Physician to Physician Discussions > To buy existing practice or start from scratch for new physician?
Hello Dr California,
I wouldn't rule out purchasing an existing medical spa but I'd really be anxious to learn why the profits are only $100k and why the owner's selling. Items like cosmetic lasers and technology are high on the list of importance and, frankly, there are a number of technologies I wouldn't take much less buy. If you're new, I'd spend some time reading posts by those physicians who have been around for a while and I'd take careful note of the cosmetic laser reviews. I'd also make sure that the entire staff was on board with the transition.
You might want to post more descriptive versions of each of the medical centers and list which IPLs or cosmetic lasers they have to solicit some advice.
Anyone else have thoughts on purchasing an existing medical spa center?
Medical Spa MD
-Where is the client list? Is that included in the assets that you are purchasing?
-What about the charts, are they being transferred to you as the medical director?
-Who else has access to those names/charts? If they are desperate they may have already sold those names to another bidder.
-What is the average package sale?
-What is the breakdown of treatments sold? ie: is the bulk of the gross collections coming from laser hair removal, from fotofacials, from where?
-Who is doing the selling and who is doing the treatments?
-Who is their demographic? Can they prove who it is or is it just speculation, meaning what kind of marketing/sales tracking are they doing now
-where is it located? Is there walk by traffic that a staff could pull in, like a mall, or are you going to have to invest in advertising and doing in house events?
Be ***super*** careful about checking out that net profit claim of 100K.
I have seen "creative accounting" used in medspas for sale. If you can get a look at a sampling of their charts it usually exposes a lot of challenges you will face. Like why is someone coming in for 27 laser hair removal treatments on their underarms? Crappy staff or crappy lasers?
Is there an office manager/clinic director that will speak to you off the record about why they aren't making more $$$? can you talk to the treatment providers and get their feedback too?
I can see the pros and cons of both starting from scratch and of walking into an already set up business, it's going to depend on the individual circumstances and challenges of each particular location to make a determination to buy or walk away.
BetterOffNow
Dear Dr. California: In my opinion, one of the most important things to find out if considering buying an operating aesthetic clinic/med spa is the number of "uncompleted packages" (pre-paid services not yet delivered) you might be stuck with delivering. I have seen situations where someone is trying to sell a med spa with literally hundreds (even thousands) of pre-paid services (usually laser hair removal, photofacials, cellulite, etc.) outstanding. Somehow you need try to figure out how much it is going to cost you in terms of staffing, room usage, etc. to deliver all these services which have already been paid for (since YOU will be finishing off all these packages at YOUR expense with no remuneration).
med spa guy
These responses were incredible. Things I did not, and would not have, thought of. I appreciate it. I'll be sure that every one of these is addressed before making any potential purchases.
Dr. California
These responses were incredible. Things I did not, and would not have, thought of. I appreciate it. I'll be sure that every one of these is addressed before making any potential purchases.
Dr. California
These responses were incredible. Things I did not, and would not have, thought of. I appreciate it. I'll be sure that every one of these is addressed before making any potential purchases.
Dr. California
In addition to the comments already posted, some other considerations are:
Is the laser equipment current technology and what you would have purchased anyway if you started from scratch.
Is the laser equipment paid off, or are there outstanding lease payments (this will affect your cashflow if there are still lease payments, usually from $5000 or more per month). This should be taken into account given the sales price of the practice.
If the location is good for you, and the office design and construction is acceptable, then there is benefit of buying an existing practice, because a buildout of a new location may cost you $100-200K. There is also the cost of time. It may take several months to a year to build out a location, and depending upon the negotiated lease on the office, you may find yourself paying rent for an office that you haven't opened yet.
Is there a laser nurse that will be staying on? This will be useful because new start ups also take time for the learning curve with training staff on the lasers.
We spent a lot of time and money building out our second office a few years ago, and it has taken time to build it up to pass the break-even point. In retrospect, if I could have walked into a space that was ready to go, with staff and flow already established, it would have been worth the $250K. But again, that would assume other factors of location and the architecture and design of the office, and that it was the right equipment.
Kai Yan
What percentage of revenue is typically net profit in a medical spa?
DrCalifornia
Depends on a huge # of factors. Payroll-which if including dr's salary should be about 30%-35% of gross revenue, rent which is dependent on location, equipment leases, loans for buildouts etc. as well as other fixed expenses, plus fluctuating expenses like marketing for certain times of the year.and of course,the net profit will fluctuate from month to month and year to year.
I've never seen a formula for what a medspa "should" be generating in net profit-If anyone has one, I'd like to see it too.
BetterOffNow
Depends on a huge # of factors. Payroll-which if including dr's salary should be about 30%-35% of gross revenue, rent which is dependent on location, equipment leases, loans for buildouts etc. as well as other fixed expenses, plus fluctuating expenses like marketing for certain times of the year.and of course,the net profit will fluctuate from month to month and year to year.
I've never seen a formula for what a medspa "should" be generating in net profit-If anyone has one, I'd like to see it too.
BetterOffNow
I am a new non-core physician looking to enter the medical spa industry. I did some business searches online that show some pretty nice med spas for sale. The net profit is usually around 100k with a cost of 250-300k to buy. Many of them include laser equipment, chairs, etc. What do you guys think of this rather than starting out from scratch? Are there any benefits to starting new? Thank you very much!!!