Guide to Selling a Dermatology Practice in Illinois

The market for dermatology practices in Illinois is attracting significant attention from buyers. For practice owners, this presents a unique window of opportunity. However, navigating the complexities of a sale requires more than just a willing buyer. A successful transition depends on strategic preparation, a clear understanding of your practice’s value, and a well-managed process. This guide provides key insights for Illinois dermatologists considering their next chapter.

Market Overview

The current environment for selling a dermatology practice is strong, both nationally and here in Illinois. Well-funded private equity groups and larger strategic health systems, like Schweiger Dermatology Group which is already active in the state, are seeking to expand their footprint. This demand is not just a passing trend. It is fueled by fundamental strengths within the specialty itself.

Why Buyers Target Dermatology

Buyers are drawn to dermatology for its unique business model. Practices often have a healthy mix of medical, surgical, and cosmetic services. This creates diverse revenue streams and reduces dependence on insurance reimbursements, a significant risk factor in other specialties. The growing demand from an aging population and an increased focus on aesthetics means the specialty has a strong outlook for continued growth.

The Illinois Landscape

In Illinois, from Chicago to the surrounding counties, we see buyers actively looking for well-run practices to acquire. These can be “platform” acquisitions, where a buyer establishes their first major presence in the region, or “tuck-in” acquisitions to expand an existing network. For a seller, this activity means you have options, but it also increases the importance of a structured approach to ensure you connect with the right partner on the best possible terms.

Key Considerations

Before you even think about putting your practice on the market, some internal work is necessary. Addressing these points early on can prevent major delays and challenges down the road. Selling a practice is a significant decision. It requires careful thought to get it right.

Here are a few initial points to consider:

1. Get Your Ownership Aligned. If you have partners, the single most important first step is ensuring every owner is in complete agreement on the decision to sell. A lack of consensus is one of the quickest ways for a potential deal to fall apart, which can damage your reputation with buyers.
2. Prepare for a Deep Dive. Buyers will conduct extensive due diligence. They will scrutinize your financials, billing and coding practices, and operational procedures. Getting your documents organized ahead of time and identifying any potential issues shows professionalism and builds trust.
3. Know Who You’re Talking To. Not all buyers are created equal. It is important to vet them just as they are vetting you. We advise our clients to speak with other dermatologists who have sold to a potential partner. You need to ensure their clinical vision, culture, and post-sale expectations align with your own.

Market Activity

The high level of market activity means that if you own a thriving dermatology practice in Illinois, you have likely received unsolicited calls or emails from potential buyers. This interest from both private equity funds and established medical groups is a clear sign of the market’s strength.

Managing Buyer Interest

An unsolicited offer can be flattering, but it is rarely the best one you can get. These initial offers are designed to start a conversation, often with pressure for a quick, exclusive decision. It is important to resist this pressure. A single offer gives a buyer all the leverage. You have no way to know if the price or terms are competitive.

Creating a Competitive Process

The key to maximizing your practice’s value is to create a competitive environment. This involves confidentially approaching a curated list of qualified buyers simultaneously. Generating interest from multiple parties allows you to compare not just the purchase price, but also other critical terms like your future salary, clinical autonomy, and the vision for the practice. This process turns the tables and puts you, the seller, in control of your own exit.

Sale Process

A well-run sale process protects your interests and keeps the transaction moving forward smoothly. While every deal is unique, a typical process involves several distinct phases. Understanding these steps can help demystify the journey from your initial decision to the closing table. Many deals encounter unexpected challenges during due diligence, which is why preparation is so important.

Valuation

“What is my practice worth?” This is the first question every owner asks. In medical M&A, the answer is based on more than just revenue. The most common starting point for valuation is a multiple of your practice’s Adjusted EBITDA.

1. Start with Adjusted EBITDA. EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of cash flow. We then “adjust” it by adding back personal expenses run through the business or normalizing an owner’s salary to market rates. This gives a true picture of the practice’s profitability.
2. Apply the Right Multiple. The multiple a buyer is willing to pay depends on risk and growth potential. Larger, more diversified practices command higher multiples. For dermatology, these can range significantly:
   • 5-7x for practices with under $3 million in EBITDA
   • 7-9x for practices in the $3-5 million range
   • 9x and above for larger “platform” practices
3. Tell the Right Story. Numbers alone don’t create value. The story does. A practice with multiple providers, a strong base of cosmetic self-pay services, and efficient operations is a lower-risk investment for a buyer. Framing this narrative correctly is key to achieving a premium valuation. A comprehensive valuation is the foundation of a successful strategy.

Post-Sale Considerations

The final sale price is only one part of a successful deal. What your life and career look like after the transaction is just as important. These are not afterthoughts. They are critical deal points that must be negotiated and clearly defined in the legal agreements before you close.

Your Role After the Sale

For many physicians, selling does not mean retiring. You may want to continue practicing for several years, but with less administrative burden. Your employment agreement, including compensation, schedule, and level of clinical autonomy, is a crucial component of the overall deal structure. You need to have a clear understanding of your role and responsibilities under new ownership.

Protecting Your Team and Legacy

You have spent years building not just a business, but a team and a culture. A key concern for most sellers is ensuring their long-term staff are cared for during the transition. The buyer’s plan for retaining your team, including their approach to benefits and culture, should be a major point of discussion. The right partner will see your staff as one of the practice’s most valuable assets and will work to protect the legacy you have built.