Secrets to Selling Your Medical Spa: Professionally Prepared Financial Statements

Posted By Madilyn Moeller, Friday, February 2, 2024

Financial reports

By Pacific Reliance

Are you contemplating selling your successful medical spa? Whether you have retirement on your mind, or perhaps you are wanting to explore new business horizons, there are a wealth of insights to consider to ensure this process is as seamless as a medical spa treatment.

First, let's talk about what truly matters: getting the most out of your medical spa sale. When selling, it’s all about maximizing your medical spa’s value, ensuring top-dollar returns. Perhaps your journey to this point has been a rollercoaster of dedication and sacrifices, all aimed at building up your successful medical spa business. You've put in plenty of hard work, and now, it's time to make sure you get every bit of value you deserve from it.

One key lies in professionally prepared financial statements, and it's of the utmost importance. It’s understandable that diving into financial discussions might not be everyone's cup of tea, but this is where the genuine gains take place.

Professionally prepared financial statements aren't just dry numbers on paper—they're the compelling story of your medical spa's financial journey. Transparent financial statements build trust, enhance the credibility of your medical spa, and facilitate the sale of your medical spa on more favorable terms.

Think of your financial statements as the “dashboard” to your business. Just as your car has a dashboard that informs you if you’re low on fuel, your engine is overheating or your doors are left open, your medical spa also has a dashboard.

The monthly profit & loss statement is your dashboard to your medical spa. If prepared well, it will inform you of issues such as declining revenues, high cost of goods, out-of-whack labor costs and if the net profit is in line with industry standards.

How do you achieve this level of financial finesse? Bring in the experts. Get yourself a seasoned professional to organize those books. When you first opened your medical spa, perhaps you or a family member prepared your financial statements in an effort to save money. As your medical spa grows, it’s a wise idea to hire a professional bookkeeper or accountant who understands your business.

Your bookkeeper or accountant should keep track of key performance indicators, essentially giving your medical spa a financial health checkup.

The key performance indicators you should be following monthly are:

  1. Gross revenues;
  2. Cost of goods per category in income;
  3. Labor cost broken down by provider and non-provider; and
  4. Net profit.

Each indicator tells a story.

Gross revenues: Monitor sales per major category of income monthly. Separate your income by:

  1. Injectables/neurotoxins;
  2. Lasers;
  3. IV hydration;
  4. Membership;
  5. Retail sales; and
  6. Other products and services.

This data should be pulled from your EMR/EHR. Compare month to month and make sure your sales are steady or even better, increasing monthly.

The average single-location medical spa has revenues of more than $120,000 per month. How does your medical spa compare? If it’s below the average, work on hitting those numbers.

Cost of goods: Monitor your cost of goods sold (COGS) by category of major income. Your target should be between 20 and 30%, with neurotoxins running at the higher spectrum. A high COGS could indicate theft or improper usage.

Labor costs: Separate your labor costs by providers and non-providers (administration). Compare these numbers monthly and in relation to your revenues. Labor costs above 40% should be an indicator of higher-than-average costs and should be examined.

Net profit: The net profit of a medical spa should be minimum 20% of revenue, with highly efficient practices running at 30 – 35% profit.

Analyze each number monthly as well as quarterly and look for significant increases or drops. Compare the numbers monthly as well as quarterly and discuss them with your accountant.

Selling a medical spa may involve a lot of paperwork, but think of it as a spa day for your business—a bit of revitalizing mixed with deliberate procedures.

For additional questions regarding your financial statements or for a no-cost valuation of your medical spa, please contact Pacific Reliance.

Pacific Reliance Medical M&A Advisors is a national full-service business brokerage specializing in the marketing and sales of medical-based businesses with annual revenues between $1 million and $20 million. Its specialties include medical spas, urgent care centers, pain management practices, and general practices. Its buyers include national strategic buyers, family offices, and private equity groups, as well as individual owners and investors.

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