Is the Med Spa Market Consolidating?
There’s constant chatter in the med spa market about the trend toward consolidation. Investors are knocking down doors looking to buy. Small business owners are selling their practice for more than they ever dreamed of. And despite traditional fears—like employees having to brush up their resumes once the practice is sold—there’s actually room for career opportunities and more growth.
Skytale Partner, Ben Hernandez, spoke with Nicole Chiaramonte, CEO, and Drew Fine, CCO, of Advanced MedAesthetic Partners about consolidation in the med spa market. Read their insights below or listen to the full interview on the Skytale Insights podcast.
Updates and Trends in the Med Spa Market
Here’s a quick stat: Other industries might be consolidated around 50%, where many of the practices are part of larger conglomerates. In the med spa space, it’s only 5% or 6% consolidated.
There are still many standalone med spa practices that manage all their operations under one roof. But the natural trend is toward more consolidation. That means more M&A, more investment talks, and more opportunities for small business owners.
The aesthetics market is growing by 10% to 15% a year, which is very aggressive. Why so much growth? In health and wellness industries, it’s more common to see expansion as opposed to cutting costs (unlike airlines). Med spa services are cash pay and patients want to be there (unlike dental offices or car repair shops). And providers want to be there, too—they’re often leaving environments like the ICU, ER, or OR and looking for a less demanding line of work. Read more about what’s happening in the med spa industry in 2023 and beyond.
Nicole and Drew share this simple formula for how to grow as a med spa:
- Find a great market.
- Differentiate yourself in a great market.
Should You Sell Your Med Spa Practice?
The short answer to the question above: it depends. Because of the recent heavy consolidation, the idea is new for many potential sellers. Nicole suggests first identifying what you want out of your practice and where you want to go.
What are your pain points? Are you tired of running the business side, like hiring, training, and marketing? Want better work-life balance? Dreaming of laying on a beach in 10 years at your newly-purchased second home?
Pain points often lead to consolidation. When investors step in to help manage the nitty-gritty business side of things, it can create more room for you to do exactly what you love. Explain your goals clearly to your financial advisor, consultant, investor, and everyone else involved in the process. Just about any deal can be structured to align with your personal and professional goals.
Preparing to Sell Your Aesthetics Business
Drew predicts that in 15 years, many med spa practices will be part of larger entities. It might lead to 40% to 60% consolidation. Some of these entities may have different focuses, like franchises or regional centers. From data to technology, providers will have to be on their A game in professionalism. Read more about what buyers are looking for in a med spa practice.
At the end of the day, the way to succeed is by building a great practice. The rest will take care of itself.
“You should be running your business as if you’re ready to go to market,” says Nicole. “It means that everything from accounting, to how you’re running the business on a day-to-day basis, your policies, your SOPs, are all in order.”
She also reminds sellers to invest in accounting and legal ahead of time. It’s less money to do it right the first time than it is to clean it up.
Finding the Right Fit When Selling Your Business
There’s a lot of fear that comes with integrating another organization into your practice—whether it’s a new investor or a financial partner like Skytale. In talking about the relationship with an investor, Nicole and Drew prefer to use the word “partner” instead of buyer and seller. Investors partner with a practice because it’s well-run and has great potential. Investors actually want the practice to succeed. And med spa owners can take heart in understanding how their benefits and overall operations could actually improve.
An investor should want to keep the existing team in office and build their careers. Employees will have more potential to move up to being a trainer or regional manager. There’s a tremendous amount of growth available from these partnerships.
But at the end of the day, communication is key. Selling your business is an emotional process. In the two to three weeks before the transaction closes, you can begin discussing the integration process.
“Empathy, understanding, and appreciation for what people do seems to go quite a long way,” says Drew. “It’s something that we’ve been emphasizing over and over again.”
Stay Relevant in the Med Spa Market By Running an Excellent Practice
Even though technology is changing rapidly, the med spa business is still deeply personal. Clients come to the appointment and meet with a provider who’s a foot away from their face, handling delicate parts of their body. Patients have to have trust in their med spa. As long as your practice can offer a safe, enjoyable experience, people will pay well for it.