MEDI CAL SPAS
Transaction
MEDICAL PRACTICES ARE VALUED AT 2X ADJUSTED NET INCOME
Buyer Says. . . Seller Says. . . Monte Zwang is a principal of Wellness Capital Management, providing cash flow and financial strategies to businesses in the wellness industry. Monte has been a consultant for more than 25 years, teaching entrepreneurs and company leaders in health care, real estate, food and beverage, day spa, resorts and hotels, and retail industries the strategies of cash flow management. For more information visit: www. WellnessCapital.com
Different Views of the Same Transaction. By MONTE ZWANG
SELLER SAYS: "It's time to sell. I've got an established medical spa location and great clientele. I want to move on with my life." BUYER SAYS: "I want to buy a medical spa business. Can you find me a turnkey situation in great location with limited local competition and a motivated seller?" SELLER SAYS: "Here are my financial statements, leases and contracts. I've been waiting for an update of my financials since June from my CPA". BUYER SAYS: "I've never been in the industry, but because of my vast corporate experience, I know that by bringing my marketing and accounting experience, I can increase the sales, profitability, and value of any business I buy."
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BROKER SAYS: "Most medical practices are valued at 2x Adjusted Net Income and 65% of Gross Revenue. Most medspa businesses are valued at 4x Adjusted Net Income and 45% of Gross Revenue." SELLLER SAYS: "My financials need to be tweaked to show a net profit. I put a lot of personal expenses through the business and not all of the sales are showing on the financials (wink-wink). I want the asking price of the business to be based on what I claim the collections and business expenses to be, not what is shown on the financial statements and tax returns." BUYER SAYS: "How did you come up with the value? I'd like a business that has growing income, and is profitable. I don't want to pay anything for the business value, only asset value."
www.medicalspasreview.com
MEDI CAL SPAS
MEDICAL SPAS ARE VALUED AT 4X ADJUSTED NET INCOME SELLER SAYS: "A buyer can make a lot more money than I did if they raise prices, change the therapist's compensation program, bring in a medspa partner, and negotiate a new lease." BROKER SAYS (TO SELLER): "You are selling what you have today; revenue, cash flow, assets, and liabilities.You are not selling blue sky or business based on changes the buyer could make. Be aware of the importance of the Curb Appeal of your business. The financial, operational, and physical presentation of the business should look the way you would want it to see it if you were going to buy it yourself."
(3) a lease that is in place and probably lower than today's market rate (4) training and transition by the seller and the benefit of the seller's experience, (5) established business procedures and systems (6) established trade name and location that clientele identifies with this type of business (7) existing clientele that can be marketed to and built upon and (8) the ability to walk in and operate a going business."
BROKER SAYS (TO BUYER): "You are buying the business as it exists today; assets, liabilities, and cash flow. When you negotiate a price, there should be adequate cash flow to service the debt. The lease on the premises should be of adequate length to service the debt."
Some other thoughts that help the deal get done. A successful transaction should remain completely confidential until it closes. An asking price is a starting point. The actual purchase price is finalized as negotiations progress. When one side tries to "win" or dominate the transaction, it's unlikely that the deal will be completed. When buyer and seller respect each other's perspective and enter negotiations with an attitude of cooperation, it is more than likely that a transaction will close to everyone's benefit.
SELLER SAYS: "Why should I pay for business value? I can build a facility from scratch in that new retail development downtown and save some money."
Wellness Capital Management brokers the sale of medical practices and businesses in the health, wellness, fitness, and spa industries.
BROKER SAYS (TO BUYER): "You are purchasing a known commodity and your investment carries less risk. You are banking on your ability to maintain and grow from and established base of business.You are not starting from ground zero. Some of the benefits of buying an existing business are (1) established sales, profit, and cash flow (2) working equipment that is installed, functioning, and licensed
For more information, please visit our website. If you are a buyer or seller, we're happy to offer you a free initial consultation.
www.medicalspasreview.com
We can be reached via e-mail (Monte@WellnessCapital.com) or telephone 888.727.5489. We look forward to hearing from you.
MEDI CAL SPAS •
Transaction