Financial Terms
Valuation Metrics
- EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization; a key metric used to value healthcare practices
- Multiple: The factor applied to EBITDA or revenue to determine practice value (e.g., 5x EBITDA)
- Revenue Run Rate: Current revenue projected over a full year
- Working Capital: Current assets minus current liabilities needed for daily operations
Deal Structure
- Asset Purchase: Acquisition of specific practice assets rather than the entire legal entity
- Stock Purchase: Acquisition of the entire legal entity including all assets and liabilities
- Earnout: Performance-based payments made to sellers after closing
- Holdback: Portion of purchase price retained to address potential post-closing issues
Operational Terms
Practice Metrics
- Active Patient Base: Number of unique patients seen within a specific timeframe
- Patient Retention Rate: Percentage of patients who return for services
- Provider Productivity: Revenue generated per provider
- Treatment Room Utilization: Percentage of time treatment rooms are in use
Regulatory & Compliance
- Corporate Practice of Medicine (CPOM): Laws restricting non-physician ownership of medical practices
- Management Services Organization (MSO): Entity providing non-clinical services to healthcare practices
- HIPAA: Health Insurance Portability and Accountability Act governing patient privacy
- State Board Regulations: Rules governing medical spa operations and ownership
Legal & Due Diligence
Key Agreements
- Purchase Agreement: Primary document outlining terms of the acquisition
- Non-Compete Agreement: Restricts seller’s ability to compete post-sale
- Employment Agreement: Terms for retained providers/key employees
- Assignment of Leases: Transfer of property or equipment leases
Licensing & Permits
- Medical Director Agreement: Contract with supervising physician
- Facility License: State-specific permits for medical spa operation
- DEA Registration: Required for prescribing controlled substances
- Professional License: Individual provider credentials
Personnel & Transition
Staff Considerations
- Key Personnel: Essential employees critical to practice success
- Integration Plan: Strategy for combining acquired practice operations
- Retention Agreements: Contracts to keep vital staff post-acquisition
- Training Requirements: Staff education needed for compliance/operations
Technology & Systems
- EMR/PMS: Electronic Medical Records/Practice Management Software
- Patient Portal: Online platform for patient communication
- Merchant Services: Payment processing systems
- Inventory Management: Systems tracking supplies and products
Financial Operations
Revenue Streams
- Fee for Service: Direct patient payments
- Membership Models: Recurring revenue from patient memberships
- Product Sales: Retail revenue from skincare/wellness products
- Package Sales: Prepaid treatment bundles
Expense Categories
- Cost of Goods Sold (COGS): Direct costs of providing services
- Operating Expenses: Ongoing costs to run the practice
- Marketing Expenses: Patient acquisition and retention costs
- Facility Costs: Rent, utilities, and maintenance expenses
Industry-Specific Terms
Treatment Categories
- Medical Aesthetics: Injectable treatments, laser procedures
- Wellness Services: IV therapy, hormone replacement, weight management
- Skincare Services: Facials, chemical peels, microdermabrasion
- Body Treatments: Body contouring, cellulite reduction
Equipment Classification
- Class II Devices: FDA classification for most aesthetic devices
- Capital Equipment: Major medical devices requiring significant investment
- Consumables: Single-use supplies and products
- Maintenance Contracts: Service agreements for medical equipment
