The San Diego dermatology market is one of the most dynamic in the country. For practice owners, this presents a significant opportunity, but navigating a sale requires a clear understanding of market trends, valuation, and the buyers involved. This guide provides insight into the current landscape for selling your dermatology practice in San Diego, helping you understand the key factors that will shape your exit, from initial valuation to post-sale planning and making a successful transition.
San Diego Market Overview: A Seller’s Climate
The timing for selling a dermatology practice has rarely been better, and San Diego sits at the center of this trend. Nationally, the market is projected to grow substantially. This tailwind is even stronger in California, where patient demand continues to surge.
Strong Local Demand
San Diego benefits from a robust healthcare economy and favorable demographics. The presence of major health systems like Scripps Health and UCSD Dermatology creates a competitive environment and a well-established referral network. For a private practice, this means you27ve likely built your business in a location with a strong, consistent patient base.
A Magnet for Buyers
This combination of national growth and local strength makes San Diego a prime target for acquirers. Individual physicians, regional groups, and private equity-backed platforms are all actively looking for well-run dermatology practices in the area. This high level of interest creates a favorable environment for sellers who are properly prepared.
Key Considerations Before You Sell
A strong market is a great start, but a successful sale depends on navigating a few critical points specific to our state and specialty. We find that owners who think through these issues early are positioned for much better outcomes.
Here are three ares to consider:
- Navigating California Law. California27s Corporate Practice of Medicine (CPOM) doctrine places restrictions on who can own a medical practice. This directly impacts how a deal with a private equity group or MSO must be structured. Getting this wrong can invalidate a sale, making expert legal and M&A guidance critical from day one.
- Understanding Your Buyer. The right buyer depends entirely on your goals. A sale to a private equity group will look very different from a sale to another physician. One might offer a higher cash payout, while the other offers more continuity for staff and patients. We help owners clarify their goals first, then identify the right type of buyer.
- Protecting Your Confidentiality. How do you market your practice without alerting your staff, patients, and competitors? A structured, confidential process is key. It ensures that only vetted, serious buyers get access to sensitive information, protecting your practice27s value throughout the process.
San Diego Market Activity: Who Is Buying?
The San Diego market is not just promising in theory; it’s active in practice. We are seeing transactions of all sizes, from solo practitioners planning their retirement to larger groups looking for strategic partners. For example, a Mohs practice in North San Diego collecting $900,000 annually was recently acquired, showing strong interest even in smaller, specialized clinics. This activity is driven by a diverse set of buyers, each with different goals. Understanding these buyer profiles is the first step in positioning your practice effectively.
| Buyer Type | What They Typically Look For | Common Goal for Seller |
|---|---|---|
| Individual Physician | A turnkey practice with a stable patient base. | A clean exit and legacy preservation. |
| Local/Regional Group | Geographic expansion and adding skilled providers. | Access to more resources while often retaining some clinical role. |
| Private Equity Platform | Practices with strong cash flow (EBITDA) and growth potential. | Maximum valuation, often with a chance for a future payout (rollover equity). |
The 5 Steps of a Practice Sale
Selling your practice can feel like a complex journey, but it follows a structured path. Breaking it down into clear stages helps you stay in control and anticipate what’s next. While every sale is unique, here is the general roadmap we use to guide owners.
- Valuation. This is more than a number. It’s about understanding the true financial performance and growth story of your practice. It sets the foundation for the entire process.
- Preparation. Here, we organize your financial and operational documents into a clear, compelling narrative for buyers. This is where we address potential issues before they can become problems later.
- Confidential Marketing. We identify and approach a curated list of qualified buyers without disrupting your practice. The goal is to create a competitive environment to drive the best offers.
- Negotiation & Due Diligence. After selecting the best offer, the buyer will conduct a deep review of your practice. Proper preparation in step 2 is what makes this stage go smoothly.
- Closing. The final stage involves legal documentation and the transfer of funds. We manage this process alongside legal counsel to ensure a seamless transition.
Understanding Your Practice’s True Value
When buyers look at your practice, they are not just looking at your revenue. They are trying to understand its true profitability. The single most important metric in a practice sale is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Think of it as the real cash flow your business generates. We calculate this by taking your net income and adding back things like owner’s discretionary spending, one-time expenses, and any above-market owner salary. This number gives a clear picture of financial health.
That Adjusted EBITDA is then multiplied by a number (the “multiple”) to determine your practice’s base valuation. This multiple isn’t random. It’s influenced by your service mix (cosmetic vs. medical), your reliance on a single provider, your growth history, and your location in a desirable market like San Diego. A practice that has been professionally prepared for sale with a clear growth story will always command a higher multiple.
Planning for Life After the Sale
Signing the sale agreement is a major milestone, but the work isn’t quite done. A successful transition is one that is planned well in advance to protect your legacy, your team, and your financial future. How you structure the deal today determines what your life looks like tomorrow.
Your Role After the Sale
Most buyers will want you to stay on for a transition period, typically from a few months to a few years. This is a key point of negotiation. The right agreement gives the new owner the support they need while giving you a clear path to your next chapter, whether that’s retirement, relocation, or a new venture.
Protecting Your Team and Your Legacy
What happens to your staff is a major concern for most owners. The buyer27s plan for your team should be a central part of your negotiations. A good advisor ensures that employee agreements and cultural fit are discussed early, protecting the people who helped you build the practice.
Maximizing Your Financial Outcome
The final number in a sale isn’t what you get; it’s what you keep. The structure of your deal has massive tax implications. Furthermore, in many sales to larger groups, you may have the opportunity to “roll over” some of your sale proceeds into equity in the new, larger company. This can create a “second bite of the apple,” allowing you to benefit from the future growth you help create. Planning for these elements is not an afterthought; it is a core part of the sale strategy.
Frequently Asked Questions
What makes San Diego a favorable market for selling a dermatology practice?
San Diego benefits from a strong healthcare economy, favorable demographics, and the presence of major health systems like Scripps Health and UCSD Dermatology. This creates a competitive environment and a well-established referral network, resulting in a robust, consistent patient base which attracts many buyers.
Who are the typical buyers of dermatology practices in San Diego and what do they look for?
Buyers include individual physicians looking for turnkey practices, local/regional groups aiming for geographic expansion, and private equity platforms focusing on practices with strong cash flow and growth potential. Each type of buyer has different goals ranging from legacy preservation to maximizing valuation.
What are key legal considerations when selling a dermatology practice in California?
California’s Corporate Practice of Medicine (CPOM) doctrine restricts who can own a medical practice, affecting deal structures especially with private equity groups or MSOs. Expert legal and M&A guidance is essential to ensure the sale complies with state law and is valid.
How is the value of a dermatology practice determined in San Diego?
Value is primarily based on Adjusted EBITDA, which reflects the true cash flow of the business by adjusting net income for discretionary spending and one-time expenses. This is then multiplied by a market-driven multiple influenced by factors like service mix, provider reliance, growth history, and location in San Diego.
What steps should a practice owner follow to ensure a successful sale and transition?
The process involves Valuation to understand true value, Preparation of financial and operational documents, Confidential Marketing to attract qualified buyers, Negotiation and Due Diligence to finalize the deal, and Closing with legal documentation. Planning for post-sale roles, protecting staff, and financial structuring are critical for a smooth transition.
