Deal Breakdown: Weight loss med spa with fat margins

Sometimes complicated is good.
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I’ve looked at thousands of businesses for sale, and learned to read between the lines. Every issue, we'll take a deeper look at a listing, learn something, and I'll rate the deal at the end! 

This week’s listing: A chain of three med spas near Boston, Massachusetts. They’re doctor-owned, and specialize in weight loss.  

The numbers: $4.7M in revenue, $1M in cash flow, asking $3.25M. So far, so good.

Green flags

First off, since these places are doctor-owned, and centered around doctor-led services… it’s going to be trickier if you’re not a doctor.

So why is that a green flag? Because a little complexity can scare off a lot of buyers. And the doctor thing is easy enough to resolve, with something called a Medical Services Organization (MSO), where a doctor does the billing on your behalf but you own the business behind the scenes.

So if you stick around and work through that, you may be the lucky buyer.

Other stuff to like: this is definitely a growing category. Discretionary purchases like weight loss therapies are the stuff you want to be in. Usually insurance isn’t involved, so you can pretty much name your price for a premium service.

Because the reality is Americans keep getting fatter. And we’re going to keep spending money on health (and vanity). 

Next: the location is great. Boston is a booming area with lots of high earners who will spend money on stuff like this.

There’s also a lot of recent developments in the weight loss space, which I see as a benefit — you’ll have more effective tools in your arsenal. See Ozempic, etc as the newest “wonder drugs” helping people with their weight loss efforts.

And that’s the final thing I like: you’re in a business that’s helping people. You’re giving people a way to get healthier and like themselves better. And that’s exciting and inspiring to be part of as a business owner.

Red flags

I called the doctor-owner complication a green flag, but it definitely means you have a few extra hoops to jump through over buying something else. You’ll need to set up that MSO relationship as an intermediary, and that might confuse a lot of small business lenders. (Heather talked about this when we reviewed this deal on our podcast Acquisitions Anonymous.)

I also notice the listing talks a lot about “brand” — which says this might be part of a larger franchise. If that’s true, your options are pretty limited in what you can do in terms of adding new services or expanding beyond the currently limited area.

The other thing I don’t really like is the narrow focus in a pretty broad industry. Traditional med spas do weight loss, but also do laser hair removal, chemical peels, IVs, and all sorts of things you can cross-sell or upsell your customers on.

Of course, that’s also an opportunity to grow. 

What I’d ask

My first question: Is this a franchise of a larger chain?

If so, I’m walking away. But that’s just me. 

Running a franchise is a whole different ballgame than running your own business, and it’s not my forte or interest.

Next, I’d want to know why the focus is so narrow. Have they tried branching out? 

That would give me some idea of the opportunity here.

My rating

At the end of the day, you really can’t ignore those numbers. Figure out the regulatory stuff and you’ve got yourself a great business.

And getting something at this price that generates a million dollars in cash… That’s a quick way to become a millionaire.

I like it. I’m giving this 🌶️🌶️🌶️🌶️ out of 5. 

My podcast Acquisitions Anonymous did an episode on this deal — give it a listen

What do you think? Check out the deal yourself and let me know!