Shorr Solutions: The Podcast Ep. 96 - Making the Right Choice: Top 10 Things to Look for When Buying an Aesthetic Practice - Shorr Solutions


Thinking about buying an aesthetic practice vs building one from the ground up? This decision is a pivotal point in your career and making the right choice is critical. In this episode of Shorr Solutions: The Podcast, we’ll explore the top 10 factors to consider when buying an aesthetic practice.

Tune in to learn from our host and practice management expert, Jay Shorr. He will guide you through what you need to know, from assessing the practice’s financial health and legal compliance to understanding its demographics and potential growth opportunities. We aim to provide you with a comprehensive guide to ensure you make an informed and advantageous decision for your future.


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00:00:04:08 – 00:00:53:05

Welcome to Shorr Solutions: The Podcast. I’m your host, Jay Shorr. I’m the CEO and founder of Shorr Solutions, a national and award-winning consulting firm, assisting aesthetic and surgical practices with their operational, administrative and financial success. I have an amazing team of practice management experts and clients across the U.S. and as an industry expert with firsthand experience owning a multi-million dollar cosmetic dermatology and plastic surgery practice.

Listen in as I lend you my expertise and best tips to successfully manage and grow your aesthetic practice. I will also be bringing in guests along the way, so get ready to be equipped to operate your aesthetic practice strategically and profitably. Welcome to Shorr Solutions: The Podcast.

00:00:54:20 – 00:01:51:05

Hello again and welcome to another episode of Shorr Solutions: The Podcast.

And I’m your host, Jay Shorr. Today we’re going to be speaking about a very, very important topic that I get asked all the time. And this is titled Making the Right Choice: The Top Ten Things to Look For When Buying an Aesthetic Practice. Now, when we talk about an aesthetic practice, we’re going to talk about multiple things. An aesthetic practice can be dermatology, cosmetic, aesthetics, all kinds of different practices that we have.

But for today, what we’re going to speak about most is what we’re supposed to look for when we’re going to buy an aesthetic practice. Because the age old question is, should I start one on my own or should I buy an already existing one? So let’s talk about the top tips.

00:01:51:18 – 00:03:28:09

Number one, what is the financial health of the practice you’re looking to buy? Because we need to carefully examine the practices’ financial records, which include P&Ls, revenue, expenses and profitability to ensure that it is financially stable. Now, many people really don’t understand how to look at a P&L, the profit and loss, because we can have a positive gross profit and have a negative net profit. Most people don’t understand all of that.

And let me just get into that a little bit because when we look at the financial health of the practice as our number one thing, we want to know what is our cost of return? How long will it take for us to make our money back? And has this practice been making money steadily or is it been a slow growth?

Now, when I look at practices, I also look at the last three years of historical data. So what does that mean today? We’re in 2023, soon to be heading into 2024. So now usually we’ll look at 2020, 21, 22 and the first nine months since this is, you know, already the fourth quarter of 2023. But what’s really important is COVID was a weird year.

Some practices made a lot of money and some didn’t. Whether it was surgical or non-surgical heading into 24, maybe we’re always looking at 21, 22 and 23. All right.

00:03:28:14 – 00:05:00:02

What’s the next thing? Location. You’ve heard that over and over and over again with realtors. And what are the three Ls? Location, location, location. We have to evaluate the practice’s location in terms of geographics, meaning where they’re located. Demographics, meaning the populace of the people in there. Race, color, creed, religion, income, housing, education. That’s the demographics. Accessibility and competition to determine its potential for growth. Now, accessibility, meaning can a patient get there? Do they get there quickly? Is it on a corner? Is it is a parking lot somewhere where our patients can park?

And who is our competition in that specific area? Now, if you’re in an area of farmland somewhere in South Carolina or in Georgia or Nebraska or Idaho, for example, may be different, than if you’re looking on Park Avenue in New York and Rodeo Drive in Beverly Hills. It’s a totally different dynamics of location because what you may get in the certain amount of square footage or dollar per square foot is going to be a totally lot of difference between one area geographically and another.

00:05:00:23 00:07:34:09

Number three, ensure that the practice that you’re looking at has legal compliance and that they comply with all relevant federal, state and local laws and regulations. If they are as surgical practice and they’re in the state, are they registered and accredited and do they have the proper certifications, licensing permits and contracts in place already? So, Jay, why is this important?

Let me share why It’s very important because many times medical practices, although they think they understand, the laws vary from state to state, Commonwealth to commonwealth, sometimes municipality to municipality. However, it’s really state mandated. So when you’re looking to buy a practice already, you want to know do they comply? Do they have HIPAA regulations in place, which is a federal law?

Do they have the proper people that are able to perform the procedures according to who is allowed governance wise in that particular state or commonwealth? And let me give you an example. In Florida, where I’m from, a practical nurse, a medical assistant, a registered nurse is not allowed to inject, neuromodulators, toxins, dermal fillers or operate lasers. An aesthetician may, but only for laser hair removal if they have an electrology license, specific training. Whereas in other states RNs and others may be able to perform some of these procedures.

In Florida, only a PA or an NP can do that with a medical director that has actually given them those privileges. So you need to be very careful because you don’t want to be going back and saying, Oh, well, in that state where the corporate practice of medicine does exist. Florida, that means that a non licensed professional may own a medical practice, whereas in certain states like Georgia and Texas, they may not.

So then you have to have what they call a management service organization or an MSO that has an MSA, a management services agreement with the owner or the medical practice. It’s one of these laws that each state has, so be very careful that you understand the laws of the land.

00:07:35:11 – 00:09:18:00

Number four, does the practice that you’re wanting to buy have a patient base that you want in your practice that you’re going to open up or buy?

So you have to analyze the patient base, including, once again, demographics, geographics retention rate and assess its value to the growth potential. Because if you see that a patient has not been coming back to this medical practice and the retention rate is very, very low, then the owner of the practice may tell you, Oh, we have 20,000 patients, but none of them have been back in the last 2 to 3 years.

So what is the value of that worth? There’s an old term called goodwill. So you want to buy goodwill because the name of the practice and they’ve got X amount of patients. Ladies and gentlemen, goodwill is where you donate old clothing for the needy and furniture. Goodwill doesn’t have a whole lot of value today in buying a medical practice unless the practitioner is going to remain on because they are the name of the practice.

I heard somebody tell me at a lecture that if you are a solopreneur solo practitioner and you don’t have any heir apparent or anybody that performs any additional ancillary services, then what you actually have is a job inside your own business because it is not sustainable, because without you, there really is no business.

00:09:19:07 – 00:10:45:13

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00:10:47:13 – 00:11:49:00

Number five, what is the reputation of the aesthetic practice that you’re looking to buy? Check on the practitioner’s reputation, the National Practitioners Databank. You can check on reviews online, offline, patient testimonials to gauge its standing in the community. Because the worst thing we want to do is buy a practice no matter how good you are the name of the practice, unless you’re going to change it or the location has a horrific reputation in the community.

Many people don’t even know the businesses change hands. What they do know is that medspa, that medical practice has been in that same location and the general public has no idea. All they know is that’s a chop shop or what an amazing medical practice that is. So I would do your due diligence, hire people to look online, do background checks.

00:11:50:07 – 00:13:44:11

Next, number six. Technology infrastructure. Today is totally different. I grew up in paper charts and yellow pages. I know a lot of you are rolling your eyes. A lot of you are going, Oh, boy, this is an old dude talking right now. Well, things have changed. I’ve become very techie. I’m very in tune with AI. But you have to have good technology infrastructure to assess the practices’ technology, equipment and to determine if upgrades or investments are necessary.

Well, which are they? It’s all of them. Electronic medical records, electronic health records, phone systems, lead generation software, everything that has cloud based because the server based technology is things of the past, folks. I remember I had one of the best servers never known to man and boy, was it expensive and boy was the annual license expensive. And then the cloud came out and I was kind of leery about using the cloud.

But I’ll tell you what, I think it’s wonderful because I travel a lot. I travel a lot where I lecture. I travel a lot for my personal life, and I know that I’m able to be in touch and in tune with my staff. If I was practicing again and had my medical practice and I want to make a disclaimer when I referred to my medical practice and everything, I am not a physician.

I was in a partnership with my late wife who had a medical practice because in the state of Florida, a non-physician cannot own a medical practice. So it’s very important because we want to know all of our technology. Is it up to date? Do you have everything, all the processes, the protocols? Are they in the cloud? Do you even have them?

00:13:45:11 00:14:47:00

And what type of marketing efforts are we going through? Review the practice’s marketing strategies and their online presence to understand and how it attracts and retains patients? Because we can attract a lot of patients, we can bring them in if we don’t retain them. That’s the kiss of death, because then we’re always going to be chasing our tail.

Because then the one question similar to that of the shark tank that every one of the sharks ask is what is the cost of a client acquisition? In our case, what’s the cost of patient acquisition? We can bring a lot of people in, but if we don’t retain them, we’re constantly going to be spinning our wheels and churning and burning and spending a lot more money because it is much less expensive an investment to keep the wonderful patients that we have and already love us than it is to keep turning them over and having to recruit new ones.

00:14:47:17 – 00:16:24:12

Number eight, the vision and the strategy. You as a practitioner wanting to buy a practice have to have a clear vision for the practice’s future and a strategy for growth and improvement after the acquisition takes place, because the acquisition isn’t going to be an overnight strategy. First, you have your due diligence. Second, you create what they call an LOI.The LOI is the letter of intent that many times is non-binding. Have these done by attorneys, ladies and gentlemen. All right. People like us can help you. But at the end of the day, the reason that you want a great attorney is in the event that something goes wrong, you want to make sure that not only do you have somebody that created the transaction, but you have somebody then help litigate it in the event it ever has to go to litigation.

Because the LOI will then turn into an actual agreement. What the LOI does, it actually can prevent more often from the person selling from engaging and entertaining in any other current and future strategy with other people? While your LOI is in place, please always contact an attorney for better advice and more clear, concise and consistent advice.

00:16:25:18 – 00:19:27:23

Number nine, your negotiation terms. You have to engage in transparent negotiations between the buyer and the seller to secure a fair and mutually beneficial purchase price. What I tell my clients when they hire us, they want to sell their business, they want to sell their practice, and everybody thinks that their business is worth more than it is. Oh my God, I bought this piece of equipment and I’m not going to name any of them.

I want to be fair to everybody. And it was a $150,000, $200,000. I ask, have you made money on it? Hopefully the answer is yes. I say, Well then don’t worry about the value of what it’s worth. You only want to be able to know that there is value in it. But what is the value? Don’t fall in love with an ugly baby.

Once you’ve gotten the life use out of that equipment, the actual value of what that equipment is worth is the revenue that it can generate from the procedures it can perform in your hands. Now, does it have actual value? It does have intrinsic retail value in the secondary market. Let me caution you about something. If you really want to know what that value is, go online, look at it on eBay, and look at some of the secondary laser resell.

I’m not going to name any of those companies either. I don’t like to disparage anybody. But here’s the caveat with that as well. When you buy a piece of equipment, second hand or a medical practice, if you don’t buy the company, the corporation, and all you’re buying is assets. Many of the capital equipment companies will not allow you to buy products, will not allow you to market the piece of equipment by name because you haven’t purchased the license.

And I’m not going to name any of those companies either. Contact me and I’ll be able to discuss that with you one on one. But what happens is they want to recertify. They want a real license, and then you’ll have to buy another warranty. Sometimes there’s a recertification fee, because it’s a very expensive or egregious price, comes with a warranty and will allow you to buy consumables, will allow you to buy other tips and be able to get it serviced with OEM (original equipment from the manufacturer) parts.

Very important to know because if your machine goes down, what happens is you may have to find somebody in the secondary market to repair it. You’ll get very limited warranty, if any at all, and you may get generic parts and may not last that long, and then you’re going to have to buy them again. It’s a catch 22.

00:19:28:22 – 00:20:34:22

And last, make sure that you engage with good industry resources associations, good law firms, health care attorneys, accounting guidance and consultants like Shorr Solutions for guidance and support throughout the entire acquisition process. I and my team will help to be able to guide you on the operational, administrative and financial and resource for you to be able to help guide you with proper legal and accounting guidance so that you are in touch with people that have been there, done that have the wells on our back to prove it.

And the main thing about doing this, about acquiring a practice is this is going to possibly be a lifelong dream. It cuts the time for you to have to acquire a practice or do it on your own, as you probably will be able to buy an existing one.

00:20:35:23 – 00:21:20:20

But the last thing that I didn’t mention was staffing. It’s very important because will the staff stay at the new practice that you’re going to buy? Many times they loved their old bosses and they don’t know you. Or it just may be that they’ve hung around long enough knowing that the boss is going to retire or the owner is going to retire. And once they retire, the staff may retire as well, because they may have been very good to them with benefits. They may have been very good to them with retirement programs, IRAs, 401s, defined benefit programs and you may not necessarily be able to offer that.

00:21:21:20 – 00:23:19:10

Ladies and gentlemen, thank you for sharing a little bit of your time on Shorr Solutions: The Podcast. Until next time, I look forward to hearing and seeing you once again. Good luck. God bless.

So that wraps up today’s episode of Shorr Solutions: The podcast. If we mentioned any website links, you can find them in our show notes to work directly with me and our award winning team of consultants to increase efficiency, increase revenue and decrease costs in your aesthetic practice, schedule a free consult with us today.

We will help you establish and refine your aesthetic practice’s protocols for maximum efficiency and productivity, decrease your expenses and increase your profitability with an expert financial analysis of your business. Attract more patients, convert calls to consults, convert consults to treatments and keep patients coming back for more. With our sales training, coaching and complimentary access to our conversion cascade online course.

Recruit, hire and train new team members and manage any staff turnover with our human resource expertise plus more, head over to our show notes and click on the link to schedule a free 30-minute consult with us today.

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