacturing and aerospace manufacturing, where if you sell to a company in that market, there's only a couple customers, right? In this case, too, there's only so many insurance carriers on the health insurance side left. And so it's not like you can just go to, you know, any Joe Schmoe on the

corner. There's like less than 10, probably conceivable. You can diversify. And then that 56% growth can can turn into 56% you know shrinking if you lose one that one customer they're not happy you know so that that's the downside of it and you have to be able to scale up fast for those big you know those big wins that you might get so i'm sure that they did that which is impressive so because of this hippa high trust sock two in theory you don't have to worry about somebody cutting in and under coming in and undercutting you with an indian or a south american call center is that how you guys see it? I think that that still could happen,

but I think it is some barrier to entry. I just looked up the high trust certification. I think there are some different levels to it. I think it's probably more of an indication, not that they have something that is truly proprietary and unique, but they probably have paid or enrolled in some type of back-in software that makes it so that, you know, patient information isn't, you know, disseminated unnecessarily, that, like, you don't have, you know, 10,000 people's

social security numbers that can get downloaded to a flash drive, you know, in your call center and walk out the door. Yeah, to your point, Heather, if we think that the dynamic here is a handful of big clients dumping a lot of business on these guys very quickly, that's not inspiring. It's scary. It's kind of scary to, operationally speaking, because you just doubled the size, you know, potentially maybe not doubled, but you just massively increase the size of your call center, your people. So that whole turnover dynamic is probably still playing out right now. And it's not an easy business to run, is my opinion.

Do we think these guys pay their people per call, so mostly hourly, or do we think they are motivated to maximize enrollments? Like they're this company's employees? Yeah. Not how does the carrier pay this company, but how does this company pay the employee? Either or both, right? How does the profit chain kind of flow through from, you know, from customer to the call center owner who would be the business owner here to the employee? Like, is there, first and foremost, do we think that the insurance companies are paying incentive fees based on success rates for call in and call completion?

And then do we think that the owner of this call center is turning around and paying their employees? that based on incentive kind of payments as well. You would hope so. You would hope this can be right. Yeah, the only hints I have is they say non-union employees. So it must mean they're other competitors do have unionization somewhere. I don't know if they would be allowed to pay those kinds of incentives. You know, this is highly regulated.

So it could be that there are rules that prevent them from doing that. I would kind of expect that there would be, actually. Hey, everybody. If you've listened to the show, you've probably heard us talk about, franchises. While franchises can be a great path to business ownership for the right person, like there's a lot of pitfalls, and it's important to be really careful, as there are certainly good franchises to be in and bad franchises that you don't want to be in. Conner Gross is a friend of the pod and a resident expert on franchises, and Connor not only owns and operates his portfolio

of multiple franchises, but he's also a franchise consultant and helps others work through while picking the right franchise for them. So as he's sponsoring today's episode, everyone should totally click in the show notes below to join Conner's newsletter and attend one of his gateway to franchise ownership workshops. If you're ready to move and move quickly, schedule a call with Connor and his team today. The elephant in the room on this to me is that most of the time, the insurance company knows what parts of the value chain are worth owning and what parts are not worth owning. So I've got a friend who is really high up in Blue Cross Blue Shield who handles their M&A arm, and they own a ton of businesses that aren't blue related is the way they

talk about it. And they derive revenue from all these other sources that are similar in the sense that they're really good at like claims processing and pushing paper and, you know, compliance driven tasks. But they own a ton of things that aren't health insurance related. And they insource things that are worth owning. And then they, you know, prefer to delegate things that aren't worth owning. It makes me wonder if all the insurance companies don't own this task and self-perform it, is it more commoditized? The margins don't look commoditized, but is it one of those things that maybe there's very low switching costs for this versus other parts of the service chain? I have a question. Can AI make this more efficient? Oh my gosh,

Heather. I hadn't thought about that yet. That's the billion dollar question for every deal right now, right? But this seems like one where you could, you know, like you could actually AI agents, you know, could you do a blend of human and AI to handle some of these cases that they handle? Aren't you a little surprised that nowhere in this teaser does it say anything about AI? Yeah, they mean. People over ascribe AI involvement in things now, and this doesn't have any mention of it. Yeah. Speaking of call centers, could I go to call center rant for 45 seconds? Oh, yeah.

So, you know, we switched to Google Fiber here at the Gertley House, and I called Spectrum and said, hey, we don't need our cable motive anymore. They're like, well, hey, if you stay, well, by the way, we've been overcharging you for the past year. We raised your rate, but hey, don't worry about that. If you were to renew at this even better deal, it would have been less than half the cost. Would you like to stay? And I'm like, wait a second, so you want me to be a loyal customer after you've been screwing me for the past year by overcharged me? Is that, that's what you're telling me? me. That's what was going on my head. The lady was very sweet. And I said, no, thank you. We're happy with Google Fiber. See you later. And that was it. But one interesting thing that, reflecting on it, was how they clearly were the retention and churn questions. They had written them in a way that they wanted to get specific answers. They wanted me to tell them the reason I was leaving was because the service went down all the time and they weren't very helpful. Like that is what, and they were plenty helpful, just the service went down all the time. But clearly, they got the answer they wanted by phrasing the questions the way they wanted to be.

It was very enlightening. Sure. Which I think goes back to my point about attrition, right, is 99% of the time when somebody's calling your call center, you're already starting off on the wrong foot. They don't call just to say, hey, by the way, Spectrum or Blue, Cross Blue Shield or Etnam. Hey, you're doing a great job. I just wanted to let you know. It's you took some of my money and I want it back and I disagree with you and I'm ready to walk out the door. Like the employee, right, in this case, these 160 employees, they probably get yelled at like 90% of that.

Oh, yeah. You know. And these are health issues. So people are very upset, very emotional usually. Yeah. I went to the pharmacy and, you know, my medicine isn't $20. It's, you know, 220 and I can't afford that. Like it's, there's a reason why, you know, there's layers of separation between the patient and the provider.

and this is just one, you know, aspect of that. Which is like, yeah, it's like the DMV. It's basically how it feels. You are going to have a better time of the DMV than you will calling these guys. Yeah. But there is, I mean, a tremendous opportunity, assuming that there is some kind of sticky relationship, whether it's contractual, whether it's high switching costs,

if there's some kind of tether between you and the insurance, company, even if it's not a, you're not going to have a 15-year contract for something like this. There's probably performance requirements and they can cancel on their side if you're not keeping up. But my best case scenario is if you sign the NDA on this and you have a conversation with the owner, the seller, my best case scenario would be they have an incredibly sophisticated onboarding workflow for new employees where you can go. from not knowing anything about how to answer the phone in a call center, to being a self-sufficient employee who can handle the majority of the cases

in like a very, very small amount of time. Yeah. That would be an amazing, like that would be a great green flag on this to say, okay, they can ramp up employees, you know, when needed, when call volume, you know, starts to become overwhelming. Yeah. Or they had already gone down the path of starting to build some custom AI and systems to give themselves a competitive advantage.

Because, I mean, I've seen businesses like this when they're a big service provider for the customers like these insurance companies, at some point, they're going to put this contract out for bid, and you're going to be up against other folks. And you need to have, you know,

hopefully table stakes is that you've been doing a good job the past few years, but also be able to have built up enough efficiencies and effectiveness and what you're doing that the other folks can't compete anymore. But I'm not seeing that with this. just seeing there, they've been like, hey, we'll hire more bodies, which is not the right answer. I wanted to mention something, the boring part of this teaser, working capital,

but I, I, it's exciting to me, but, uh, so they, they brag about 2.9 million of networking capital. But what that tells me, because I've got a lot of, of assets, guess what that is? That's accounts receivable and a long cash conversion cycle, which is very expensive all the time to run this business. Um, so they're, they're pointing, it out as a plus, but I'm kind of saying, eh, not too excited about that because your $4 million of EBITDA, you've got a whole bunch of cash, $2.9

million tied up all the time in a long cash conversion cycle, because these insurance companies, you think they don't pay your claims fast. Guess what? They don't pay their service providers fast either. They have a year's worth of EBITDA tied up in AR. Yeah.

Yeah, this is a super long cash cycle. There is a very decent chance. They have two or three people whose job is every month just to fight with the insurance companies get paid as a vendor. Yeah, could be. And if there's any complexity, like you mentioned to how they get paid, like their incentives or something, I have a feeling there's something there, right? It's not just straightforward, oh, this is the straightforward invoice for our services. There's some kind of metric in there that is performance-based, and there you have it. they're fighting it out every month with the numbers and, you know, justifying their invoice or

whatever, that's probably one of the, not only running a big call center that is, you know, compliance oriented, but you're also, this is a, this is another hard part of this business is managing your working capital. They don't say anything about it, but I wonder if this is a, kind of a remote workforce or a captive kind of in-office workforce, that dynamic, especially for something like this. We have a vendor, I'm not going to say their name, where it doesn't matter what time of day we call, but we have to leave our service rep a message and then they call us back. And it's because I know that the service rep works from home. And I hear their kids and their dog in the background. And I can't get them, you know, at the drop of a hat because they're

not sitting at their desk. They're, you know, sitting at their kitchen table, which is fine. But it would impact the ability to kind of scale up and scale down your infrastructure. Like 160 people, if they're all in the office, you have to have a desk for them. You have to have phone lines. You have to have a computer. You have to have a break room. You have to have a, like, you have a lease, you know? And if you need to go from 160 to 320 to 320, you probably have to double the amount of square footage that you lease.

And those are three to five-year leases, maybe seven-year leases depending on your market. So it's just a very, it would tell you a lot about how this business function. This ultimately smells to me like one of those businesses I would love to have started. I'd be happy to own it. And I am not as enthused about buying it as other stuff. Yeah. I don't know this space. And the skeptic in me is like, well, they're telling me about the high trust and SOC2 certifications.

But what certifications do they not have? And I don't know that I need or it would make me more value. as an operating entity in dealing with the insurance companies. My mind immediately goes to, I think this business would be inherently a lot more valuable if they were doing something that was harder to replace through automation and AI. So if it was the next kind of step in the chain of like telehealth and it's a call center that helps get you connected with like a nurse to do telemed, I would like that better. but I think the insurance company owns that.

I don't think they delegated out to my point earlier. Yeah. And I think that your point about whether you're running an in-person call center or not, I'm leaning towards it's probably in-person because of the compliance issues. And or, you know, maybe it's not. And to get that other certification that would make you more valuable, that's what it would take. Yeah. And that's a very expensive move.

So that's a really important question, you know, where is the staff and why? How much do you think these guys are expected? to get for this business? 25 million. Yeah, I don't think they get it. No. I think that there's probably also a lot of consolidation, you know, that drives that multiple and that value expectation higher.

And there's some reason this one hasn't been consolidated, and that's why it's on this type of, you know, this type of M&A platform. Would be good for like a super searcher. I could see that happening. Somebody backed by an F.O. I mean, you're not going to, it's too big for SBA. Lenders are going to be worried about the growth and the lack of, you know, hard assets to lend against.

And the cash conversion cycle is yucky based on what we're seeing. You would need a partner with a ton of insurance, you know, and health, you know, health compliance expertise to help you navigate this. Because otherwise, you're going to be the sucker at the table. Mm-hmm. Yeah, it feels like a perfect, like, some of these like super searchers that we see that are tied into a single family office, maybe made their money from, from medical or healthcare or dealing, you know, any, any sort of ends of dealing with this sort of world and understand it super well. And, you know, would be okay with, hey, more cash is going to be acquired. Is this thing grows to keep up with the capital requirements? because, you know, when you have 120 days to get paid by these insurers and decent chances

you're having to pay spiffs and bonuses to your staff on a 30-day rolling basis, that means the bigger your profits get, the more money you've got to have tied up in the company. Other than that, it's great. Yeah, I don't know that I'm like a hard, like, thumbs down on this, but I'm definitely not thumbs up. I just, I don't know enough about this business to really know, is there any staying power or not? that probably makes me trend towards just thumbs down. It's attractive on a handful of, you know, aspects, but just not to me. Heather, where are you at? Same. Same as Mills. I think it's a nice

company here. And I'm kind of agreeing with you too, Michael. Like if I started it from scratch and owned it, you know, I might be fine to be in that position, but to put any kind of leverage or even bringing investors and try to grow this would be, I'd be thumbs down on that, that idea. Yeah, I'd get the sim. I think there's some key questions. about. Yeah. What's the customer concentration look like?

What do those contracts look like? I mean, to your point, Mills, it could be a five-year contract, could be a 10-year contract, what do renewals look like? What do my escalators look like? Can I fix this cash conversion stuff?

Like, those are a lot of the kind of fundamental questions I don't want to dig into in the SIM. Do I have to move to Detroit to run this business? Pretty decent chance is a call center in Detroit. That's my money. My money's not going to be someplace cool like Minneapolis or South Carolina. Yeah, there you go.

Now you're talking. Definitely does not exist in Orange County, that's for sure. No, no. No. All right. Well, that's where we're right on this one. We'll put the link below. Thanks everybody for being here.

Do us a favor. Tell your friends about our newsletter. We send out weekly emails about the deals, and it's a great way to improve your deal flow. And Mills, hear this. Get more jokes from us because the newsletter is also entertaining. So you can subscribe to it on our website, which usually linked wherever you found this point.

podcast. All right. Talk to you next week. Thanks for being here.