Aesthetic Practice Valuation in 2026: What Buyers Are Actually Paying and What's Quietly Driving Multiples Down

Aesthetic Practice Valuation in 2026: What Buyers Are Actually Paying and What's Quietly Driving Multiples Down

DATE

8th September 2026

TIME

8:00 PM - 9:00 PM

CATEGORY

Finance & Practice Valuation

Transcript

Lightly edited auto-generated transcript. Speaker turns, timestamps and wording are kept as recorded; only names, brand names and obvious transcription errors were corrected.

Don Adeesha (Host) 00:06

All right.

Good evening, everyone. Welcome to this expert panel. I'm Don Adeesha. for this… Tonight, we are… I'm very…

No one starts thinking about an eventual exit. in 2026, and it is causing buyers to discount that value. We're going to get beyond the headline multiple and into things that buyers really are writing. The earnings, the people, the systems, the owner dependence, and the due diligence that can make or break a deal. A couple of quick housekeeping notes before we begin. We are recording tonight. You'll receive a replay link afterward in your inbox.

Don't let it make you passive. Real value's happening right here, right now, live. Go ahead and use the Q&A button for questions you want us to answer, or else you can use the chat for conversation with the community. I have mine on both the feeds and will do my best to weave in your thoughts and concerns as we go along.

Right.

And, before we get into the discussion, I want to take a moment to thank tonight's sponsor, and our business.

Aesthetic Growth Partner, Ekwa Marketing.

Ekwa Marketing is founded by the very same co-founder of Business of Aesthetics, Naren Arulrajah. Now, Ekwa works with Aesthetic practices on three pieces you see right here on your screen. First up, helping the right patients find you through search visibility, then building conversion-focused websites that turn attention into conversion.

For strengthening that content and social… before a patient ever calls. Now, they've been serving, Canada, and the UK for over 15 years. We'll talk more about it later in the program.

Right, then let's head and… Here, and then into the work.

So, our guest tonight is Andrew Miller, senior… Financial Partners. Andrew works with… To the decision.

Okay, I'm gonna go ahead and stop sharing my slides, and then we will get into the discussion.

Andrew, how are aesthetic practices being valued in today's market, and what has changed in the way that buyers determine what a practice is actually worth?

Andrew Miller 03:05

That's a good question, Don. Loaded question, so we could maybe even spend the full, full time on this question. So, first off, thank you for having me, but…

You know, there's two parts to that question. The way practices are valued is still kind of looking at it, in the traditional way, when it's, you know, you're looking at that adjusted EBITDA calculation.

And for those that don't, you know, maybe don't know, adjusted EBITDA is, you know, your revenue minus your expenses, adding back interest, depreciation, amortization, taxes, so on and so forth. And then some other, additional add-backs that may or may not be, reoccurring on a yearly basis, and that maybe a buyer finds that can be a quote-unquote add-back, and that's a whole other discussion as well. So, you know, the way practices are valued today, it's still based off of that adjusted EBITDA times The, multiple, that is somewhat assigned, and that multiple is going to be based off of, again, location… number of locations, location size, type of practice, whether it's, you know, surgical or non-surgical, or, you know, med spa, derm.

So on and so forth. So that's pretty much the way that it's valued. So again, you take your revenue, you take your expenses, you come up with an adjusted EBITDA number, and, you know, for ease of the example, maybe that number's, you know, $100,000, and they assign a 5X… multiple to it, that means that that practice is, you know, hypothetically worth about $500,000 at that point. So, that's the… the first… the first way to… to go about it. And as far as what has changed, I mean, as you know, Don, like, the, Aesthetic industry is kind of ever… changing, and in doing this for as many years as I have, you know, you've kind of seen just the trends and kind of what's sticking around.

So really what's changed, I mean, I think the example that comes to mind for me, mostly, is, you know, on the GLP-1 side. A lot of our, you know, clients that we worked with were getting, you know, full credit for that.

For the sales in GLP-1s and weight loss, but, you know, ever since some of the regulations became a little bit more strict, in the last 12 to 18 months, we've had some clients that go to market and, you know, buyers, and practice evaluators are basically discounting the, GLP-1 revenue, you know, upwards of, you know, 60-70%. So, what that means if you sold 100,000 in GLP-1s for that year, you're really only getting credit for 30,000 to $40,000 of those sales. So…

That's been, you know, kind of one of the… one of the ever-changing parts of the landscape is, you know, as, you know, different types of services and different types of service mixes come, you know, in and out of the industry, and the timing of the practice Valuation, sometimes you can get full credit for it, sometimes you may not.

So… but at the end of the day, you know, that's kind of why we try to tell our clients, diversified service mix, diversified between the providers, and not putting… not putting all of our eggs in one basket, because at that point, you know, then we're…

Have a risk at that point, and if something goes, you know, awry with, regulations, a provider leaves that's doing 80% of the work, that could really hinder a lot of the way that the practice is valued.

Don Adeesha (Host) 06:39

That's really interesting, Andrew, because we all know GLP-1s and that whole service mix is, you know, what's trending right now. Can you elaborate a little bit more on why we are not going to get the credit that we, you know, deserve? I mean.

$100 is $100, isn't it? Or…

Andrew Miller 07:03

Sure, and I think that… so, you know, thinking of it from a transaction point of view, where, you know, the buyer's obviously trying to buy it for the cheapest price possible, and the seller's trying to sell it for the best price possible. So…

The reason why, you know, we're seeing some of that where you don't get full credit is because it's so readily available, you know, everywhere now. I think during the Super Bowl back in February, there was maybe 5 or 6 different commercials, and, you know, people were advertising that you can get GLP-1s for, I think it was as low as $149 or $99, whatever it may be.

So, while a lot of the practices that we worked with were really, you know, they kind of hit a home run with it, back before these regulations, you know, were a little bit loose, and at that point, you know, again, it was… it somewhat spiked the revenue, I don't want to say unfairly.

But in a way that's maybe not quite as repeatable, you know, on a year-over-year basis.

So that's why we've seen some of, you know, some of our clients that have gone through the process that, you know, they're receiving a discount on, on services like… like some of these GLP ones, because they are just so widely and readily available, kind of across the nation.

I think Don may be having some internet issues.

Don Adeesha (Host) 08:33

Okay. Sorry, there's a little bit of an issue with my network, since there seems to be a bit of a storm around the, block here, apologies for that. So, Andrew, my next question is, how does an owner dependence affect valuation when the practice relies heavily on the founder for revenue, patient relations, or even day-to-day decisions? And can you break that down for us individually, if you don't mind?

Andrew Miller 09:01

100%, and yeah, so… that's… one of the things that, you know, specifically with me, you know, I work with I think it's maybe 27 to 28 clients, and you know, whenever clients are looking to kind of take that next step in succession plan. usually beyond the profit and loss and beyond the balance sheet, you know, beyond the financials, you know, the first thing that I like to look at is how much is the revenue… how much of the revenue is attributed to the owner.

And if it's over 50, 60, 70% or more, not in a great spot to really, kind of take that next step, because again, most of the time when the owner's looking to kind of sell the practice, they are looking to retire, or kind of move on to that next venture.

And they're usually going to have to kind of stick around for a little bit until the buyer ends up finding that replacement.

So usually, depending on whatever that timeline is for a potential transaction, whether, you know, it's 2 years, 5 years, 10 years beyond that, we're trying to, you know, really, again, diversify the revenue, not have any sort of key man risk to where that owner is, You know, holding so much weight in that revenue, because again, if, you know, that person decides that they don't want to do this anymore, or that person decides they want to sell, it really impacts the value, on a multiple standpoint, because to find and replace that revenue at that rate, at that efficiency, is going to be really, really tough.

So, you know, we always… I always like to tell my clients, whenever they're at least 2 to 3 years out, we have to kind of start talking about it, so that way we can, figure out where that revenue is, going and how we can diversify it. And one of the examples that I gave, it's a client of mine, and it was very similar example, and, you know, that the owner was responsible for, I believe the number was 65% of the revenue, and, you know, we really focused on, you know, getting her providers up and, you know, to where everyone was at least contributing no more than 20%. It was about a… you know, a 30 to 36 month kind of transition at that point, and it was a lot of trust on her part to trust the providers to get where they wanted to get to. And, you know, ironically enough, she cut her production from 65% to, I think the number now is about 18%. And, at that point.

The revenue grew because she kind of empowered everyone else to, to kind of take ownership of their own individual practice within the practice. Practice size doubled, and they are pretty much on the market right now, you know, and they're talking to a few different potential buyers, and the reason why they're getting, you know, valued at that 7 to 9 multiple is because of the fact that the owner's doing less than 20% of that revenue. So there's…

Not much of a keyman risk there.

Don Adeesha (Host) 11:48

How did she empower her teammates to really contribute towards, That marketing, per se.

Andrew Miller 11:57

Yeah, I think a lot of it was the fact, you know, it was… you know, I don't want to toot our own horn, but, you know, we did… put a lot of goals in place for the providers, you know, gave them provider scorecards, and a lot of it, too, was trusting her instinct to train, develop, grow, you know, send them, you know, to… you know, trainings to, you know, courses, so that way they're a little more confident, and they're more confident in the treatment room with their patients. And at the same time, you know, the owner has…

Be very diligent and not take on any patients, because most of the time, whenever the owner opens up the practice, they want to see the owner, they want to see the main surgeon, whoever it may be.

So, you know, we basically had to draw a line in the sand and say, look, you can produce at the same level, or a little bit less, but you cannot take on new patients. You're going to be doing what you're going to be doing, and anyone new that comes in, we're going to have to find that best fit for them, and trust that they're going to be able to.

Perform the services at that same level, and by doing that, she was able to cut down about a day or two of, you know, working, you know. in the practice, and then working on the practice, and she dedicated a lot of time to train, be in the room with them, understand, like, how they work with people and patients. And again, that's, you know, we had providers that were doing, you know. well below 6 figures, and now we have about 2 or 3 that are doing above 6 figures a month. So, you know, I always joke that she has the secret sauce, but it, you know, in one word, she would tell me it was empowerment and leadership to, you know, let them kind of spread their wings and grow.

Don Adeesha (Host) 13:33

And why… why were you having this discussion? Was she considering a selling of her practice, so she needed to reduce the dependency?

Andrew Miller 13:42

She was, yeah, so it was one of those where, she joined Maven back in, 2020, or her and her partners joined Maven back in 2022, and, you know, during one of our first, you know, calls, we have monthly calls with our clients. you know, that was the 5-10 year outlook, was to end up selling the practice. And, you know, next step planning, retirement with spouses, you know, everything like that. So, again, looking at the financial part, financials were healthy, but The, the biggest gap.

To really try to grow the practice was, you know, she was pretty much maxed out. So in order to, in order to position herself the best way. it was to, you know, grow, empower the team, and really, you know, not so much cut down on her production, but grow everyone else's production around her, so by nature, her percentage just came down. She did, you know, slowly take some time off, like, I say take some time off, but was able to cut some days down and just work a little bit more efficiently.

But the whole, you know, the goal back, you know, almost 4 years ago to the day was, you know, I would like to, you know, her and the partners decided they want to sell the practice in the next 5 to 10 years, and we're…

I'd say pretty close to doing that at this point. You know, it's… next step is, you know, figuring out who the best fit is, and then…

LOIs are signed, and due diligence, and, you know, the next step beyond that.

Don Adeesha (Host) 15:04

So it really came down to being intentional about their own goals of selling the practice. 100%. Now, Andrew.

What are some of the other ways that buyers are currently willing to pay a premium for, and what factors can reduce a practice's valuation?

Andrew Miller 15:24

So I do think, you know.

Practice is… what are they… two questions, right? What are they willing to pay a premium for? Recurring revenue is one of the ones they're looking at. You know, memberships, I know, are really big in the industry. You know, and by nature, recurring revenue is great, but I don't want to get… I don't want to turn this into, like, a really big accounting lesson, but…

At the same time, with the recurring revenue with memberships, depending on how the membership is set up, if we have a lot of deferred revenue, that's sitting unrealized on the balance sheet, that actually could hurt at the same time in the point of a sale.

So, you know, a lot of buyers are looking for a really strong membership, but at the same time, that strong membership is not just the monthly amount that's being paid, but also how quickly are our patients Using up the benefits of the membership, because the last thing that they want is to go in there and purchase a practice that maybe has, you know, $500,000 of unused revenue that will eventually have to be, quote-unquote, paid back.

By the practice at some point. So, recurring revenues, you know, willing to pay a premium for it, but at the same time, if we don't monitor it, it also could be, hurtful when it comes to the point of sale at that point. The next thing is, you know, diversified Revenue mix, service mix is also a big one. You know, we try to not have…

You know, whether it's an injectable heavy practice, or a laser-heavy practice, or a surgery-heavy practice, you know, we try to really, you know, be intentional about diversifying the revenue so that not… no one revenue stream is carrying 70-80% of the practice's revenue, because of the fact that we understand that, you know, cost of goods, there's different costs that come with it. Some providers maybe need to be paid a little bit more. So I think if we have, you know, a well… established kind of diversified service mix between injectables, between laser, between wellness, even, you know, memberships, GLP-1s, whatever that may be, that shows the signs of, like, a healthy practice.

Practice that can kind of withstand the trends a little bit more. So I do think that showing, hey, you know, we have a healthy mix here, this is, this is something that maybe, a buyer's looking to, acquire. So, and then as far as what… cuts value? That was part of your second question, correct? Or two-part question, I guess?

Don Adeesha (Host) 17:46

That's correct.

Andrew Miller 17:47

So again, that recurring revenue, that's the, you know, the bad part of that is the unused revenue from that membership and from that recurring revenue. Again, that could, I don't want to say be a red flag, but definitely will come up during the due diligence process at that point.

The other thing is discount dependence. You know, we see a lot of…

Buyers that don't love when practices discount. We always, you know, I don't want to say always advise against it, but we try to steer clients away from discounting, because we try to make sure that our clients are providing, like, the best, you know, level of service, the highest quality treatments.

So on and so forth, and when we start to discount, we start to train the patient a little bit more, that it's just going to be expected. So…

I do think that, you know, really getting away from the discounts, is also gonna be a…

You know, a way to not… have the buyer, you know, cut value in that sense, because again, when you're, you know, doing a lot of discounts, the revenue could look great, but the profitability is likely not going to follow, because of that fact. And then, you know, likely the other thing is, you know, having a really diversified, you know. or I guess displaying the fact that providers can really have a well, you know, organized, like, treatment plan. You know, we see a lot of practices that kind of come in, and it's one and done, like, I'm gonna get my Botox, and then they may not see their patient for 6 months, or 12 months, or whatever it may be.

So if we can kind of get away from that single, you know, treatment concentration. and show, you know, the retention within our practice with our patients, on top of the fact, you know, that they're not just coming in for Botox, but they're coming in for laser, they're coming in for a facial, they're maybe part of the wellness, you know, that kind of shows that they're bought into the practice, and not just bought into a type of service that we may be offering.

Don Adeesha (Host) 19:36

type of services. If you don't recommend each service to bring in about 70% to 80% of revenue, what would you recommend, like, for that mix to be on a healthy, ratio?

Andrew Miller 19:48

It's… I mean, it's really gonna depend on what the practice is actually, you know, truly offering, you know, and it's one of those where, I hate to say it depends, but it's… it depends, you know? We have practices that You know, they're surgical, they're derm, they're med school, they're wellness all together. And, you know, obviously by nature, with the way surgery works, those are very, expensive. appointments, procedures, so that, in nature, is going to carry probably at least 50% of the revenue, if it's still pretty well diversified. But if we're looking at it just from a, you know, an Aesthetic practice, you know, without taking into account germ and surgery, you know. trying to at least get into maybe 30% to 40% range, and then, you know, we typically like to see retail in that 10% to 15% mark. Maybe the membership's kind of also in that 10 to 10 to 15-ish percent, and then everything else kind of splitting the 60%, whether, again, it is on, you know, lasers and filler and talks, and, you know, aesthetic procedures and so on. So…

It's always hard because every practice is kind of built different, but that's typically the way that we, like to kind of have it structured, where, you know, on our main service lines, in that 30-ish percent mark, you know, 20ish to 30ish percent, and then retail and memberships, if they have it, kind of carrying out the rest.

Don Adeesha (Host) 21:13

Andrew, do you have any tips for us with regards to, unused membership perks or services? How can we, kind of use those?

Andrew Miller 21:23

As far as… as far as how to… as far as how to redeem… or… redeem them? Is that kind of what we're looking at?

Don Adeesha (Host) 21:32

So you have a membership plan, and they're not being utilized.

So, how can we encourage our patients to utilize them a little bit more? Because you said when there's Underused, revenue in that, locked in.

That's kind of not a great signal to a potential buyer.

Andrew Miller 21:53

Correct, yeah, so that's one where, you know, when we're working with clients that are heavy on the membership, you know, when we're meeting with them every month, again, beyond looking at the financials and everything else, it's one of the first things that we look at is, hey, you know, is our deferred revenue going up or down? And at that point, you know, we're pretty much Asking the providers, the front desk, you know, anyone involved with the practice, like, hey, you know, we have to call, call these patients to come in. In some states, you know, the deferred revenue ends up going away, and we can kind of just count it as revenue, no harm, no foul. In other states, it stays on the books forever, so it kind of depends on where you're at.

But usually, you know, we like to start off towards, like, hey, you know, if you have a relationship with these patients, you know, you should be calling them every at least two to three months and saying, hey, you know what, you have $400 of unused credit, come in, you know, we have this, you know, really cool new device, or we have this, you know, really cool treatment package, so, you know, come in and try that. So, or it's, hey, you know what, it's, you know, we're getting close to the holidays, let's, you know, let's come in and use, some of that for, you know, holiday parties, and so on and so forth. So, really, it's…

You know, understanding that each provider should have a list of patients that they see, and then the ones that maybe aren't assigned a patient, you know, leaving that to the support staff, the front desk, to make those follow-up phone calls. So that way, again, we can kind of monitor that and keep that at bay.

Don Adeesha (Host) 23:16

service, or rather, I should say, different revenue? Because, you know…

It's not as encouraging, like, if you have a full subscription, you're already bought in, right? So, calling them back again to Have your patients come in and make use of that credit that they have remaining, versus allowing it to just kind of expire and then just, you know, The profit for the practice, because it wasn't, expended on.

Andrew Miller 23:56

Correct, and I got most of that question there, Don. I think, again, the Wi-Fi was a little bit choppy. I'm not 100% sure what you asked, but the little bit that I got, I think it's, something about the profitability with the, With the unused revenue.

Don Adeesha (Host) 24:11

Yeah, what would encourage, what would incentivize a practice owner to encourage the staff members to get on the phone, call up these people who have already subscribed, reminding them, hey, upcoming holidays are coming in, why don't you make use of your credits with us?

Andrew Miller 24:30

What would motivate the practice owner?

Is that…

Don Adeesha (Host) 24:33

Yeah.

Andrew Miller 24:33

Yeah. I mean, the fact that we don't want to… I mean, if the practice owner is looking to potentially sell their practice, you know, that's…

Understanding the fact that this deferred revenue needs to come off the books. And at the same time, too, you know.

Depending on how I don't even want to get into the compensation part of it, but, you know, understanding the fact that, you know, maybe people are getting paid on the work that's getting done. So, if there's work that's getting done, it's in the provider's best interest to call people, so that way they can come in And, you know, get compensated for potentially outstanding treatments that are just sitting out there. So, and again, it kind of is all gonna, you know, depend on Compensation packages, and again, what state you're in, so don't want to get down that rabbit hole, but most of the time, the practices that we work with, you know, they're paying providers on the work that's getting done, as opposed to the work that's being collected.

So, you know, if they're… that's an easy treatment to a degree for them to, you know, get paid on, because in essence, it's… the patient's already paid for it. So, I think it kind of benefits both the owner and the provider to be proactive in that sense.

Because one, it helps, you know, keep the liabilities at bay, and at the same time, it could put money in the provider's pocket as well.

Don Adeesha (Host) 25:49

Alright, it makes sense. Thanks for the, and I do apologize regarding The choppy connection here…

Nothing to do.

Andrew, what are some of the financial numbers that an Aesthetic practice owner should understand before they even begin thinking about selling their practice?

Andrew Miller 26:10

It's a great question, loaded question again, lots of numbers that we, you know, that we can look at, but, you know, I always like to kind of start at the top and at the bottom, so it's, you know, understanding, like, what's our revenue, what's our profitability, and then at that point, what's our EBITDA? And then everything, you know, at that point, we can kind of understand where we're at, and then, you know.

We want to kind of look in the middle there of the quote-unquote sandwich, in the sense that, you know, if profitability and EBITDA is not where we want it to be, you know, likely that first area is going to be cost of goods. We understand that injectables are, you know, a lot of the times the most expensive part of running an Aesthetic practice.

So understanding, hey, you know, what is our injectable cost against our injectable revenue? And that way we can make sense of where our cost of goods at. At the same time. payroll. You know, we've had a lot of times where payroll's out of whack. People are getting a little, you know, sometimes overpaid to a degree. And then the third thing is kind of uncovering the hood on those fixed expenses, as well, and understanding where our fixed expense percentage is at.

And again, usually sometimes people overspend on marketing, they overspend on rent, they overspend on meals for the team, whatever it may be. There's, you know, on travel, even. You know, there's a lot of different factors that go into that fixed expense bucket, but I will say, you know.

If there are just a few numbers on a profit or on a P&L that we want to look at, it's going to be, you know, revenue, net income, EBITDA, and then everything else is kind of in between there. On the provider side.

I do think that we have to, you know, it's really important for the owner to understand where that average revenue per visit is, you know, average revenue per appointment are two big things as well. Average revenue per hour, is another one that we, you know, love to look at. You know, and we can look at it, we break it down on the provider type, so whether it's, you know, an injector, a laser tech, an esthetician, a surgeon, whatever it may be.

And then at the same time, we break it down for them by appointment, by case, and then by hour at the same time. So, understanding, and then it's all… in that same vein, figuring out how busy they are as well, because how much runway do we have? for them to grow, and what is our actual revenue potential with the team that we have, and do we have a lot more room to grow? Because at that same time, if, you know. if we're generating, as an example, a million dollars, but our providers are only half full, well, at that point, we technically can probably get up to about 2, 2.2 million, you know, when they're fully utilized. So understanding how busy they are. how efficient they are per hour. And then, lastly, at the same time, you know, on the marketing side, you know, what's the lifetime value per our patient? And then the cost of acquisition as well. So, patient retention and new patients as well, trying to figure out how effective is our marketing.

And then usually, if our fixed expenses are out of whack with the marketing, be willing to bet that our lifetime value and our cost per acquisition is likely not going to be favorable, because we're probably overspending For the output that we are getting. from, From those metrics. So, I know I kind of gave you guys a lot there, but, you know, on the P&L side, we can kind of review it, but, we're looking at revenue. net income and EBITDA, and then I'll be, on the KPI side, you know, average revenue per hour, patient retention, provider utilization, and then lifetime value and cost per acquisition, I'd say, are probably some of the more important Ones that we'd want to look at.

Don Adeesha (Host) 29:43

No, Andrew, those are fantastic metrics to really track, and that just, you know, shows how important a robust EMR would be, right? How important is that aspect? Because, you know, a lot of our listeners, our audience members, they are, Usually, they are the owner-provider, right? And there might be one or two, sometimes, in staff, but…

It's a tight chip that they're running, so how would you recommend to really understand whether to invest in such robust EMR versus dig into spreadsheets?

Andrew Miller 30:25

Oh, I'm.

Don Adeesha (Host) 30:25

When does that change?

Andrew Miller 30:27

I'd say probably at the onset, you know, whenever, you know, hopefully when you've opened your doors, you have an EMR, whether, you know, it's the most robust or, you know, the simplest of EMRs at that point, just having some sort of EMR and understanding how to use it.

Because at that point, I always say, you know, the numbers don't lie unless you lie about the numbers.

A lot of times, you know, when we get into EMRs, the numbers don't quite make sense and jive with the financials. So, I will say that that is extremely important to understand how your EMR works, to make sure that it's set up correctly, and that everything is being tracked.

Because at that point, we'd be able to look at, you know, again, provider production, adjustments, and discounts. That's a big thing, you know, a lot of… whenever we… it's always fun, but not as fun when we, you know, work with clients at the beginning, and we show them that, hey, you're, you know, did you know that you're… discounting things at an average of 20%. And they're like, oh, I didn't know that. And it's like, well, that's what the data says. And sure enough, when they go back and they question either providers or front desk, they go back and look, and it's like, they actually were. So, making sure that all the data in there is as accurate and as correct as possible. will allow, you know, either someone on your team or someone like us to go in there and really analyze the data to understand, okay, what's actually happening? How busy is everybody? Is or more… is there more room to grow? Because at the same time, if it's not accurate, you know, people could be giving you the wrong advice based off of the data that's in the EMR. So. you know, I know that it's probably not the most fun to sit through trainings and try to understand how some of these systems may work, but I will say. there's a direct correlation with how successful our clients are with how clean the data is. So, I do think it's definitely worth The investment and the time and the resources to make sure that, you know, either you're… the owner's running it the right way, or we either have an office manager or a front desk person that knows the system like the back of their hand.

Don Adeesha (Host) 32:30

Clean data, allows for clean and clear decisions. We're gonna pause here, real quickly, because I got something to share.

Oop.

So, we have just spent the last half hour Practice value is really about how much of the business can keep working without Everything ending on the owner.

And the same thing is true on the demand side. A buyer doesn't want to know that patients came in this year. They want the confidence that the practice has a repeatable way to keep being found, trusted, and chosen. So that's where Ekwa Marketing comes in. Your patient, your, let's say, Lizzie. already searching.

Sometimes, she knows exactly what she wants, Botox near me, lip filler near me, and sometimes, she just knows the problem. How do I get rid of these under-eye wrinkles? So, you want your practice showing up in that moment when she's searching for these terms.

And, like, we were just talking about, full lifetime value of a lead.

We're not talking about energy. is the patient who trusts you, follows the treatment plan, gets the outcome sheet, and tells friends where she got her confidence back from. So, if you're wondering how well your practice is positioned to attract more patients like that, Ekwa is offering you a complimentary 60-minute Practice Growth Strategy Meeting, valued at $900.

The first 4-5 minutes are focused on your practice and the opportunities they uncover. The final 15 are about what closing those gaps could look like.

You can go ahead and QR code or use the link in the chat. It takes under a minute to reserve a time. I do believe, Yeah, the link is there, businessofaesthetics.org slash msm slash eXpanels.

I'll repeat that one more time, businessaesthetics.org slash msm slash eXpanels.

Alright, then.

Get back into our conversation here.

So, Andrew, how important This is a great question, I think, right after the previous point.

How important are you in financial records and financial transparency when a buyer begins evaluating a practice during due diligence?

Andrew Miller 35:08

That, I mean, it's, it's extremely important, because unfortunately, you know, when you go into the due diligence at that point, you've likely already signed a letter of intent, an LOI, and it's gonna have some version of a potential agreement, and obviously, in order to reach such an agreement.

You know, the buyer has to do their due diligence and, you know, go through the, financials and the KPI data, you know, with a fine-tooth comb at that point. And I think, you know, I've seen it where it doesn't go great because of the fact where, you know. records prior to, you know, kind of working with us. There wasn't clean data, you know, a bookkeeper was kind of putting things in places that they shouldn't have been, not maybe reconciling things the correct way. You know, maybe there was a switch in EMRs and, you know, the data didn't transfer over.

But I do think from a transparency and an expectation level, having clean financials and clean data One will make the process go much more smoothly. I mean, I've been a part of due diligence calls that have been, I think, maybe 5 or 6 hours, and that's just one. I've been a part of some that have been about, you know, maybe 2 hours. I've been a part of some that, you know. due diligence call… or due diligence processes that take as little as 2 to 3 months, and some that take up to 6 to 9 months because of the uncovering that needs to be done. So, I will say, you know, if anyone here is looking at potentially that next step and that next part of their plan, you know, growing their practice to eventually sell.

Just from a transparency, from an expectation standpoint, having the clean data will limit the surprises, and usually, whenever something is uncovered, it's usually uncovered for the negative for the seller. It's usually never uncovered for the positive.

So, at that point, you know, we've had deals fall through because there's been data that lowers the purchase price by several six figures. And, you know, it doesn't bode well for the owner, it doesn't bode well for us, it doesn't really bode well for anybody, because again, there was a, you know, to a degree, kind of counting some chickens before they had hatched. So, you know. having that data is gonna, again, speed up the process, make it much less painful, and also, you know, going into it, hopefully, you know, people are getting the price that was on that LOI, there aren't any, you know, kind of back-end surprises, or even just deals falling through. So, yeah, the clean data is, you know, we always We're big sticklers on that, for that reason, because, again, they… it will be uncovered at some point, and it… it's never usually for the better.

Don Adeesha (Host) 37:50

So…

I do believe that a lot of, you know, because I am privileged to sit across and speak with a lot of, experts in the industry as, in front of fantastic audience members who are part of the aesthetic industry, and a lot of them really want to do a good job. So there is that transparency characteristic already built in. They want to, achieve a great outcome for their patients, they want to run a healthy business, do well by their staff. what do you think, I mean, in your experience, where is the gap between that good intention versus what's actually happening in their own business that You know, makes them a little bit, fall short on that transparency.

Andrew Miller 38:43

I think it… I don't think it's ever really intentional. I mean, I think that the examples that I've given were the fact that, you know, we didn't really have our hands on it too much for, you know, a period of time to kind of really make a difference. The one example that comes to mind is a client that kind of came to us and was really, you know.

Wanted to sell, but her timeline was not, unfortunately, it was not able to be really as spread out as we would have liked.

So when we had jumped on, you know, there was a lot of changes to be made. We were able to recommend any bookkeeper, recommend, you know, EMR training to kind of get the data right. The bad thing was, is, you know, whenever due diligence and quality of earnings QOVs are happening.

They usually go back 12 to 24 months. So, at this point, you know, the client was only with us for about maybe 4 to 6 months. So, you know, the 4 to 6 months of data was starting to become really, really clean. It was all the data that was kind of prior to working with us that, you know, the client didn't really know what to ask the bookkeeper.

Or, you know, say, like, hey, this looks off, or this looks wrong. So… a lot of the times, you know, it's sometimes too late. So, you know, sometimes for buyers, whenever you do, you know, or for sellers, rather, whenever you are working with them, like, you know, in this one instance that I talked about at the beginning, you know, we've been with them for 4 years, so…

The stuff, you know, back in 2022 and 2023 is probably not going to get looked at all that much, probably not even really 2024 at this point, so… you know, I feel very confident that there is going to be really clean data and, you know, no bad intention. A lot of the times when we see the data not be as clean as it should be, is whenever it's a quick process from, you know, working with them to due diligence, and there's not enough time for… time to pass.

To kind of get that bad data off the books. So, I mean, a lot of…

What we just see is that clients maybe don't understand what to look for in the financials or on the KPIs and see if it actually makes sense. And they don't know, you know, how to potentially talk to the bookkeeper and say, hey, this… shouldn't be here, this is wrong, or this should be an asset instead of a liability, or whatever it may be. So I think that's where, you know, that one instance that I gave you is because there just wasn't enough time that it passed by. So there was no…

Ill intent with it.

Don Adeesha (Host) 41:03

What's… what's the hallmark of good data?

Andrew Miller 41:08

the hallmark of good data.

Don Adeesha (Host) 41:10

Hallmark signs, oh, good data.

Andrew Miller 41:12

I mean, when… typically, whenever we start… we look at things and we see that the EMR production and collections level starts to equal, the revenue levels in their financials. that's usually the, the telltale sign that things are being done correctly. The biggest thing that we've seen, especially, like, whenever we start with a client, is you know, their EMR can say, oh, they've collected $3 million.

But QuickBooks says that they collected 4 million in that same time period. It's like, well, where's the other million at? It's, something's missing here.

So, we have our, you know, within our models and our spreadsheets, you know, we have certain checks that, you know, it kind of flags us if it goes outside of the bands of, like, hey, it's outside of a 2-3% mark, which is kind of what we feel comfortable with.

And if it gets beyond that, then we start to, you know, look at things and say, hey, this is not done right.

You know, another example that I can give is, you know, a client of mine that's also looking to sell, switched bookkeepers because their old bookkeeper retired, and You know, the new bookkeeper does a really good job, but was not counting the memberships correctly because of their accounting process, their accrual-based accounting instead of cash.

And the way that they were doing it, they were double counting the memberships. So, within 2 months, we basically were able to catch, the mistake, because the level of production was… not growing as quickly as what the financials were showing. So, it's one of those where it's like, hey, this doesn't look right, and we basically emailed the bookkeeper and said, can we just take a look at this? Had about a meeting or two, and sure enough, it was not done. That one part was not done correctly because of the checks that we had had.

And, you know, if that wasn't caught, or she was doing this on her own, she could have gone the next 6 to 12 months over-recognizing and overstating revenue, which would have, again, led to an expectation that our practice was maybe worth a little bit more, and then under the fact that after due diligence would have happened, they would have likely uncovered that revenue was overstated and it wasn't worth as much as it should have been. So, I think it's mostly, you know, when the hallmark is whenever the EMR and the financials really start to match up on a revenue and a collections basis, that's usually that telltale sign that's like, hey, this is, we're on the right track here.

Don Adeesha (Host) 43:37

Okay, appreciate the clarification, Andrew. I…

We've got a question from one of our registrants, perhaps you can weigh in on? Then…

Increases the option to buy in 6 to 12 months.

That's all they've said in that, So I think it's… they're asking, like, what's your opinion on leases with the option to buy in 6 to 12 months?

Andrew Miller 44:08

Like, from a, like, leasing the actual practice?

Don Adeesha (Host) 44:13

Mmm… leasing the actual… well, there…

Andrew Miller 44:16

Or leasing advice.

Is it leasing a device, leasing the real estate?

Don Adeesha (Host) 44:24

I think, Sharon Jordan. If you can clarify a question to us in the chat, we… Andrew will be able to give you a much better answer, if you don't mind.

Yeah. So, until we get to it, perhaps we can move on to the next question. So…

What operational systems documentation do Buyers expect to see, and how can weak or undocumented systems affect the value of a practice?

Andrew Miller 44:57

Yep, so, and again, apologies with the internet. I think it's what systems and documentations are buyers expecting at the point of, Of the sale, is that… is that… that's kind of what I got there.

Don Adeesha (Host) 45:10

Andrew Miller 45:12

Yeah, so really, going back to the clean data, you know, usually the first thing that, you know, a buyer is going to be looking at and asking for is, you know, can I have the last 12 months of data from the financial standpoint, you know, broken out by month, and the same thing on the KPI data, you know, looking at what the providers are doing.

On a monthly basis. So that's usually the first step. And usually, you know, if things look good there, then it goes on to, okay, let's talk about, you know, what do the employment agreements look like? Is anyone at risk of leaving? Who's doing the most? You know, what is our… what does our debt look like? You know, what does our lease, you know, how many… what's our debt service for our potential devices? Do we have any leases? Do we own the building? Do we not own the building? Do we have a medical director? What does that payment look like, and are they at risk of leaving? Do we need to find someone else? you know, SOPs with our, you know, treatment planning, you know, what does that look like? Is it easily transferable if we lose somebody?

I do think that, you know, the systems, it's all gonna kind of start, and the nucleus is gonna be at the financials and at the KPI level, but usually when that looks good, that's when the hood really comes up, and they start to really look at, again, you know, what is… you know, what are our systems and processes for, you know, outlining new treatments, continuing with existing treatments, what does it look like to train our providers? Like, how easily can we train them? And then at the same time, again, medical directors, employment contracts.

You know, if they're gonna be taking over any sort of debt, what does that debt structure look like?

As well. So, yeah.

Don Adeesha (Host) 47:06

Because you… You just mentioned, like, with regards to SOPs, with treatment planning, and, of course.

With regards to training. your own providers, and how easy it is to train them. We document something like that.

Andrew Miller 47:32

Oh, can you repeat that, Don, real quick?

Don Adeesha (Host) 47:36

Yeah, because when you mentioned, it's important for a buyer to perhaps, after the financials and the KPIs are all done and that nucleus is gone, then, with regards to the SOPs.

With treatment planning and outlining how treatments are to be done, and then you mentioned a point with regards to how the providers can be trained on And how easy it is. Or did I misunderstand?

Andrew Miller 48:10

No, no, no.

Don Adeesha (Host) 48:11

Yeah, that's correct.

Andrew Miller 48:11

That's correct, yeah, it's really about the growth and the scale, so that's why, you know, it's looking at the past financial health of the business, and at the same time, kind of the systems and the documentation that's in place is pretty much what is it going to take to continue the growth and the scaling of the business from a buyer's perspective? And that's why I go back to, you know, SOPs, operational.

Because they want to understand, okay, how… what it took the owner to get from point A to point B, which point B is quality of earnings and due diligence, to the point of how do we get it from point B to point C, because obviously the buyer, you know, they are buying a practice to eventually make a profit from it, so they want to understand, too, like, how…

Easily, or how accessible is it to scale and grow this practice with the team that we have, and the operational, Pretty much systems that have been put in place.

Don Adeesha (Host) 49:06

Okay, I think I understood it. What you basically meant was how easy is the material that you have already in place? How easy would it be to get a new staff member and then bring them up to form with whatever you have already? Is that along the lines of.

Andrew Miller 49:25

That… yes, and that's after the fact that, assuming the financials and the KPI data, you know, kind of checks out at that point.

Don Adeesha (Host) 49:32

Of course. So we do have, the update from Sharon. Sharon was asking regarding leasing the building. So, leases with the option to buy…

Andrew Miller 49:42

a lease to own? Is that kind of what we're thinking? Lease to own, I think, is maybe what we're…

Don Adeesha (Host) 49:49

Leasing… leases with the option to buy in 6 to 12 months, so, yeah.

Andrew Miller 49:55

I mean, that one's… it's gonna be that it depends, too. You know, it's obviously gonna depend on, you know, do those lease payments end up going into the overall principle of the building? You know, that would be kind of my first question is. because I'd hate for you to potentially… and I have to be careful, because this is, like, not any sort of real estate advice, but the first thing that I would look at is, you know, of those 12 months, is any of that applied to the actual principle of the building. You know, typically, whenever we're looking at a potential sale, you know, most of the time, the real estate's gonna add an additional factor to it. You know, if you own the real estate and you sell that along with the practice, that's gonna be, you know, an asset that we… that you can either decide to you know, sell with the practice or keep for yourself and become a landlord of the buyer. So, I guess to answer your question, though, that 6-12 month lease to potentially own. Probably not a bad option to look at, but, you know, I do think that it's worth probably talking to an attorney just to make sure that everything is kind of lined out, correctly, and then at the same time, you know. what the potential down payment looks like, interest rates, do those change, as well. So, not a bad, probably not a bad deal, but again, probably it depends, and if you want, Sharon, you can… we can set up a call, or you can talk to me about it, we can kind of go through all the… the ins and outs with it.

Don Adeesha (Host) 51:40

In chat, perhaps we can take it as we go along in these final few minutes. Now, Andrew, if an Aesthetic Practice owner plans to sell in the next few years, what should they be working on today to protect and potentially increase the value of the practice?

Andrew Miller 51:56

Yeah, so, great question. I think this is a good question that it kind of, rounds out with kind of everything that we've talked about. So, it's really understanding, you know, looking at where you're at, you know, with your practice, if it's a single location or multi-location. understanding where your revenue is, and then at the same time, now, you know, kind of figuring out maybe what your goal is. You know, we want to be realistic about the goals on the revenue side, and say, you know, if you're at 3 million bucks and you want to get to 6, well, it's like, well, do you have the space to do it? And then at that time. you know, we want to look and see, okay, well, what do our providers look like as far as how busy they are, and look at that utilization. And at the same time, how many rooms are maybe not being utilized? Because the provider utilization only kind of tells us one story. If you have 3 providers that are not busy, but then you also have 3 rooms that are sitting Unused, then you have a lot of potential for growth.

On the other end, if you have 6 rooms and they're all being used 90% of the time, well, then there's not much more room for growth at that point. So, I do think understanding your numbers, looking at your revenue, looking at your current profitability, and if we're not kind of sitting at that 20% to 25% mark, on an adjusted EBITDA basis. trying to figure out, okay, where do I have to improve at that point? And then once we kind of figure that out, and it's likely going to be a utilization issue with the providers and trying to get everybody as full as possible.

Also looking at the owner as well to see, okay, how much of that production is the owner doing? And what does your timeline potentially look like to, you know, sell at that point? Because a lot of times, owners don't mind staying on a little bit longer after the sale. Some owners want to just leave.

So a lot of that's going to depend on how much of the production you're doing. And then lastly, after we kind of identify, you know, maybe what needs to improve on the financial and on the KPI front, making sure that the data is as clean And as accurate as possible, because whenever you do go through due diligence, even though we work with clients and the data's as clean as ever. they're still probably going to find something or nitpick something that's going to just require some additional, clarification. So, starting now with making sure that your data is clean, on your EMR and on your financial software is also going to be imperative, depending on your timeline as well.

Don Adeesha (Host) 54:21

Okay, appreciate that. Such a comprehensive answer, Andrew.

Andrew Miller 54:27

We can talk about this for hours.

Don Adeesha (Host) 54:29

Right, and we really do hope we can in the future, perhaps. With that being said, I do want to remind everyone of a… complimentary marketing strategy meeting with Ekwa Marketing. If the ideal patients in your area are searching… are your patients, are your clients are searching for the treatments that you offer, that you love to offer, make sure you are the practice that they find, trust, and choose. Go ahead and Click that link in the chat box, or else you can go ahead and scan that QR code to book your complimentary marketing strategy meeting with Ekwa Marketing. It takes less than a minute to book.

And it'll be well worth your time.

Right, Andrew, where can the people find you and the work that you do?

Andrew Miller 55:22

Yes, so I work with, Maven Financial. I'm a senior, financial consultant with them. I… let me get my email, because I send so many that I actually don't remember what it is. I believe it's andrew.miller. at mavenfp.com. Let me double check here… yes, andrew.miller at Mavenfp, I can drop that in the chat. Usually pretty quick to respond.

Oh, you guys already got it, perfect. So, just send me an email, and I will, you know, again, we can either hop on the phone, or set up a Zoom call, and, you know, talk through questions, and go from there. But, looking forward to, you know, maybe talking to a few of you guys here at some point.

Don Adeesha (Host) 56:08

Awesome, thank you very much, Andrew. And to our attendees here tonight, thank you very much for investing this hour in the success of your practice. As you exit the webinar, a quick feedback survey will pop up. If you don't mind, please take 30 seconds to fill it out and let us know how we did. What can we do better to ensure that even more value is provided to you next time around. With that being said, I'm Don Adeesha. It has been my pleasure hosting this panel on behalf of Business of Aesthetics. Until next time, then, take care.

Good night, everyone.

Andrew Miller 56:42

Thank you guys.

Business of Aesthetics | Expert Panel Replay Transcript