Cosmetic Services, Practice Value and Pre-Sale Planning

Posted Friday, April 23, 2010 to INDUSTRY > Law

Posted by Chris Majdi, CHBC

Medical Practice Valuations

Cosmetic Surgery Practices provide a varying mix of services depending on the markets in which they are located as well as the practice style and preference of practicing physicians. Patient demand is also a major driver that dictates these services.

The demand (or perceived demand) for cosmetic services was driven into a frenzy during the pre-collapse economic period, and many physicians were more than willing to accommodate this demand by adding cosmetic services. For most physicians, providing services which were highly demanded was simply logical. Furthermore, there was no shortage of vendors, medical practice consultants, and others who blindly recommended that practice owners add cosmetic services.

The economic situation of the last two years has brought much of this into question, as many practices suffered due to a service mix disproportionally weighed towards cosmetics. Many cosmetic services were heavily tied to discretionary consumer spending and practice financials suffered as a result. Cosmetic work is generally not covered by insurance and can be subject to wide variation in the discretionary spending habits of consumers. Many sellers of medical practices during this time were forced to postpone their practice sale because of massive downturns. Other found themselves selling their practices at less than favorable price and terms.

While the economy is in recovery mode and demand rises again for cosmetic services, hard lessons can be soon forgotten. While cosmetic services can be an extremely valuable addition to a practice and it is logical to provide services as demand dictates, it is crucial to assess how the service mix can affect practice value. When selling a medical practice it is of utmost importance to work with a transition consultant to create a meticulous pre-sale strategy and transition plan in advance of bringing the practice to market.

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