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 out there. It is important to know that 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. Do your research so you know everything about the area the practice is in.
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 that is paid in cash. In recent industry trends, investors are placing a premium on the lucrative cosmetic procedures.
Certain medical offerings can make a practice attractive. One of the most effective techniques for treating the two most common types of skin cancer is Mohs Surgery. This treatment can be done as an outpatient procedure but it requires both a surgeon and a pathologist. If you offer Mohs surgery at your practice, then you will likely need to have an in-house pathologist, which is 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’s 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. Talking with staff, clinical and administrative, can help you get a better understanding of the full context of the sale if possible. Ask questions, where appropriate, beyond gross collections and patient volume. The nurse practitioners and physicians assistants can be the backbone of the a practice and tend to know the ins and outs of the day to day functions the best. While having a successful team can be a valuation driver, they can also be a valuable source of information.
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 contact that’s a general broker or someone on the team that’s done mapping and location research in the past.
Questions to consider: 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.