The Guide to Aesthetic & Wellness Practice Valuations

If you’re an owner of an aesthetics or wellness practice considering selling to another individual or a Medical Support Organization (MSO), understanding your practice’s value is crucial. This blog explores what goes into an aesthetics or wellness practice valuation, why it matters and how you can approach the process to maximize your return.

Why a Valuation is Essential

When you decide to sell your practice, one of the first questions you’ll likely ask is, “What is my practice worth?” A valuation provides a clear answer. Whether you’re selling to another individual or an MSO, a comprehensive valuation ensures that your practice is priced correctly, protecting you from underselling and enabling you to attract serious buyers. Furthermore, a well-prepared valuation provides insights into the financial health of your business, helping you negotiate better terms.

Many practice owners believe they can base the value on potential earnings or future performance; however, buyers, especially institutional ones like MSOs, are far more interested in the current operational status, financial performance and potential risks. Selling your aesthetics or wellness practice without a proper valuation is like selling a home without an inspection — it leaves too many questions unanswered.

Key Factors in Aesthetics and Wellness Practice Valuation

Valuing an aesthetics or wellness practice involves analyzing several key factors, from your financials to your market position and unique service offerings. Below are the core elements typically evaluated.

1. Revenue and Profitability

One of the most important components of any valuation is your financial performance. For most aesthetics and wellness practices, this means taking a close look at revenue streams, profit margins and cash flow. Buyers will closely examine:

• Annual revenue
• EBITDA (Earnings before interest, taxes, depreciation and amortization)
• Historical growth trends

Practices with steady or growing revenues and healthy profit margins are more attractive to buyers. They indicate a sustainable and scalable business model, whether you run a medspa, dermatology clinic or plastic surgery practice.

2. Patient Base and Demographics

Your patient base is another critical factor in determining value. Buyers will want to know:

• How many active patients you have
• What types of services they seek
• Patient retention rates

For instance, a plastic surgery practice with a high percentage of repeat cosmetic surgery patients is likely to have a higher valuation than a medspa with a fluctuating customer base. 

Similarly, the demographics of your patients can affect value. Are they primarily in a higher-income bracket, seeking premium services or is your practice located in an area with growth potential?

3. Service Offerings and Specializations

Aesthetics and wellness practices that offer specialized services or advanced treatments often command higher valuations. Buyers, whether individuals or MSOs, are willing to pay a premium for practices with niche expertise, such as:

• Dermatology clinics offering advanced skincare solutions
• Med spas with proprietary body contouring services
• Plastic surgery practices specializing in facial reconstructions

The broader reaching and more specialized your service offerings, the more attractive your practice becomes, particularly for MSOs looking to expand their range of services through acquisition.

4. Location and Market Conditions

Where your practice is located can significantly influence its valuation. Practices in prime, high-traffic areas or affluent communities are generally valued higher due to their access to a larger, more lucrative patient base. Furthermore, local competition and market demand play a crucial role. A wellness clinic in a saturated market may have a lower valuation compared to a dermatology clinic in a growing area with minimal competition.

5. Staff and Operational Efficiency

The strength of your staff and how smoothly your practice runs are additional factors influencing its value. A well-trained team with minimal turnover adds value because the buyer won’t need to invest significant resources in recruitment and training. Efficient operational procedures, a well-run back office, and the use of advanced technology systems for scheduling, billing and patient management can also boost the valuation.

The Role of a Broker in Practice Valuation

An experienced aesthetic practice broker or wellness practice broker plays a vital role in accurately assessing the value of your practice. They have an in-depth understanding of market trends, buyer expectations and the nuances of valuing healthcare businesses. These brokers provide specialized services, helping you not only get an accurate valuation but also positioning your practice effectively in the market to attract the right buyers.

When selling an aesthetics or wellness practice, having a knowledgeable broker is especially beneficial when it comes to MSO transactions. MSOs tend to have specific valuation metrics and criteria, which brokers understand and navigate efficiently. Whether you are working with an aesthetics M&A broker or a wellness M&A broker, their expertise can be the key to getting the highest possible valuation for your practice.

Different Types of Buyers and How They Impact Valuation

Who you sell to can impact the value of your practice. The two primary types of buyers for aesthetics and wellness practices are:

• Individual Buyers: These buyers are often other practitioners looking to expand or enter the market. They tend to place a high value on practices that are turnkey operations with an established patient base. Individual buyers are often interested in practices with strong brand recognition and loyal clientele, but they may have limited financial resources, which can affect the price they are willing to pay
• Medical Service Organizations (MSOs): Selling to an MSO typically results in higher offers and more lucrative deal structures, especially if your practice fits into their strategic growth plans. MSOs are typically more focused on practices with established profitability, efficient operations, and strong growth potential. However, they may also push for lower valuations to improve their return on investment, especially if they need to invest in improving infrastructure or staffing

Preparing Your Aesthetics or Wellness Practice for Valuation

To maximize your practice’s value, it’s essential to prepare well before seeking a valuation. Here are some steps you can take:

• Financial Preparation: Ensure that your financial records are accurate and up to date. Be prepared to present financial statements, tax returns and any other documents that demonstrate your practice’s financial health
• Improve Efficiency: Streamline operations and ensure that your practice is running as smoothly as possible. This includes everything from patient scheduling to billing and accounting processes
• Enhance Services: If possible, expand your service offerings to include more specialized treatments that could increase your practice’s appeal to buyers
• Retain Key Staff: Maintaining a stable and experienced team adds to the overall value of your practice

Closing Thoughts

A proper aesthetics practice valuation or wellness practice valuation is essential for anyone considering selling their business. It provides an accurate representation of your practice’s worth and ensures that you attract serious buyers, whether you’re dealing with an individual or an MSO. By understanding the factors that impact valuation and working with a wellness practice broker or aesthetics practice broker, you can maximize your return on the sale of your practice.

If you’re interested in getting a valuation for your practice or learning more about how to position your business for sale, contact us today. Whether you’re ready to buy an aesthetics practice, sell an aesthetics practice, or explore options with an MSO, we’re here to help.