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Dermatology Private Equity
Dermatology Practice Valuation
The actual value of a dermatology practice for sale is the value of the offers on the table AND the location. As comfortable as negotiations may seem, keep in mind that your proposal might not be the only one. And remember that it’s the location of the practice is paramount to maximizing the return on your investment. If you hear yourself say that a practice ‘looks like’ a good deal or ‘seems like’ it’s in the right part of town, let those be signs that you need to get maps and know for sure.
The Services the Dermatology Clinic Offers
One of the appeals to private equity firms buying medical practices is the diversification in dermatology. Valuable derm practices have a medical component, which may be covered by insurance, and a cosmetic component which is paid in cash. In recent industry trends, investors are placing a premium on the lucrative cosmetic procedures.
But certain medical offerings make a practice just as attractive. Mohs surgery considered the most effective technique for treating the two most common types of skin cancer – can be done as an outpatient procedure but requires a surgeon and a pathologist. If Mohs surgery is offered at a practice, it will likely have in-house pathology, a huge valuation driver.
The perfect mix of offerings will, of course, drive up the price and the multiplier, but the practice will be well-positioned for a high return.
Nurse Practitioners and Physician Assistants
First, using nurse practitioners and physician’s assistants effectively is a huge valuation driver for a dermatology practice.
Second, they can offer information beyond the numbers. A dermatologist may be selling his practice because he’s exhausted, or burnt out. This may have had an impact on the happiness of staff and patients. Talk with staff, clinical and administrative, to understand the full context of the sale if possible. Ask questions, where appropriate, beyond gross collections and patient volume.
The Pitch
Young dermatologists are weary of selling to consolidators. They likely enjoy the autonomy and flexibility of owning their own practice but may stress over the day-to-day aspects of management, billing, etc.
If you find a diverse, healthy dermatology practice in a great location, cast vision for the upside. Will the doc have any hiring and firing authority – will they be able to keep his or her team? This option is very appealing to them. Depending on the arrangement, the doc can also make money from their equity in the practice and the buyout often means they’re immediately debt free. Finally, if kids or a family are on the horizon, this sale means a steady, predictable career in dermatology.
The Lease
The practice’s lease will be your biggest spend next to human capital and if you want to make money – not just save money – you’re not going to rely on a contract that’s a general broker or someone on the team that’s done mapping and location research in the past.
Hiring a healthcare real estate company for lease administration should be a first step. You owe it to your group to be fluent in each lease you’re taking over.
Was the lease negotiated with the landlord or with someone specialized in healthcare real estate transactions? Who is responsible for light bulbs when they go out? Or stains on the carpet? Or when construction impedes client parking? Again, purchasing a derm practice isn’t about saving money, it’s about making more money. When it comes time for renegotiation or when something goes wrong, profit depends on you knowing your options and who is responsible for what.
Yes, Help me Read the Lease and Make More Money.
The fact is – baby boomers are living longer. An increased life span means skin cancer screenings and diagnoses are also on the rise.
In addition, there’s an increased desire for cosmetic procedures – with 17.1M cosmetic procedures performed in 2016 alone!
Match that with fairly good reimbursements in comparison to other specialties and the fact that cosmetics are often paid in cash, and you’ve got an industry primed for investment.
Want an advantage in the market?
Before you think you know exactly where to go and which clinic to buy, call us.
We specialize in:
- Mapping specific locations, and turning around demographics and competition data in less than a business week
- Reading every detail in a lease to make sure you know exactly what you’re getting and where you need to negotiate
- Planning for the long term. So what happens after you buy the practice in that nice part of town? You’ll need somewhere else to go and the location may not be as obvious.
You need us on your team if you’re going to grow strong – let us analyze a market, find holes that no one else sees, and set you up for success.
Find out what our clients have to say about Practice Real Estate Group:
Dr. Alice Bui, DDS, Wonderland Pediatric Dentistry, Cypress TX
We’re growing like wildfire. Practice Real Estate Group made the whole process easy for me. We had an initial meeting where we discussed what I wanted to get out of the practice, and they took it from there. I have lots of friends who have thought about opening over the past two years and I always recommend Practice Real Estate Group.
Dr. Harold Khamara, DDS, Benbrook Dental, Benbrook TX
From day one we were seeing 20 patients every day, three years later I have three practices. I wouldn’t be where I’m at without Practice Real Estate Group. They got me me in touch with everyone I needed to get through the entire opening process from location selection to opening my doors.
Dr. Jennifer Barondes, OD, InSight EyeCare, Cibolo TX
There’s a lot of nervousness, apprehension, and work that goes into starting a business. Practice Real Estate Group cares about not only about finding you the right location, they care about your success. Our practice has exceeded our expectations due almost entirely to Practice Real Estate Group’s research and hard work. We’ve referred three friends and will continue to do so.