The Austin market for dermatology practices is more active than ever. Private equity firms and strategic buyers see the value in our city’s growth and the profitability of the specialty. For you as a practice owner, this presents a significant opportunity. However, navigating this landscape requires a clear understanding of your practice’s true value and a strategy to approach the right buyers. This guide provides a straightforward overview of what you should know when considering the sale of your Austin dermatology practice.
Curious about what your practice might be worth in today’s market?
Market Overview: The Austin Opportunity
Austin is not just a great place to live; it is a fantastic place to own a dermatology practice. The citys rapid population growth and strong economy create a robust patient base. For sellers, this environment makes your practice a highly attractive asset to buyers looking to enter or expand in a thriving Texas market. The financial profile of the specialty itself adds to the appeal.
High Profitability
Dermatology is one of the most profitable medical specialties. Well-run practices can see profit margins of around 43%, a figure that consistently catches the eye of sophisticated investors.
Strong Revenue Potential
The revenue potential further separates dermatology from other fields. A full-time physician can generate significant revenue, with research showing medians around $1.3 million for medical dermatology and up to $1.8 million for cosmetic services. This strong top-line performance is a key driver of high valuations.
Key Considerations for Austin Sellers
When you decide to sell, buyers will look beyond the high-level numbers. They want to understand the story and stability of your practice. Here are a few things they will focus on, and that you should prepare to present in the best light.
- Your Service Mix. Do you focus on medical, cosmetic, or a blend of both? A diverse service offering, especially with cash-pay cosmetic procedures, can be a major value driver.
- Your Team. A stable, experienced team of providers and support staff is a huge asset. It shows the practice is not entirely dependent on you and can transition smoothly to new ownership.
- Your Patient Base. Buyers will want to see a consistent and loyal patient base with clear growth trends. Be ready to discuss your key referral sources and patient demographics.
- Your Growth Story. What is the potential for growth? Can a new owner add ancillary services, bring in another provider, or expand to a new location? Articulating this upside is critical.
Market Activity: Who Is Buying in Texas?
The buyer landscape in Texas is dynamic and dominated by two main groups: private equity (PE) firms and Management Services Organizations (MSOs). We have seen this firsthand, with firms like U.S. Dermatology Partners and DermCare Management actively acquiring practices in the state. These buyers are sophisticated and bring significant capital, but they have different goals. Understanding their motivations is key to finding the right fit for your personal and financial objectives. Many owners worry about losing control, but the right deal structure can preserve your clinical autonomy while providing liquidity.
| Buyer Type | Primary Goal | Typical Seller Role Post-Sale |
|---|---|---|
| Private Equity (PE) | Build a larger platform for a future sale in 5-7 years. | Remain for 3-5 years, often with equity rolled into the new company. |
| Strategic MSO | Expand geographic footprint and operational efficiency. | Stay on for a transition period, often 1-3 years. Clinical role is primary. |
| Local Practice/Group | Grow market share in a specific region. | Role can be flexible, from a quick transition to a long-term partnership. |
The Sale Process: From Preparation to Closing
Selling your practice is not a single event. It is a process that, when managed correctly, can be completed in under six months. It generally follows a clear path from initial preparation to the final handshake.
- Confidential Valuation. The first step is to understand what your practice is truly worth. This involves a deep financial analysis that goes far beyond a simple revenue multiple.
- Strategic Positioning. We then package your practice’s story, highlighting the strengths that will appeal most to qualified buyers. This is done through a confidential information memorandum.
- Buyer Outreach. We confidentially approach a curated list of potential buyers from our proprietary database to create a competitive environment.
- Negotiation. We manage offers and negotiate terms on your behalf to secure the best possible price and structure for your goals.
- Due Diligence and Closing. This is the final stage where the buyer verifies all information about the practice. Proper preparation here is critical to prevent last-minute issues that could derail the sale.
Valuation: What Is Your Practice Really Worth?
Many physicians I talk to underestimate the value of their practice because they look at their tax returns. Sophisticated buyers, however, look at value differently. They focus on a metric called Adjusted EBITDA, which represents the true cash flow and earning potential of your business. A professional valuation is the foundation of any successful sale.
Understanding Your True Earnings (Adjusted EBITDA)
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. More important is Adjusted EBITDA. We calculate this by taking your net income and adding back personal expenses run through the business (like a vehicle lease), one-time costs, and any owner salary that is above a normal market rate. For example, a practice with $500,000 in net income could easily have an Adjusted EBITDA of $700,000 or more once normalized. This is the number buyers use for their calculations.
Applying the Right Multiple
Once we establish your Adjusted EBITDA, we apply a valuation multiple. This is not a fixed number. It varies based on your practice’s size, your reliance on insurance vs. cash-pay, whether you have associate-driven revenue, and your growth profile. For a multi-provider dermatology practice with over $1 million in EBITDA, multiples can often range from 5.5x to 7.5x or even higher in today’s market.
Post-Sale Considerations: Planning for What’s Next
The sale of your practice is not the end of your story. It is the beginning of a new chapter, and the terms of the deal will define what that chapter looks like. A well-structured transaction protects your future and your legacy. Here are a few things to plan for.
- Your Future Role. With most PE and MSO buyers, you should expect to stay on for a period of 2 to 5 years. It is important to negotiate your role, compensation, and clinical responsibilities upfront so there are no surprises.
- Your Financial Upside. Many deals include an “equity rollover,” where you retain a percentage of ownership in the new, larger company. This provides the potential for a “second bite at the apple” when the new entity is sold again, which can significantly increase your total financial return.
- Your Staff and Legacy. We help you negotiate terms that protect your long-serving staff and ensure the culture you built is respected. A smooth transition for your team and patients is a top priority in any sale we manage.
- Your After-Tax Proceeds. How the sale is structured has massive tax implications. An asset sale is taxed differently than an entity sale. Planning for tax efficiency from the very beginning can save you hundreds of thousands of dollars.
The structure of your practice sale has major implications for your after-tax proceeds.
Frequently Asked Questions
What makes Austin an attractive market for selling a dermatology practice?
Austin’s rapid population growth, strong economy, and robust patient base make it an attractive market. The city’s growth and the profitability of dermatology as a specialty appeal to private equity firms and strategic buyers.
How is the value of a dermatology practice in Austin typically determined?
The value is mainly based on Adjusted EBITDA, which accounts for true cash flow and earnings potential by adjusting net income for personal expenses, one-time costs, and above-market owner salaries. A valuation multiple based on practice size, revenue mix, and growth potential is then applied, often ranging from 5.5x to 7.5x or more for multi-provider practices.
Who are the typical buyers of dermatology practices in Texas, and what are their goals?
The main buyers are private equity firms and Management Services Organizations (MSOs). Private equity aims to build larger platforms for future resale, while MSOs focus on geographic expansion and operational efficiency. Local practices may also buy to grow market share. Seller roles post-sale vary from staying several years with equity to shorter transition periods.
What key factors do buyers look at when evaluating a dermatology practice in Austin?
Buyers assess the service mix (medical vs. cosmetic), team stability, patient base loyalty and growth trends, and growth potential such as adding services, providers, or new locations. Demonstrating a well-rounded, growing practice with a strong team and diverse offerings enhances value.
What are important considerations for dermatology practice owners after selling in Austin?
Owners often stay on 2-5 years post-sale, so negotiating roles and compensation is crucial. Many deals offer equity rollover for future financial gains. Protecting staff and practice culture, ensuring smooth transitions, and structuring the sale for tax efficiency are essential for long-term success and maximum proceeds.