The decision to exit one’s dermatology or medical spa practice is a significant milestone in the professional journey. Whether retirement, a career change, or other motivations that prompt this decision, understanding the factors that can impact the exit value of a practice is crucial. This article explores five key elements that can dramatically influence the exit value of a dermatology or medical spa practice.

WALKING TOWARDS THE EXIT

In many situations, the decision to sell a practice is not entertained until the clinical provider or owner is considering retirement. It is important to understand that a lot of value within the business is centered around the doctor, provider, or owner. Ensuring that the production associated with that provider remains consistent is paramount for any prospective buyer. As such, one of the primary considerations influencing the exit value of a dermatology practice is the duration one plans to stay active within the business that is being sold. Thinking through a potential exit as many as five to seven years ahead of retirement will serve a provider incredibly well in the sales process and will pay off incrementally when they 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 the overall exit value tremendously. 

PERCEIVED VALUE

This may come as a shock, but many healthcare offices are somewhat lacking in the financial reporting arena. It is not uncommon for a provider to bring on a client and quickly realize that half of the financials for the valuation period may or may not be complete, accessible, or built properly. While buyers 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 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 a practice.

PATIENT RELATIONSHIPS 

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; being able to provide reports centered around the number of repeat patients a provider has 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. 

STAYING COMPETITIVE  

One would be hard pressed to find a buyer who is interested in taking on a dated facility that has not had its technology updated in a decade. That does not mean one needs 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 the practice is updating its technology as needed, refreshing the interior design and ensuring the place looks modern and inviting to both patients and potential investors. Most buyers will not be completely hung up on having the most up-to-date lasers and treatment modalities; however, a visually appealing office with technology that has been addressed within the prior three to five 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.

MARKET DEMOGRAPHICS

Understanding the demographics of the 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 a practice and viability of being an acquisition target. While there is less that can be done about natural demographic evolution over time, if a provider is truly looking at an exit from the business in five, seven, or 10 years, understanding how the local area is going to be impacted by future growth and development is helpful in determining the timeline. Being aware of these trends allows one to adapt their practice strategically, ensuring that it remains relevant and attractive to potential buyers.

Maximizing the exit value of a medical aesthetics practice requires careful consideration of numerous factors, including those listed above. By being proactive and making a plan, dermatology practice and medical spa owners can ensure a graceful and prosperous exit.