Cameron Hemphill hosts the “Medical Millionaire” podcast, featuring Jeff and Youssef from Med Acquire. Jeff and Yusuf discuss their transition from finance and tech into the medical esthetics space, emphasizing the potential for growth and the role of private equity. They highlight the importance of preparation for practice owners considering an exit, including maintaining high EBITDA margins, recurring revenue, and strong team culture. They introduce a tool that automates due diligence metrics, making it easier for buyers to assess practices. The conversation also touches on the fragmented software market and the potential for smaller clinics to attract buyers.

Transcript

This is medical millionaire the podcast, helping your Med Spa increase in status, visibility and profitability. Join your host as he dispels myths, shares trends and gives you actionable steps today that will take your medical practice to the next level. Here’s your host, expert marketer and founder of growth 99 Cameron Hemphill,
hey everybody. Cameron Hemphill, here your host for medical millionaire. Hey, first off, thank you so much for taking the time to tune into the podcast. Our goal is to give incredible value and insight to practice owners. So if you own a medical esthetics practice, you’re in the wellness space, the health cosmetic Durham plastics this podcast, it’s 100% designed for you, and we want to help you take your practice to the next level. So what I have for you today is a special treat. I got a wonderful couple of gentlemen here that have entered the medical esthetic space over the past year, but they have a massive background when it comes to M A how to exit your practice, how to grow your practice, how to prepare for that. And so I want to welcome Jeff and Youssef from med acquire.com to the show. Jeff Yousef, welcome to the show.
Great to be here. Hey cam, thanks a lot. We’re really excited.
Yes. Thank you guys for joining. I know you’re super busy. Shoot, man, we had conversations last year like I want to say it was October. November. Holidays came, and finally, here we are, so I appreciate your patience, and so let’s jump right in. Talk to me and the audience around your specialty, your background, like, Why do you love this space, and where do you see the space going as we go into 2024
Yeah, so we’re obsessed with the space, because a lot of the success that you see in other sectors, we think will play out in esthetics and in med spas as well. My background, by the way, quick introductions, I’m Jeff Luke Youssef,
yeah. I’m Yusuf Khaled. So, Jeff, you wanna give your background first?
Yeah? So
my background stems from, you know, finance and investment banking, where I spent countless hours, day and night working on these Excel models so that you don’t have to and then made my transition into tech and product, where I co founded a clinical trials software company to assist M and A and buying and selling. So made my way into esthetics with you. SIFS, help
Yousif,
yeah, so I’m the
tech side of this company, so I’m helping build all the products that assist at assist Jeff in closing the m&a deals. My background, I’m a software engineer. I worked for a long time at a conversational AI startup spun out of MIT. I then got thrust into the world of dental, and specifically dental m&a, very niche and very different from what my, you know, my previous background was, but I was working with a dental clinic brokerage who had sold over $300 million worth of transactions, and I was helping, you know, assist with the deals and essentially build technology that helps expedite the process because, Cam, I know you, you have some experience in the in the M and A world, it’s it’s quite an antiquated, inefficient process, and there’s lots of room for technology to help the seller and the buyer come to an agreement and understand, you know, what everyone’s looking for. And so through that, through these, you know, experiences that Jeff and I both had, we kind of connected as friends to say, you know, we want to work together. And we’d been hearing a lot of buzz about the esthetic space, the rate of growth, the, you know, I think post COVID, there’s a huge interest in kind of the services offered at Med spas, which people are more investing in their health? And, yeah, we just see, we see big opportunity in the space. Yeah,
absolutely, guys and, and, you know, that’s what’s interesting is, you know, you, you’ve been going to these conferences, right? At least, I have for many years. I was like, I went to the first American Med Spa Association Conference. This was in Las Vegas before they moved to the win. I feel like it was a lifetime ago, but in reality, it was only, I think, seven years ago. And since then, we’ve gone to, you know, shoot hundreds of conferences and speak on stage and. Just network and listen. And back then the word private equity in medical esthetics didn’t even exist, like it didn’t even exist, even though esthetics have been around for your before, the last seven years. And you know what’s what’s interesting is now what you hear when you go to these conferences, there’s a lot of people talking about private equity. And I think even for the audience, like, let’s just trim this back a layer, like, what the heck is private equity?
Yeah, we wanted to demystify all these financial terms for for the audience, yeah, private equity is really what you would call institutional capital, which means you’ve got a lot of rich, wealthy people investing in a fund. So they’re accumulating all their assets into a big pool, and they’re taking capital from that pool, money from that pool, to invest in med spas, and the more med spas they buy, the idea is there’s a scalability factor. Here. You’re making your brand more efficient. Your costs lower, right? Like, for example, when you buy Botox, when you buy more units, you know, the unit costs should be less. So those are sort of the philosophies behind a private equity platform. And, you know, while we’re out, we’re on that point, there are a lot of different buyers that we at Med acquire. We’re working with, because we understand, you know, as you if you want to sell one day, you want to work, potentially, work with different types of buyers. So you’ve got the fancy private equity guys with billions of dollars to individuals like you and us, you and I. They’re coming out of college, they’re coming out of, you know, MBA. They’re what you would call a search fund. They’re searching a specific business to buy, and how they would usually finance. That is through you’ve probably heard of an SBA, a small business loan from a bank, and oftentimes, those types of acquisitions deals, they’re looking for a growth partner. You know, since they’re buying one, as opposed to private equity, they’re buying tons of, you know, multi, multi, right? So ultimately, we’re working with the big guys as well as the smaller guys, because we feel like, you know, there are a growing number of buyers across the space. You know, other buyers include franchises that you’ve probably seen grow into your neighborhood these days. You You know there are multi clinics also that are just growing and scaling so, so there’s quite a number of buyers, and we’re seeing a lot more foreign interest as well. Right before all you hear, you know, the the Dubai’s of the world, like the, there’s a lot of foreign investments into esthetics these days as well. That
could be interesting. Yeah,
awesome. No, I appreciate it. And you know, just for the audience, okay, there you guys have it, right? Private equity, big pool of capital, large institutions, there’s different layers of buyers, right? Like you said, search funds, maybe somebody that is looking to an end user, that’s looking to grow their practice and buy you out or whatever. There’s, there’s lots of avenues, right? And so I remember years ago, and it’s still taking place now, but this movement came into the dental world, and just for the audience, the what happened private equity came in, and there was a lot of consolidation that took place. And what that means is they started buying practices and and in these practice owners, you know, sold their practice at a pretty good times multiple based off of their their EBITDA. And I don’t want to be here to talk about my expertise on, on M and A and EBIT on all these financial terms. I mean, that’s, that’s what, why you guys are here. But you know, like as like for the for the listener that’s tuned in, you know, when is it the appropriate time to start thinking about this? Like, why should someone start thinking about, Hey, should I exit? Should I not exit? Should maybe I should raise capital, maybe I should go get a loan, maybe I should raise private money, institutional money, or maybe I should sell like, what does that look like when people are having those conversations as they’re as they’re preparing and thinking for their future?
Definitely, I
think a few things come to mind. First of all, I love the analogy you made with dental. I think just in entrepreneurship as a whole, you know, you. With you in growth 99 in general, a lot of what we do when we try to add value to a market is look at what’s worked in other markets, right? And you probably said, Oh, I’m going to provide these services at growth 99 and you probably had inspiration from other companies. And with the whole esthetics market, it’s a lot of people think the same way, which is, well, what happened in dental, what happened in optometry or veterinary, all these other healthcare verticals which have experienced a lot more consolidation? And can we, can we draw some insights from that? So in terms of, you know, preparation, we always say, sell when you want to, not when you have to right the worst, and I’ve, I haven’t seen this yet in the esthetic space, but it’s definitely a common occurrence in other verticals. Is a doctor who has a great setup suddenly has to retire for whatever reason. Maybe they fall ill. Maybe they, you know, really want to pull their money out. Maybe they just burn out, whatever it looks like. And that’s what becomes, what we call a fire sale, where, you know, it’s like, sell in the middle of the night and be out by morning. And because of that, you’re not going to get best price, right? And oftentimes you sell for a huge discount, because the buyers that would pay top dollar expect a lot more preparation. They expect a certain level of maturity and stability in the systems in the business. And they expect, at least in the case of private equity, that you stay on for a number of years post sale. So all of this to say, you know, preparation is huge. It’s the name of the game. If you want to maximize the value of your clinic, you should be thinking, I would say, you know, three years out from when you when you’re thinking about selling, you want to at least put it into motion. But I can, I think Jeff can speak,
yeah, a lot of echoing the preparation that Yousef is loaded to, you know, a lot of the preparation is what you should already be doing. To be frank with you, right owners listening to this podcast, know, there’s a laundry list of things that you’re pushing aside, whether it’s bookkeeping, whether it’s, you know, reducing your no shows whether it’s looking at these certain KPIs and calculating it. These are things that you should be doing. But you know, everyone’s busy, and you know your business is growing, it’s tough to do everything all at once, so when you do want to sell, you’re going to need to put in the time and work, and that’s where we could help you right, assist with doing all these different things so that you prepare for diligence. You prepare to show all these numbers and documents to your buyer, to potential buyers, and you’re not only doing that for for maximizing your valuation and for the sale process, but for your own clinic, right? You’ve discovered that, wow, all these things that I’m doing is actually helping me potentially grow my clinic as well. So oftentimes, you know, when we talk to clients, we, we, we do emphasize growth, and we do, you know, want to, we definitely want to surface all these KPI metrics that that we can get into later, yeah. So
if I’m, if I’m hearing you guys correctly, you know, and you made a great point, prepare, right. So, so if you’re going to sell, if you want to exit your practice, best piece of advice, prepare, right? Because, you know, look at it this way, if you imagine the amount of time and effort it took to open the practice, right, imagine how much like you had to build a website, you had to find the space, you had to buy equipment, you had to buy inventory, you had to hire people, fire people. You had you had to open up your social media accounts, maybe run ads. And then you move into the growth phase of, okay, cool, I’m growing now, and now, things get crazy, right? Revenue goes up. Maybe move to a new location. Your Facebook account gets shut down because you posted something that you shouldn’t have that violated Facebook policies, like a new one, that then you got to redo the website, because the first one you built out a date, and then, you know, you got to hire someone, and then all of a sudden, you teach them everything as an injector, and then they take your techniques and they go open up their own practice, and now you’re in a lawsuit. They’re like, Dude, I talk to practice owners all the time, and I see some of the best providers and practice owners go through hell, like, literally go through hell getting to where they are. And so if they’re going to say, You know what, man, it has been five years, six, 710, year, like, just bull run of this space. Just. Hammering, hammering, hammering, and they wake up one morning and they’re like, Dude, I’ve had enough. I gotta sell, like, and I gotta sell this week, right? Bad strategy, right? Because, yeah, maybe you’re burnout, maybe you’re tired, but the same time like, that’s gonna lower your position, that’s gonna lower your your value, right? So I guess, like, one of the comments I’ll make is
make sure to remember how
much time you put into the business, so you could put that effort into preparing to sell your practice. Yes, and I think
that’s that’s a great point, and it’s also relevant to understand the buyers in the space and their requirements. So, like I mentioned, a lot of private equity buyers say, We want you to stick around for a couple years post sale, right? And that’s something that when we talk to doctors, like pretty much no one knows that,
and they always what do they want to do? Let’s talk about that for a sec. Why don’t they want to come in and just say, hey, here’s your cash. You know, we got all the smart people and why they wanted to stay around. Let’s talk about that
tons, tons of factors. So one is that, you know, unlike if you’re buying a house, right, maybe the analogy is, why don’t you know when I sell my house, why don’t they want me to stick around and make sure the firm is right? It’s because a house is very easy to manipulate. It’s, you know, inanimate objects. You can go and do whatever the hell you want with it. A business is not a business is comprised of clients, relationships with staff and the landlord, and all these other, you know, more stochastic properties that are harder to to control. So when it’s
like or the provider that conducts the the procedure, right? Like they’re a huge asset, right?
Exactly. So, you know, buyers will have their own and we can get into this when we talk about the metrics, buyers have their own checklist when they do due diligence to basically predict the revenue. So another, you know, I’ll just give you a sneak peak. One, one big factor they look at is proportion of revenue by staff member. So if the owner is doing 95% of the revenue, that is a huge red flag for a buyer. They’d say, You know what, like, if we buy this, we don’t have confidence that we’re gonna get that revenue to persist over time, as soon as you leave. And so, you know, say that you your business passes their checklist, and they say, You know what? This revenue is pretty predictable. We think that if we buy it, we can maintain it. They’re still gonna say, Okay, well, let’s, have a transition period, right? Instead of you opening up or, you know, leaving and then all the revenue suddenly disappears, let’s have a transition period where we work with you and your staff, and they get to know us, and we give them all management contracts where they stay on, and we just make sure that it’s a smooth transition. And a lot of a lot of a lot of times there will be what’s called an earn out, where the buyer will pay more to the seller based on performance in that kind of purgatory period post sale. So it’s basically just meant to incentivize the owner to say, you know, not just cash out and leave, make sure that we get ROI as we want, and make sure that all these relationships, everything you’ve built here is not this fragile thing that breaks as soon as you leave, but make it a system that we can reap the benefit of as well.
Said, it that way,
I want to ask you a question there, because I see this a lot. I see this all the time, where, hey,
I and when,
when a provider gets into this space, and let’s call it, they’ve been in the space for a couple years, maybe they’ve branded themselves, right, instead of the brand, you know, XYZ medical spa, versus Sally the injector, if you will. Not to offend any Sally’s out there, but just just saying, I’m just, you know, just trying to put things in perspective, a brand is different than an individual. And so if a buyer that is a, let’s just call a sophisticated buyer like private equity, if they have these check boxes, right, this checklist, they’re like, Oh my gosh. Like, Sally, you bring in 95% of the revenue, and you have four other staff members, and they’re bringing in 5% that that’s a red flag. So talk about why that’s a red flag and and then also, like, what is that? That metric of percentage of revenue per staff member. If you could share that? I think that would be very interesting,
definitely. Yeah, so I think it’s a red flag again, like the you know, I’ll sound like a broken record, but it’s all about predictability. If the revenue is, for example, take a business like spirit, Halloween, you know, it operates. For one month of the year, during during Halloween, whenever all the costumes come in, it’s predictably, you know, seasonal. We know it’s going to happen in October. We know we’re not going to make any money in January or other months. And obviously, med spas are not as seasonal as that. But you know, predictability is, is the metric. And so when you look at a mess ball business and you say, yeah, all the revenue comes from this one person. The idea is that, again, they’re just, they’re way too core to the business. And at that point, it’s like, you know, it’s the same reason why, if you are a freelancer or a consultant, you have a service based business, your multiple so the coefficient times your, your your EBITDA that a buyer would pay for it is going to be a lot lower than if you’re a software business where you know you’re scalable, it’s not dependent on one person. So Med Spa is the exact same thing if it’s a system that’s predictable, that’s not relying on one person, then a buyer will always find it much more attractive on that point. Again, we’ll get into the metrics later on. But another factor there is membership revenue, right? So if you think about well, if revenue is not dependent on all staff, that’s more predictable. Another thing that makes it more predictable is if revenue is not dependent on specific visits every month, every month, which is why a membership program where they say they’re paying me no matter what its subscription is even better than, you know, ad hoc appointment revenue. So that’s kind of the whole, the whole mindset. And then I think, Jeff, you can speak to some of the some of the metrics and the benchmarks you’re seeing on the, you know, revenue per staff provider
landscape, yeah, to take you back off to that,
your providers are sales people as well, right? So ultimately, there is risk, revenue risk tied to your provider. And that’s why,
when when you sell,
the buyers would want, typically want you to stay on. Because again, even if you’re not a provider, obviously, if you’re a provider, you know there’s a revenue risk tied to you as a salesperson as well. And on top of that, even if you’re not a provider, you’re a core system to the business tied to all the other providers, right? So they want you stay on board, to keep the relationship with those providers. In terms of benchmarks, they typically say you want a provider to do up to 300,000 to truly maximize $300,000 around 300,000 in revenue
and and you know,
and then you can scale from there, right. And then, as far as membership, you know, membership and revenue is incredibly important because it becomes less so tied to a provider, and more so for the brand and the company. So that’s seen as less risky. So the more percentage of membership revenue you have, the better. Typically, you want to target 10 to 20% or even more, ideally, would be great. I
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That’s a that brings a good point. Do you? Do you typically see, from a sophisticated buyer standpoint, a EBITDA adjustment, if your membership revenue is at a higher percentage of the Ulta the top lane revenue coming into practice,
absolutely
you could see
a multiple on top of that. So how they could do it is they would apply a different multiple to, let’s say, 20% membership revenue and a smaller multiple for the 80% Non membership revenue. Okay,
now, do they look at churn rates on that too? I would assume,
Oh, yeah, absolutely. So they’re looking at, you know, whether it’s a free trial conversion, then what is the one month or two month retention after the conversion? Yeah, they definitely look into the data, because the data is there. It should be there, and they’re going to ask you for it, and that’s where we help you, you know, prepare the data. And
that’s another, another point, you know, talking about the analogy with dental, one huge difference that everyone is noticing in the med spot space is just a lack of standardization. Just, you know, one med spot to another will look completely different in terms of the services they provide. Such an umbrella term, right? You get, they run the gamut of what they do on a day to day basis, whereas in dental it’s much more homogeneous. You know, you have specialties that say, Yeah, we do periodontics or something else. But general dental practices have a much thinner number of services they provide. And so speaking to the membership question you asked, obviously, churn rate is huge. Another thing is, what’s the oftentimes you have membership programs for a specific service, right, where you say you get free massages or whatever the category is, right, the membership that they’re buying into. So they want to know, is that membership for something recurring, like like Botox, or is it something that is maybe a less preferable service offering
in terms of what the buyer is looking for?
Yeah, that brings up a really good point. I like that you brought up the the dental analogy again. But what’s interesting is that is okay, you have dental practices, and let’s just talk about that for a second. They’re all pretty similar, right? For example, like you said, like they may have a specialty here and there. We go to the dentist, we get our teeth cleaned and got cavities. We have root cows, whatever it is, pretty similar experience across the board, for the most part, and also, a lot of them use the same tools, like software tools, if you will. There’s a lot of there’s there’s less features, there’s less software availability in the dentistry space, and so they don’t have memberships. That’s for sure. Patient loyalty is, is very much. Well, I guess, I guess, I guess, I don’t know the answer that question, but I do know, in esthetics, patient loyalty is very, very high. I guess dentistry is high too I don’t think people change their dentist too often, but they don’t go nearly as often, right? We avoid the dentist. We love going to to the med spa. I mean, I’m a male, I go, I get services and treatments done. I mean, shoot, I get, like, I’m so glad that these practices bolted on wellness, and I’m seeing that explode. It’s one thing to look good, it’s another thing to feel good. But when you can look good and feel good like, I’m gonna see you all the time, you’re like, my freaking wellness therapeutic. Person I want to see and make me feel good and look good, like, let’s go right. The dentist doesn’t do that. And so I think a lot of times like, that’s all like, that’s the big high level reason of why private equity is like, Dude, this is attractive. Patient loyalty. You can scale. There’s memberships. But the challenge is, is the tools and the the fragmentation in the market,
right? And for the record, there is, you know, what you mentioned is the fragmentation of software tooling. I think there’s to your point. I think there is definitely more software tools in general, in med spa, as you know, I mean, you run a software company in this space, there’s just so many more like especially on the digital marketing side, I’ve seen a ton more tools and consulting firms that help med spas do that, as opposed to dental but I will say the dental practice management systems, the DPMS landscape is also very fragmented, just like the Med, spa, practice management space, is it just it seems to me that every healthcare vertical sees that same phenomena of just so many different vendors offering software, and it’s pretty sticky. You know, people really hate switching their their PMS provider. But I think the one thing I would say is on that point of the software and the metrics, the metrics have been way more standardized in dental and again, it’s a creature of the fact that dental practices all look pretty similar. But the metrics you look at any given practice, and you say, show me these five metrics, and every single business can give you that, and it looks pretty standardized, whereas in med spa, it’s just all over the place again because the services are so different.
That’s interesting. Yeah, and I, I didn’t know it’s that fragmented in the in the dental space when it comes to the PMs systems, but I definitely see the so much feature overlap. When it comes to, you know, this vertical for sure, in a ton of vendors and a tremendous amount of growth, right? So this world is completely different now versus it was, you know, you know, five to seven years ago, absolutely. So, all right, guys, if I was to, if I’m a practice owner, and, you know, I want to, I want to get prepared. Okay, cool, I’m, I know, in about three years, you know, I’ve been on this growth path, I’ve now have a mature practice, and I’m going to start preparing for for an exit in three years. Talk to me about, like, what is a very attractive practice look like for a sophisticated buyer, not not necessarily from a financial standpoint, because I think we are all like, pretty much aligned there. You know, patient loyalty, good EBITDA, steady growth.
But like, what makes one
so attractive? Beyond that, that like, like, what is like the man, I have to have this practice like, that’ll just push them over the edge, to give a ridiculous EBITDA multiplier. Like, what? What is the unicorn,
right? So, as part of positioning yourself for what you deem, what we deem as like the highest valuation, right? Is part of the preparation. So the preparation is also educating and understanding how to position yourself, and that’s what we’ll be able to help with. So the first step is really, you know, understanding all your metrics and the metrics that a unicorn would look what would have is a very high EBITDA margin. So before I get into Eva margin,
EBITDA is the best way to understand
this is like, what is your cash take home after paying out every everything from SaaS payroll to costs to, you know, to all your expenses before you actually pay taxes and debt. So your cash take home every day, speed of which, like most owners tell me, they know their cash take home daily. This is a metric that’s incredibly important, that they should know, because you want to know, okay, if your business is healthy, the cash take home should, should be able to cover, yourself if, let’s say, the next two months, you have to go dark, whether it’s COVID or something, you have enough cash to pay your staff, pay pay your burn. Essentially, it’s called monthly burn. So with that said, that’s your EBITDA, your cash take home. So what is your EBITDA margin? What is the EBITDA cash take home as a percentage of the total revenue. So what you typically see as a benchmark is 20 to 30% EBITDA margin. We’ve seen even as high as 35% if you’re focused on high margin services like injectables, high recurring revenue, membership revenue, etc. So the higher your EBITDA margin, you know. So let’s say, you know, your unicorn would have, let’s say 29% even a margin moving on, as we alluded to earlier, recurring revenue, revenue that’s deemed as lower risk. So having 20% membership revenue would be amazing, and then high retention rate and low turn so the lifetime value of your patients are very high because, you know, they’ve stuck around for a long time, right? So these are all specific metrics to the business itself. They’re going to look at that first. And you know why? Because that metric should be handy, should be available to analyze right away. And many times it’s a deal breaker for buyers, right? Think of it as real estate. There’s no point of going to see a house if it’s way you know above your price range, right? You can only afford 500,000 Why would you look at a billion dollar house in the same way people want to see your numbers first before understanding understanding other aspects of your of your company. So what are these other aspects? So there’s, for example, team, culture and staff. How long has your staff, especially the providers, been with you? Right? Have. Is there a lot of turnover? Because if there’s a lot of turnover, they’re coming in and out every six months or a year. That’s that’s deemed as higher risk. Are you, you know, do you? Do you actually have a semblance of culture? Are you doing company retreats, events, etc. Those are things that actually do matter, if you could show it that’s, that’s, those are qualitative points that you could get beyond that marketing. Marketing is, is, you know, can be represented in metrics, but also just the effort in marketing. And that’s why, working with growth 99 would show that you’re serious and you’ve tried marketing to to what scale, right? Because there’s an opportunity to maximize and and spend even more on marketing spend that could be a potential growth opportunity. Right? Retail sales is another one, right? Retail Sales are oftentimes recurring. So there’s a lot of other facets, and obviously the physical storefront itself, they’re going to want to come visit at some point. Is it renovated? Does it? You know, what is the least term on on the real estate if you don’t own it. So, yeah, and just overall corporate initiatives and planning. Do you do you have a 2024, roadmap? Can you express it in a concise and encouraging manner, right that? Okay, this is my growth plan for this year. These are the people I need to hire. So just HR and administrative tasks. Those are, those are all the things that a unicorn would have. All of these things would be on point. You said,
yeah, one other thing, just on the appointment side. So there’s a important metric called schedule capacity, which says, you know, you’re open for this many, this many hours during the day, how many of them are you actually serving clients? And that goes to show, you know, the the loyalty and the basically, how much you’ve juiced out of your your market. And it’s the same with the marketing, right? If you, if you’re spending a ton on marketing, there’s a there’s a ratio. I’m sure you understand cam from the marketing world. The lifetime value of a client is basically how much on average, you make on a certain client, and the customer acquisition cost, the CAC is how much you spend to acquire a new client. So the ratio of those two numbers basically says if I spend $2 to acquire a client, and that’s usually in the form of ads. How much is that client giving me back? So if I spend $2 and the client pays me $3 that’s a 1.5 ratio, which is not that great. That doesn’t show huge growth. So the higher that ratio I mean, that’s getting into the weeds. I don’t think most buyers look at that, at least not the preliminary stages. But I think just the Higher, higher level concept is, if you are spending a ton of money on marketing every month, and you know you’re at a certain revenue, the buyer might see that as you’re kind of capped out. It’s like, maybe your your market, your demographic, is shrinking. Maybe you’re in a small town and not that many people are moving, and people you know, your target demographic is shrinking as a portion of the whole city, and because of that, your marketing dollars are not going to be as efficient. So it’s a balance. You know metrics are, and it’s going to vary as well from buyer to buyer, but those are generally the benchmarks, yeah.
But if you have, like, if you understand these terms, understand how to collect these, these numbers, right? And by the way, most practices I see are not spending enough on marketing. I mean, they, you know, it’s if they understood patient acquisition cost, customer lifetime value. And if they, you know, put a plan in place to exit, and they understand these, these terms, they had compelling data to back them up. And they almost, but like before they go to market, if they even went through, like, a quality of earnings type of process. And maybe that’s something that you guys do, and they almost have this, this sheet on their practice with everything done. Man, doesn’t that make it just super compelling for a buyer to say, You know what, you got your shit together, and you know what you’re talking about, and, man, yeah, I’m gonna pay you, you know, additional time. Zbita, because of all the preparation, you know your numbers, you know where to go, you know where to take this thing. You got the vision. Somebody’s gonna pay a higher dollar for for that type of practice, versus somebody that’s that’s not prepared doesn’t know even what the acronyms are, that they don’t know their numbers, they they’re. Data is all over the place, makes
total sense. I mean, be organized, be structured, and know your numbers.
So cam, you’ve taken the words out of our mouth. We are actively working with our clients. We’ve built a tool that does exactly described so due diligence in an M and A deal is where the buyer says, Okay, I saw the high level numbers. Maybe I’ve already signed an LOI, which says, like, I’m interested in learning more about this business. It’s non binding. It’s not like a that doesn’t mean the sale is complete. It just means it’s preliminary interest. And then they’re going to go into due diligence, where they really get into the weeds, and say, I want to understand all these metrics at a very granular level, and we’ve built that exact tool. So we’ve built a tool which integrates with the core systems of a med spa. So we have a couple PMS integrations that we’ve built out and as well a QuickBooks integration. And through that, we’re able to glean all of those top level metrics to say, you know, what’s your schedule capacity? How much do you spend on these certain services? You know, we can get an estimate of your EBITDA. And basically, what we’ve seen so far, it’s early, in terms of, you know, the impact of this tool is, even if the the process to, you know, complete a deal, is still going to be a long process, because that’s obviously, it’s a huge transaction, and this is going to be a lot of back and forth, but to get to the initial loi stage, we have had success where buyers have been really interested to work with clients using that tool, because they say, like you said, Oh, wow, I have a perfect picture of this business, all these metrics, which usually take me weeks of back and forth, emailing with an accountant in another state. Now I can see in a matter of minutes. So it’s all very compelling, and in the end, we think it’s going to translate to more, you know, return for the sellers, who will basically have more buyers interested in them, which will drive their price up, and then they’ll get they’ll get paid, yeah,
and it makes my life easier, right? Because, you know, obviously when we onboard clients, I personally go through one on one coaching, and we have a team to calculate all these metrics and prepare it for them, with them, as you meant, as you alluded to Cam, and as you know, most owners don’t spend the time so, so there’s quite a bit of work there, and we’re automating it. We’re automating it so that we could do it at scale. And the best part is, we’re not charging for it, right? There are some brokers that we know do that do charge for First of all, listing and preparing all these documents, whether it’s the, you know, the pitch deck, right? Whether it’s the metrics and the model. So we’re doing it for free and and the reason we can do that is because of the the amazing work that you said does on the tech side, and because we’re connecting directly to the systems we’re you know, we have the raw data and buyers trust us that we’re doing these accurately and correctly, because it’s coming directly from those PMS systems. Speaking of which, Ken, I think you also connect to PMS systems to some degree as well, right?
Yeah, yeah, our company, we we absolutely do connect with most of them, we’ve taken the time to to see how important those benchmarks are in terms of patient acquisition to customer lifetime value like those are serious metrics that we look at. The only way to get that metric data is to connect ad buys or SEO capacity spend into acquiring of a lead, to taking that through to transaction to close, all the way through to how much have they spent over customer lifetime, value on the PMs side. So, yeah, if you bake in the APIs, which, which our company has done, then you can, you can provide that data which is, which is very compelling,
yeah. So,
so that’s amazing. And you know, we’re, we’re, we’re only a couple in, but, you know, we’re focusing on the business metrics, and, yeah, maybe we could collaborate on that. The point is, you know, for the audience you’re talking to, you know, whether it’s marketing and business, you’re talking to two different approaches to automate a lot of this calc, you know, metrics for you, for you to grow your business, which cam does, and for us to help you sell one day, right?
Yeah. So before we, we, you know, sign off your guys do. As we’ve been talking, I’ve been spending quite a bit of time on your site, you know, and I’ve spent some time on your site before. It looks like it’s you guys are building it out. So essentially, just give us, like, a high level understanding. I see that you have practices on here that are for sale. It’s almost looks like there’s a way, a place on your site where I can maybe sign in, look at listings and kind of evaluate, what is my what is my practice worth? Can I? Can I listen? Is that? Like, talk to us a little bit about that. It’s really cool.
Yeah, so
all of it is through this tech platform that we’re building for buyers. You’re right. There is a open marketplace with, obviously, some some numbers to help guide you. And if you want to request additional details, you can do that on our open marketplace. Today, we have 50 listings across, you know, very big med spas, multi clinic med spas, to the smaller guys, which is something that we’re very excited about, by the way. From a market perspective, I think everyone’s competing on bids for the for the bigger guys and and PE firms are starting to realize, yeah, they’re hyper competitive. EPA multiples are super high, valuations high. So we’re starting to help them drag down their bottom of their range to smaller clinics. And because of our transparent marketplace, because of the automations that we’re doing in terms of, you know, KPI metrics, they’re able to buy smaller clinics, you know, they’re more comfortable buying these smaller clinics, right? So this marketplace is open, and obviously we don’t share all details, unless you request detail, you know, request them, and we work with you on the buyer side to figure out, you know, to give you access the platform. And then you get access to the sellers data, as as we’ve been talking about. And then on the seller side, there is a free five minute business health check, we call it that also tells you, tells you your valuation. We essentially come up with the adjusted EBITDA number right based on a couple questions, and then we apply a multiple that’s adjusted as well based on your responses for another set of questions, and then we essentially estimate your valuation that potentially you could sell at this point. If you want to entertain that and shop around, please list directly into our platform where then you’ll have access to building these metrics, as I alluded to, connecting to the PMs, connecting to QuickBooks, so that we can come up with these KPIs for you, and then you could share that with with our buyers, right? So it’s all very much software driven and automated, and obviously there’s one on one coaching that me and the other deal managers will jump on to explain how to use a software to explain the education, the preparation that’s required.
You said anything else?
No, I think you did a good job. Sumnerizing it.
I think one other thing I’ll mention is, as Jeff said, you know, the market right now is the buyer’s most interested in larger med spas. But again, you know, talking about analogies with dental. If you go talk to a dentist and say, you know, do you know anyone who sold their clinic? Are you thinking about selling your clinic? Their first thought is not private equity. Their first thought is other dentists like that. It’s such a built out transaction in the world of dental, where, when I sell my clinic, I know that there’s going to be maybe an associate or a new grad, or a multi clinic owner who’s a fellow dentist who’s going to purchase it. And that is just yet to transpire in the med spa space, but we think it’s coming, where you know, as the industry matures. You have more and more successful multi location owners. You have more and more doctors who want to get into the space. They will begin to buy the smaller clinics instead of only having, you know, one dominant buyer type, which is the private equity firms. That
brings up a good point. I really appreciate what you guys are doing in terms of of helping the smaller practice. I like, I like the idea of having a marketplace, like, where I could go, like, I’d go to Zillow and shop for a house, right? Or I can go like, what’s for rent, what’s for sale. I can shoot I can even list my property for sale or for rent on Zillow. I like what you guys are doing here, like it’s now I don’t have to talk to a real estate agent if I want to look at home so or inquire show them. Maybe I need to have one there when I show a property. But shoot, I have rental properties myself. I use their their rental portal, and I just list my properties there and and leads come in, and we work it that way. So that’s that’s an interesting way to look at it. Obviously, there’s different nuances on what you guys are doing, but pretty similar type of, type of platform, at least from what I’ve seen on the site. And so can, so it’s, it’s me acquire.com right? That’s anybody can go there, request information,
do what they want to do, yep. M, E, D, acquire a, c, Q, U, I, R, e.com, anyone just can go on for the free business health check and valuation check. If you’re curious, it’s a, you know, it’s fun to do to see if you’re on the right track. And yeah, we’re happy to help anyone. And as I mentioned, free consultation and free listings, we don’t charge any anything, compared to, you know, Zillow, like our competitor is by, they charge for listings, and also they don’t speed your language, right? Also our, you know, we’re specifically only esthetics, practices, awesome,
awesome. Well, thank you guys so much for your time. Thank you for giving so much value to the space. Will you be at any of the conferences coming up this year in 2024
Yeah, we’re, you know, am spot definitely. We’re looking at a couple couple others, and we’ll definitely, you know, knock on your door when we’re in Florida. I think you’re based in Florida. All right,
yeah, yeah, sorry. HQ, Florida, Utah, but we’ll be at a DM spot conference for sure. I love that show. They do a phenomenal job. And, you know, when you guys are there, definitely, you know, connect. And so there you have it guys, two guys that have a tremendous background when it comes to finance, when it comes to business, when it comes to software, when it comes to understanding, like, what it takes to position yourself, to sell the challenges you go through the metrics you need to have. And so they do have this cool little get business health check thing on the site, which I think is really cool and, and, like, like Jeff said, really fun, right? So I would encourage anybody to go do it. You know, it doesn’t matter what size you are, why not? You know, it’s worth a worth a peek. So thank you, gentlemen, for being on for the audience. If you guys found this content valuable, please share it. Let us know what you guys think. Comment and have a wonderful day. Thank you so much. Until next time. Happy injecting. Thank you, Kim. Great job. Thanks guys. You