The decision to exit your dermatology or med spa practice is a significant milestone in your professional journey. Whether retirement, a career change, or other motivations prompt this decision, understanding the factors that can impact the exit value of your practice is crucial. In this article, we will explore five key elements that can dramatically influence the exit value of your dermatology practice.

Factor 1: Length of Time You Plan to Continue Working

In many situations, the decision to sell a practice isn’t entertained until a clinical provider/owner is considering retirement. It’s important to understand that a lot of value within the business is centered around the doctor/provider/owner. Ensuring that the production associated with that provider remains consistent is parament for any prospective buyer. As such, one of the primary considerations influencing the exit value of your dermatology practice is the duration you plan to stay active within the business you’re selling. Thinking through a potential exit as many as 5-7 years ahead of retirement will serve you incredibly well in the sales process and will pay off incrementally when you ultimately partner with a buyer.  This, more than just about anything else, has a direct impact on the potential risk for a prospective buyer and thus, can impact overall exit value tremendously.

Factor 2: Continuity of Revenue and Profitability

This may come as a shock, but many healthcare offices are somewhat lacking in the financial reporting arena. It isn’t uncommon for us to bring on a client and quickly realize that half of the financials for the valuation period may or may not be complete, accessible, built properly, etc. While we are certainly well positioned to help with this administrative and financial lift, it goes a long way with buyers if the financials are clean and reflect consistent performance year over year. In the evaluation process the previous three years of financials will regularly be reviewed and having a firm grasp of the reasons for growth, or any dips in revenue over that three-year timeline will help to build a “story” around the financial performance of the business. Demonstrating a history of stable financial performance and implementing strategies to ensure ongoing success can significantly enhance the perceived value of your practice.

Factor 3: Stickiness of Patient Relationships via Memberships, Etc.

The strength of patient relationships is a critical factor in determining the sustainability of a dermatology practice post-transition. Establishing membership programs and loyalty initiatives can enhance patient stickiness, fostering a sense of loyalty and trust. A practice with a solid patient retention strategy is more likely to attract buyers looking for a stable and established patient base and being able to provide reports centered around the number of repeat patients you have receiving ongoing treatment and the amount of practice revenue attached to these types of ongoing relationships is a valuable piece of information for prospective buyers to have in hand.

Factor 4: Aesthetic and Technological Updates to the Practice

You would be hard pressed to find a buyer who is interested in taking on a dated facility that hasn’t had its technology updated in a decade plus. That doesn’t mean you need to go out and break the bank ahead of entering the sales process, but it does mean that there is a strong rationale for ensuring that you’re updating technology as needed, refreshing the interior design, and ensuring the place looks modern and inviting to both patients AND potential investors.  Most buyers won’t be completely hung up on having the most up to date lasers and treatment modalities, however a visually appealing office with technology that’s been addressed within the prior 3-5 years signals to potential buyers that they are acquiring a practice positioned for future growth. Consider regular updates to maintain a contemporary and competitive edge in the market.

Factor 5: Market Demographics:

Understanding the demographics of your practice location is essential. Changes in the local market, such as population growth, economic shifts, or shifts in healthcare demand, can influence the overall value of your practice and viability of being an acquisition target. While there’s less you can do about natural demographic evolution over time, if you’re truly looking at an exit from the business in 5, 7 or 10 years, understanding how your local area is going to be impacted by future growth and development will be helpful in determining your timeline. Being aware of these trends allows you to adapt your practice strategically, ensuring that it remains relevant and attractive to potential buyers.

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The Point of it All

In conclusion, maximizing the exit value of your medical aesthetics practice requires careful consideration of numerous factors, not the least of which are those listed above. Curious about how your business would be viewed by the market today? Please reach out to us and we can provide you with a complimentary practice valuation and market analysis to help you in the decision process.

About TUSK Practice Sales

TUSK Practice Sales (“TUSK”) provides M&A Advisory services in the healthcare industry. TUSK has completed over $1B of transactions across all specialties. With an in-depth understanding of the marketplace and access to 100’s of buyers nationwide, we help our clients confidently pursue M&A transactions that maximize their long-term value. With our significant collective experience of over 40+ years of practice transactions, we offer our clients solutions that help them achieve their strategic and financial objectives. For more information, visit www.TuskPracticeSales.com