A Guide To Aesthetic Spa Valuations
If you’re thinking about selling your med spa, few items are as important as determining what your practice is worth. Without a clear understanding of this number, you cannot begin the sales process effectively.
However, as with any business valuation, determining a fair price for your med spa isn’t as simple as using a free calculator or a simple rule of thumb. There are numerous factors that influence the value of an aesthetic spa or med spa. You will need to consider all of them to get a clear understanding of what you can ask for when selling your practice.
Triumphant Partners shares a few factors that impact the value of your aesthetic spa and how to factor them into your sale process.
Why Do You Need a Valuation?
A valuation provides the organization contemplating the purchase of your practice with a view into the current state of the spa. Much like how you wouldn’t buy a car without an inspection and test drive, serious buyers won’t contemplate purchasing a med spa or another medical practice without a valuation. You might think of your spa in terms of future dollars and earnings, but the individual buying the spa is probably just as interested in current operations and processes. A valuation helps give them some peace of mind in this regard.
But a good aesthetic spa practice valuation isn’t just for the buyer. It also offers you considerable advantages as the seller. You can now enter any conversation about the sale of your practice with data to validate your asking price. This data also reduces the likelihood of you accepting lowball offers, which can consume precious time and energy, and helps you negotiate the best possible terms in any sale. The buyer might be very interested in a med spa valuation, but you should also be excited to value your practice as the seller.
Profitability
The financial underpinnings of the med spa in question will be the primary focus of this valuation. You might think of this in terms of collections and patients seen, but the evaluator will likely focus on the following gauges of long-term profitability:
- Revenue
- Tax Documents & Implications
- EBITDA
- Year Over Year Growth
Mere top-line numbers often don’t suffice when trying to determine the value of a med spa. A spa with a large amount of debt but a significant patient base may have more collections than a spa with a smaller patient base.
However, by shifting the focus from collections and patients seen to prioritize the profitability of the practice in question, the assessor can provide a more accurate picture of the spa’s financial workings. This focus on profitability helps the buyer compare different spas in various contexts and determine which is the best option for purchase after all extraneous factors are taken into account.
It’s also important to note that the above factors aren’t merely a simple review. Each spa is unique, and while the process will look somewhat similar from one to the next, it’s imperative that a financial expert with practice valuation experience is involved in the process. A spa with lower profitability that owns a large amount of real estate and medical equipment might be worth more than a spa with fewer resources, but slightly greater profitability.
One spa’s tax situation could be vastly different than another’s. There are numerous factors that collectively impact the value of your med spa. If you don’t entrust the valuation to a seasoned industry expert, you’re likely to under- or overvalue the worth of your practice, which can have dramatic impacts on your ability to sell the practice on your terms and timetable.
Location
Another reason to forgo simple online calculators is the very real impact location can have on this process. We’ve already briefly touched on tax implications, which will certainly vary from state to state. However, the trends within your specific market will also have a significant impact on your spa’s worth.
Additionally, the specific community within a market can impact value. A spa in a high-income suburb will likely be worth more than a spa in a lower-income neighborhood, even if the two look somewhat similar at first glance. An online calculator cannot include every single element that your assessor will need to consider, and this becomes particularly apparent with location.
Specialization & Patient Base
Not all med spas are the same. Many will have overlapping service areas and products, but specialization is another key consideration. A med spa that is on the cutting edge for a highly profitable procedure within the country, one that commands a high asking price, will likely be valued higher than a med spa without a similar specialization, even if the two are virtually identical in financial fundamentals. We also noted that patients seen might not be the end-all be-all of valuing a practice earlier. While this is still true, an assessor might be interested in how many patients you see if you have a high patient retention rate. This typically indicates a stable spa that could potentially be more profitable in the long run than one with significant variations in patient retention from month to month.
Contact Triumphant Partners
Are you looking to determine the value of your med spa? Call Triumphant Partners today! We proudly feature a team of financial CPAs with expertise in the medical industry, which means we can help you understand the true value of your spa, despite the complexity and nuances of your situation.
There’s no rule of thumb or “guesstimates” here. Our team of experts helps you know the fair asking price of your spa, as well as what you need to do to increase that asking price.
Call Triumphant Partners today!