Med Spa Industry Trends and Predictions for 2023

Med spa owners, we’ve got good news for you—you’re in the right place at the right time. The aesthetics industry is thriving. And investors are primed for med spa M&A. We’re sharing Skytale’s top trends and predictions for 2023 below, and you can check out our latest podcast on the med spa industry to learn even more!

What’s Happening in the Med Spa Market in 2023?

When asked about the state of the aesthetic industry, Skytale’s Tedd Van Gorden mentioned a frothy market and high investor demand. Both of these variables are conducive for med spa M&A.

For one, the industry is expanding while other healthcare industries flatline or decline. Thanks to consumer demand, the med spa space is expected to grow by $10 billion by 2027, with an average of 11% growth per year. And injections, which are just one facet of the med spa service mix, are expected to grow even more—12% over the next 5 years.

“That’s an incredible amount of growth, especially in comparison to some of these more established healthcare industries that a lot of investors are already saturated with,” says Tedd.

Why Are Medical Aesthetics Practices So Attractive to Investors?

With such impressive top line growth, it might seem obvious why investors are hungry for med spa M&A. But there are several other underlying positive factors of the med spa space:

• Private pay. Med spas generally don’t take insurance, so customers pay with cash or credit card. This is very rare in healthcare and saves med spas the hassle of dealing with insurance companies. Plus, it makes for ample cash flow.
• Recurring services. Once a customer receives a service, they usually return. A positive customer experience with injections, facials, and the like can make a loyal customer for years to come.
• Highly fractured and unconsolidated industry. Because many med spas operate independently, there’s a big opportunity for investors to partner with existing owners and build a platform.
• Increasing cultural acceptance. The popularity of wellness, healthy aging, and men’s participation in aesthetics has made that regular visit to the local med spa much more commonplace.
• Aesthetics are exciting! Unlike visiting a normal healthcare practice, patients often look forward to their visit to a med spa. And providers are excited to work there, too. This energy makes the industry feel more positive to invest in.

What Are Buyers Looking for in a Medical Aesthetics Practice?

At Skytale, we meet many investors who inquire about med spas available for M&A. And while every investor has their own idea of due diligence, here are some common themes among what investors are looking for:

• Cash flow. It’s a binary test for a company. As Ben Hernandez shared about the DNA of a beautiful business, “A simple but trustworthy evaluation of a med spa’s value comes from calculating its EBITDA… the business’s free cash flow.” This figure is all about what the business is producing and makes you more competitive.
• Service mix. Each service has a different profitability. It helps indicate what customer types and seasonality the business faces. Are the services priced at a premium, affordable, or membership level? Here’s a hint: If you can attract customers with premium pricing, that’s gold.
• Number of locations. While not a necessity for M&A, having more locations does indicate more opportunity for an investor to scale. It also shows that you have a secret sauce. Investors may feel that buying up multiple locations is lower risk with higher return.
• Utilization. This means that your business is getting the most out of the resources you have—like employee efficiency, client bookings, and use of existing retail footprint.
• Owner story. “Investors want to know about you as the owner,” Tedd says. “Why did you start this business? What do you think about your business? What is your day-to-day impact on the business? What are your roles and responsibilities?” Buyers want to see if their interests align with yours. They’re also gauging if you’re going to stick around for another decade or transition off after a few years or months.

How Do I Prepare to Sell My Med Spa in 2023?

If you’re worried that preparing to sell your med spa will require a long to-do list, hang on—most great med spas are actually already doing the right things. The following suggestions are smart moves for running a great business, regardless of whether you want to sell now, in 10 years, or never. Here are a few steps to consider taking to get the most value for your med spa.

1. Have a clean balance sheet. Show cash flow and be smart with how you finance growth and approach debt. Most buyers will want you to be debt free at closing.
2. Invest in data and good processes around data. Marketing data (page views, clicks), financial data (accounting), and operational data (number of clients per day and per provider) is key. “By having the right systems and processes in place to accurately capture this data, business owners will be able to sift through the noise and analyze and display it in an understandable format to see the complete picture of their business,” Ted explains.
3. Surround yourself with a well-functioning team. From newbie hires to seasoned veterans, all team members should be growing in the same direction. It also helps the investor not be solely dependent on you, the owner.
4. Find trusted advisors. Trusted advisors could include a good lawyer, CPA, consultant, and M&A advisor like Skytale. They’re outside people that you have faith in to give good advice and perspectives.
5. Finally, know who you are and what makes your business special. Bring this vision to life and communicate it to staff and buyers. Investors look at hundreds of deals per year, but you only sell your business once. So help your business stand out.

Keep in mind that these aren’t things to only do right before you go to market. These strategies will help you run your business for the next 40 years if you start now.

Join Skytale at the Medical Spa Mergers and Acquisitions Summit

Are you ready to take your learning to the next level? Whether you’re a practice owner planning to scale or exit, or a potential investor looking to engage in one of the fastest growing industries in the U.S, the Medical Spa Mergers and Acquisitions Summit will help you take the next step on your med spa journey.

On February 2, 2023, Skytale team members and other panel guests will discuss topics like the state of the industry, seller and buyer viewpoints, five phases of a deal, wealth management, maximizing the value of your practice, and life cycle of a med spa. You won’t want to miss it! Grab your spot today at medicalspashow.com/skytale.