Are you considering selling your medical spa in the near or distant future? Whether you’re planning a sale within the next year or years down the line, now is the time to prepare. Today, Sara Shikhman, managing partner of Lengea Law, joins forces with Jerry Deza of Pacific Reliance Medical M&A Advisors to discuss crucial steps medical spa owners should take to prepare their business for sale. Jerry, who has worked extensively in med spa transactions, offers expert advice on positioning your practice for maximum value.
A Business That Runs Itself
One of the first steps to consider when selling your medical spa is shifting the focus away from you, the owner, as the business’s primary revenue driver. Jerry explains that a med spa should run more like a McDonald’s franchise: absentee ownership, where day-to-day operations are handled by a team rather than the owner. This is a crucial factor that potential buyers look for.
Many med spa owners are the “superstars” of their business, contributing to 60-70% of revenue. If this is the case, start by training your providers to take on more responsibilities and empower your managers to oversee tasks like inventory, hiring, and scheduling. This transition toward an absentee-run business is key to making your med spa attractive to buyers.
Clean Up Your Books and Records
Jerry stresses the importance of having clear, professional financial records. Many med spa owners start small and may use a part-time bookkeeper or family member to manage finances. But as your revenue grows, having an experienced bookkeeping team who understands the nuances of medical spa operations becomes essential.
Buyers will want to see where your revenue comes from—whether it’s neurotoxins, lasers, IV hydration, or other services. Having detailed, organized financial statements is critical for ensuring transparency and building buyer confidence.
Key Performance Indicators
According to Jerry, knowing your financials inside and out is a must. Buyers will examine key performance indicators (KPIs), such as revenue, cost of goods, and labor costs. Understanding how your med spa compares to industry benchmarks will help you make necessary adjustments before going to market.
The average successful med spa generates around $130,000 to $140,000 in monthly revenue, with a 25-30% profit margin. If your spa’s numbers are far off these standards, now is the time to address discrepancies.
Building a Team
Sara highlights a common challenge: many med spa owners are the primary providers. If you are in this position, it’s important to hire and train other providers who can take over your work. A buyer will be more inclined to purchase a business where multiple providers have strong client relationships, reducing dependence on the owner.
The Sale Process
How long does it take to sell a med spa? Jerry explains that the timeline from initial interest to final sale can range from two months to a year, depending on the size and complexity of the transaction. A discovery call is typically the first step, where the buyer and seller meet to discuss the business and explore potential terms. From there, the due diligence phase begins, which can take several months as the buyer’s team reviews the business’s financials and operations.
Common Deal Structures
Many deals include holdbacks—when the buyer withholds a portion of the payment, typically around 10%, to cover any post-sale issues. This can be structured as an earnout, where the seller receives the remainder of the purchase price if certain performance metrics are met.
Jerry also discusses the role of private equity in med spa acquisitions. Private equity firms often prefer for the owner to stay on after the sale to help grow the business, offering sellers the opportunity for “two bites of the apple”—a payout at the time of sale and additional earnings when the private equity firm later resells the business at a higher multiple.
Preparing for Future Success
Even if you’re not planning to sell immediately, thinking ahead is crucial. Jerry advises structuring your business from the outset with a sale in mind. This means creating a vision for your med spa that goes beyond day-to-day operations and positions it as a valuable, sellable asset.
Building a diverse revenue stream, investing in a membership program, and staying on top of your KPIs are all steps you can take to set your med spa up for a successful sale down the road.
Final Thoughts
For med spa owners thinking about selling their business, Jerry’s advice is crucial. Whether you’re just starting out or actively preparing for a sale, building a solid foundation now will pay off in the future. Remember, the time to prepare is always sooner than you think.
If you have questions about positioning your med spa for sale or need legal guidance, Lengea Law is here to help. We have years of experience assisting buyers and sellers through the process.
Contact us for a complimentary 15-minute consultation to discuss your unique needs and how we can support you.
For more insights from Jerry Deza and Pacific Reliance Medical M&A Advisors, visit their website at www.pacificrb.com, or reach out by email at jdiza@pacificrb.com.