How to Sell Medical Spas

Selling A Medical Spa

The sale of a medical spa in South Florida should always be handled in a confidential manner so as not to disrupt the practice by alerting any employees, competitors, or customers that the spa is for sale. Prior to selling, a medical spa owner should let an experienced and local business broker price their spa based on the competitive advantages and growth trajectory of the spa versus the valuation of comparable medical spas on the market. The current average valuation of medical spas in Florida is about 2.5 x the annual cash flow (or adjusted owner benefit). The often valuable and specialized equipment owned by medical spas enhances the valuation multiple while serving as a floor of the minimum selling price. Larger well established medical spas with multiple locations and management in place often sell for 4-5 x annual cash flow. Prior to selling a med spa, business owners should obtain an accurate set of historical financial records and a physical asset list, reduce owner-dependency, streamline operations to increase profitability, and emphasize their recurring revenue and transferable patient base in order to maximize the purchase price.

What is a Medical Spa?

A medical spa (or med spa) offers non-surgical aesthetic treatments supervised by a medical physician or a licensed medical practitioner.  A hybrid between a traditional day spa and a medical clinic, med spas cater to the well being of its customers in a relaxed and inviting setting. Unlike traditional day spas or beauty salons, however, medical spas offer prescription-strength treatments overseen by licensed medical professionals. Non-physicians may own medical spas, but Florida law requires that a licensed physician oversees medical procedures. Common services offered by med spas include Botox, dermal fillers, laser hair removal, chemical peels, micro needling, and body contouring. Medical spas are in a growing market as evidenced by its expected 15% industry compounded annual growth rate in the United States from 2025-2034.

Valuing Medical Spas

  • When valuing a medical spa, it is first important to obtain the properly adjusted owner benefit (or true economic profit) from the last 12 months of operations.
  • The adjusted owner benefit uses the EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) which measures the pre-tax profitability of the medical spa absent interest costs and accounting charges (depreciation and amortization) taken against its capital equipment.
  • This assumes that the capital equipment – or the long-term assets owned by the medical spa – is included in the sale on a debt-free basis.
  • Obtaining the owner benefit requires then adding back any personal expenses of the owner that flows through the financial statement, the owner’s salary (so long as the owner is not working as a medical professional in the spa), and any other irregular expenses that the buyer of the spa would not incur.
  • In order to get the best possible purchase price, medical spa owners should be sure that the properly adjusted owner benefit is used for valuation purposes.
  • The applied valuation multiple takes into account the tangible equipment included in the sale, the growth rate of the med spa, the transferability of the customer base, the location and lease of the facility, and any competitive advantages that allow the med spa to attract and retain both customers and staff.
  • The more likely it is that the customer base will be retained and grow after the sale, the higher Return on Investment (ROI) the buyer may expect.
  • This will justify a higher purchase price and better terms for the seller.
  • A premium valuation for a med spa requires a demonstrable record of growth as evidenced in the financial statement, particularly when the growth is expected to continue after the owner is no longer involved.

Role of Owner

A med spa with an active owner functioning as a manager or trained medical professional is less valuable than a med spa with an absentee owner and management already in place. This is particularly the case when a significant amount of patients are seen personally by the owner or are referred to the med spa because of the owner. While the cost of replacing an active med spa owner may be significant, the risk of losing a significant part of the customer or patient base after the sale also poses a significant hurdle in obtaining a premium valuation. In such circumstances, a sale of the med spa may only makes sense to a buyer who can step in to the seller’s role as a trained medical professional or manager.  Med spa owners may consider lessening their own role in the business prior to selling in order to obtain the best possible purchase price.

Staffing of Medical Spa

The quality of the med spa staff and the likelihood that they will stay after the sale plays an important part in the valuation and selling process. Many patrons of med spas frequent certain establishments because they trust and appreciate the quality of the medical personnel who administer treatments, schedule visits, and coordinate health goals. Buyers of med spa will want to ensure during the formal due diligence phase that key staff members are retained after the sale. This will involve reviewing payroll records, employment contracts (including non-compete agreements signed by staff members), and employment status (i.e., whether staff members are paid as employees or independent contractors). Sellers seldom grant buyers the right to speak with staff members prior to the sale as it conflicts with confidentiality concerns.

Along with physicians, buyers of med spas are often private entrepreneurs seeking to enter the healthcare space as well as private equity companies seeking high investment returns. Med spa customers are frequently high net worth individuals who want to look and feel younger, healthier, and more attractive. It is no wonder that South Florida has a growing number of medical spas, and that buyers are willing to pay a premium price for a growing med spa with an established and transferable client base along with a trained staff of medical personnel.

Give Martin at Five Star Business Brokers of Palm Beach County a call today at 561-827-1181 for a FREE evaluation of your business.