Should I Stay or Should I go? A Medical Spa Owner’s Conundrum
Updated: Jan 11, 2023
Recession. Recession. Recession. Is it happening or not? If so, when? Is it going to happen in the near term? This year? Next? How long will it last? Who really knows? What we do know is that it will most likely happen. We also know that the medical aesthetics industry fared well during the last recession.
However, medical aesthetics was not the industry it is today, and the world was a very different place. The social acceptance of noninvasive treatments was not what it is today either. Nor was the technology as advanced. Since the last recession the medical aesthetics industry has become very hot and one that private equity is very bullish toward, as are those looking to grow their established brand.
Such bullish behavior from private equity and multi-unit brands can lead owners of single locations to feel anxious. Especially when they see how many of their colleagues have recently sold for unprecedented multiples. While it is great to be in an industry that is growing exponentially, it also attracts those looking to get in on the action while it is hot. As such, a small business owner can begin to feel pressure from all angles.
Pressure to maintain market share amidst ever growing competition.
Pressure to keep up with more capitalized practices.
Pressure and anxiety from a looming recession.
Pressure that comes with maintaining an undercapitalized lifestyle business.
Pressure to get out while the getting is good.
If you are a medical spa owner looking to possibly exit and are wondering what someone looking to buy might be looking for in a practice, all you need to do is look inward. Buyers look for healthy practices. Vital signs that indicate spa wellness are very fundamental and no different than that of a typical business.
Financial Health – What does the practice’s profitability look like? Not just this year, but last year, the year before, and next year. Is the practice showing growth? Are the margins consistent? Are the financial records organized and free from meddling behaviors? Can you share the financials with confidence and be proud to stand behind them even under intense scrutiny? If not, get them organized and straightened out prior to ever considering placing the practice up for sale.
Business Operating Systems – Do you have formal business operating systems in place? Do you have a business operation manual? Are your key operating procedures documented? Is your team held accountable for adherence to your core operating systems? Think consultation process, phone scripts, opening and closing routines, inventory management, etc. If they have not been formalized, consider writing them down and implementing a culture of execution.
Medical Compliance – Is your practice medically compliant? Do you have all the formal consents and protocols in place? Do you consistently implement Good Faith Exams and adhere to the delegation of authority as required? Is the hiring of your medical practitioner(s) following the requirements of your state? Does your MD call the shots on the medical side of the practice?
Records Management – Are client records maintained at a level that meets the standards for regulatory compliance? More so, does your team consistently adhere to record keeping standards that serve to protect both the client and the practice? How do you know? Do you have a system in place to ensure compliance? Do your client records also feed a CRM that supports your business growth efforts?
Products and Services – Is your product and service mix diverse and driven by client needs and demands? Does it protect you from seasonal changes? Do they get the intended results? Are they supporting your long-term growth projections? Have you invested wisely?
Diversified Client Base – Have you grown the client base to be diverse? Are your demographics spanning the top and bottom end of the age range for medical aesthetics? Do your clients come from varied races and ethnic groups? Are you marketing to the demographic that will lead to long-term growth? Are you top of mind? Are you using multiple strategies to grow the practice? Do your clients rave about your practice?
Leadership and Management – Is your team strong? Can they run on their own without you? Have you spent the time developing them and cross training? Are they capable of carrying the business strategy forward toward continued growth? Is the culture one that supports growth?
Replication – Have you built the business in such a way that it can be replicated? Can a competitor buy your business and roll it up into their portfolio with reasonable ease? Is your practice scalable? This point connects back to all of the previous points.
What this is really coming down to is this, have you built an enduring business? If so, you’ll get those multiples we have read about. If not, you may want to step back and do the work necessary to make your practice more attractive. Otherwise, what you are offered and what you want will be two very different things.
While most of the factors that contribute to a sellable business start with the entrepreneur, it is the agility of the practice in the face of change that underpins its success. A well-developed practice can embrace the winds of change, pivot when necessary, and endure the changes that occur in an uncertain environment. Be they technological, political, or economic, change is inevitable. It is only those practices that have been built on a strong foundation that endure. Those are the practices buyers are looking for and will pay mightily to acquire.
As Jim Collins stated in his book Good to Great, “Good is the enemy of great. Greatness is not a function of circumstance. Greatness, it turns out, is largely a matter of conscious choice and discipline.” If you are a practice owner looking to exit, make the conscious choice and do what needs to be done to earn the offer you desire. Others have done it and so can you!
Randy Stepp is a Principal with Renaissance Leadership Group. RLG is a full-service business development company whose purpose is to help business owners realize their dreams of independence and freedom.
Visit Renaissance Leadership Group at www.renaissanceleadershipgroup.com to learn more about business development.
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