How Much is Your Med-Spa Worth?

Selling a single location med spa can be a daunting task, especially if you are the owner of a small business with limited resources and manpower. However, with proper planning and preparation, you can successfully sell your med spa and receive a fair return on your investment. This guide will provide you with the information and tips you need to effectively sell your single location med spa.

Understand Your Goals

Do you want to sail off into the sunset or remain as an employee? Most sales will require a handover period that can range anywhere from 90 days in the case of an owner with limited day-to-day involvement in the business, to 3-5 years in the case of an owner who is also a primary service provider. Its not uncommon for a seller to be paid for the business itself, and then to remain on as a paid member of the staff. This in particular is an ideal arrangement for a smaller business with only 1-5 staff. You get financially rewarded for the business you’ve built, while handing the risk and endless business building tasks to the seller.

Understanding the Market

Before putting your med spa up for sale, it is important to understand the current market conditions. If you’re a med spa with less than 10 staff members, you may have difficulty finding such numbers as these businesses are not as frequently sought for purchase. Nonetheless one estimate from North American data estimates a purchase price of 0.22-0.46x revenue. So if your sales were $100,000 last year, then available data would suggest a purchase price of $22,000-46,000.

What Impacts this range

1. Revenue. Obvious as it sounds, a business that has greater revenue usually has a greater purchase price

2. Profit. If the business is producing a profit (usually based on EBITDA, Earning’s Before Interest, Taxes, Depreciation and Amortization), then this is often used as a basis of calculating purchase price. Similar businesses in the med spa space in North America sell for 1.38-4.51x EBDITDA. For instance if, after all expenses excluding interest costs, taxes, and depreciation is $25,000 (remember to pay everyone who works in the business including yourself BEFORE you calculate profit) then you might expect to receive $34,500-$112,750.

3. Accurate numbers. A buyer will want to know what they’re buying, so having audited financials from your accountant more clearly show what is of offer. Even without this, clearly being able to show what the business generates on a monthly or annual basis gives the buyer more confidence they will see a return on their investment

4. Growth potential. If your business is successful but has room to grow with just the input of some cash for a new laser, marketing or supplies, then this is more attractive to a buyer. Remember, they’re looking at this as an investment opportunity.

5. Do you work in the business? If you’re the main service provider for the clients along with being the owner then to a buyer YOU are in fact “the business”. It does a buyer no good to purchase a business when the main person offering the services leaves. You’ll need a clear way to transfer the clientele to a new employee, or negotiate to remain an employee service provider. The buyer will likely want to pay for the business through a “seller’s note” where they effectively pay you for the business over a 3-5 year period to ensure you live up to your end of the bargain

Preparing for the Sale

Once you have a good understanding of the market, it is time to start preparing for the sale of your med spa. The following are some important steps you should take to ensure a successful sale:

1. Clean up your books: Make sure that all of your financial records are up-to-date and in order. This will make it easier for potential buyers to understand your business and help you to avoid any potential issues during the sale process.

2. Get your med spa in order: Make sure that your med spa is in top condition and that all equipment and facilities are in good working order. This will not only make it more appealing to potential buyers, but it will also increase the value of your business.

3. Consider a professional valuation. Expect to pay $2500-10,000 for this service, but this helps to make your business easy to understand by a potential buyer. No buyer wants to pay top-dollar for a business if they’re concerned about skeletons in the closet.

4. Consider hiring a professional broker. A business broker can assist in getting a business ready for sale and in front of interested buyers. Costs range for this service, but estimate range from 5-15% of sale price for this help.

5. Mentally prepare yourself. Most business owners over-estimate the value of the business they’ve poured their blood, sweat and tears into. They also may, or may not, be prepared to hand over the reigns to someone else.
   

Marketing the Sale

Once your med spa is ready for sale, it is time to start marketing the business. If you don’t have a business broker, the following are some effective ways to reach potential buyers:

1. Utilize online resources: Post your med spa for sale on websites that cater to buyers and sellers of businesses. Kijiji, LinkedIn and business sales sites.

2. Network with other businesses: Reach out to other businesses in your area, such as salons and spas, to let them know that your med spa is for sale. This can be a great way to reach potential buyers and generate interest in your business.

3. Advertise in industry publications: Advertise your med spa for sale in local publications, such as newspapers and magazines. This can be especially useful if you think your locations might be useful as part of a larger chain.

Negotiating the Sale

Once you have received interest from potential buyers, it is time to start negotiating the sale of your med spa. The following are some important things to keep in mind during the negotiation process:

1. Be flexible: Be willing to negotiate on the terms of the sale, such as the asking price, financing options, and closing date. This will help you to reach an agreement that works for both you and the buyer. Remember that if you are, in fact, “the business” then the buyer will want to hear that you expect to stay on for several years. Under such circumstances its common to be paid over several years to guarantee the buyer’s investment.

2. Have a clear understanding of the terms: Make sure that you have a clear understanding of the terms of the sale, including the purchase price, financing options, and closing date. This will help you to avoid any potential issues during the sale process.

3. Consider hiring a professional: Consider hiring a professional advisor, in addition to a lawyer or accountant, to assist you with the negotiation process. This will help to ensure that the terms of the sale are fair and that all legal requirements are met.

Closing the Sale

Once you have reached an agreement with the buyer, it is time to close the sale of your med spa. The following are some important steps to take during the closing process:

1. Review all closing documents: Make sure that all closing documents are accurate and complete before signing. This will help to ensure that all of the terms of the sale are met and that you are protected throughout the process.

2. Transfer ownership: Once all closing documents have been signed, transfer ownership of the med spa to the buyer. This can be done through a bill of sale or other legal document.

3. Provide training and support: Provide training and support to the new owner, if necessary. This will help to ensure a smooth transition and will help to maintain the value of the business.

Conclusion

Selling a single location med spa can be a complex and challenging process, but with proper planning and preparation, you can successfully sell your business and receive a fair return for your hard work.

When you’re ready to discuss options, contact us at Waterloo Med Spa Holdings, we’re actively looking for smaller clinics with less than $1M in revenue in the Waterloo Region and surrounding area.