The market for dermatology practices in Denver is strong, driven by national growth and significant buyer interest. For practice owners, this presents a unique window of opportunity. However, turning that opportunity into a successful exit requires more than just a healthy market. It demands careful preparation, strategic positioning, and a clear understanding of what sophisticated buyers are looking for today. This guide provides the insights you need to navigate the process.
Curious about what your practice might be worth in today’s market?
The Denver Dermatology Market: A Snapshot
The timing for considering a sale is excellent. The U.S. dermatology market is forecast to grow at over 7% annually through 2034, and the number of practicing dermatologists has been on a steady rise. This national momentum creates a very favorable environment for practice owners in a desirable, high-growth city like Denver.
Strong Revenue Potential
Dermatology remains one of the most profitable specialties. National benchmarks show median revenues around $1.3 million for medical dermatology and $1.8 million for cosmetic practices. Well-run practices can achieve operating margins north of 25%. This financial strength makes your practice an attractive asset to a wide range of buyers.
The Denver Advantage
Denver’s dynamic economy and growing population add another layer of value. Buyers are not just acquiring a practice. They are investing in a thriving community with a strong patient base. This makes Denver a prime target for groups looking to expand their footprint in the Mountain West.
Key Considerations Before You Sell
A strong market is a great starting point, but the final value of your practice is determined by its operational health. Before you even think about putting your practice on the market, it is important to look inward. We see many owners overlook internal factors that can either boost or suppress their valuation.
Three areas deserve your immediate attention:
- Optimize Your Operations. Skyrocketing staffing costs are a major concern for buyers. Likewise, poor revenue cycle management can be a hidden drag on profitability. Research shows practices can lose nearly 20% of revenue to simple billing and collection issues. Tightening these areas demonstrates operational maturity.
- Understand Your Provider Mix. Is your practice’s success tied entirely to you, or do you have associate providers driving revenue? Practices that are not dependent on a single owner are less risky for a buyer and typically command higher valuations.
- Protect Your Legacy. A sale affects more than just you. It impacts your staff and the patients you have served for years. Planning for a smooth transition that protects your team’s future and ensures continuity of care is a critical part of the process.
Understanding Today’s Market Activity
The landscape of practice ownership has changed dramatically. The era of solo-to-solo practice sales is fading. Today, the market is defined by consolidation, with private equity (PE) firms and large dermatology management groups (DMGs) as the most active buyers. By 2023, it was estimated that up to 15% of all private dermatology practices were backed by private equity.
This shift changes the game for independent owners. You are no longer just selling to another doctor. You are negotiating with professional investors who use sophisticated methods to value and acquire practices. Understanding this dynamic is key to a successful outcome.
| Practice Model | Market Trend | Implication for You as a Seller |
|---|---|---|
| Solo / Small Practice | Decreasing Share | An attractive “tuck-in” acquisition for a larger group looking to expand in Denver. |
| PE-Backed Group | Increasing Share | These are sophisticated buyers who pay premium valuations for well-run practices. |
The Path to a Successful Sale
Selling a practice should not be a reactive event. The best outcomes are achieved through a deliberate, confidential, and structured process. While every sale is unique, the journey generally follows a clear path that protects your interests and maximizes value. Running a professional process ensures you create a competitive environment where buyers compete for your practice, rather than the other way around.
Here are the four main phases:
- Preparation and Strategy. This is where the most value is created. It involves a deep dive into your financials to calculate your true earnings, preparing marketing materials that tell your practice’s story, and identifying the right types of potential buyers.
- Confidential Marketing. Your practice is confidentially introduced to a curated list of qualified buyers. This is done without alerting your staff, patients, or competitors, preserving the stability of your practice.
- Negotiation and Structure. You will likely receive multiple offers. We help you compare them not just on price, but on terms like your future role, staff retention, and clinical autonomy.
- Due Diligence and Closing. The chosen buyer will conduct a thorough review of your practice. Proper preparation prevents surprises and ensures a smooth path to the closing table.
How Your Dermatology Practice Is Valued
One of the first questions any owner asks is, “What is my practice worth?” The answer is more complex than a simple multiple of revenue. Sophisticated buyers value your practice based on its profitability and future potential, not just its top-line collections.
Beyond Net Income: Adjusted EBITDA
The single most important metric in a practice sale is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). We start with your net income and then add back expenses that a new owner would not incur. These include your personal salary above a market rate, personal car expenses, or other one-time costs. This reveals the true cash flow of the business, which is what a buyer is purchasing. For example, a recent Colorado dermatology practice with owner’s discretionary earnings of nearly $538,000 shows the significant cash flow potential buyers look for.
What Determines Your Multiple?
That Adjusted EBITDA figure is then multiplied by a number (the “multiple”) to reach your enterprise value. This multiple is not fixed. It is influenced by factors like your practice’s size, its reliance on a single provider, the mix of cosmetic versus insurance-based revenue, and its growth prospects. While smaller practices might see lower multiples, well-positioned practices with over $1M in EBITDA can command multiples of 5.5x to 7.5x or even higher in today’s market.
Planning for Life After the Sale
The day you sign the papers is not the end of the journey. A successful transaction includes a clear plan for what comes next for you, your team, and your legacy. Thinking about these elements early in the process allows you to negotiate an exit that truly aligns with your personal and financial goals. Many owners are surprised to learn they have more options than a simple cash sale.
Consider these key post-sale elements:
- Your Future Role. Do you want to retire immediately, or would you prefer to continue practicing for a few years with less administrative burden? You can structure a deal that accommodates your ideal timeline.
- The Payout Structure. You may not have to take all your proceeds as cash at closing. Many deals include an “equity rollover,” where you retain a minority stake in the new, larger company. This gives you a potential “second bite at the apple” when that larger group sells in the future.
- A Smooth Transition. A key part of any deal is ensuring continuity of care for your patients and stability for your staff. A good partner will be committed to retaining your team and honoring the culture you have built.
Frequently Asked Questions
What is the current market outlook for selling a dermatology practice in Denver, CO?
The market for dermatology practices in Denver is strong and growing, driven by national growth trends and significant buyer interest. The U.S. dermatology market is forecast to grow over 7% annually through 2034, making Denver a prime location due to its dynamic economy and growing population.
What are the key factors that influence the valuation of a dermatology practice in Denver?
Valuation is primarily based on Adjusted EBITDA rather than just revenue. Factors influencing the multiple applied to EBITDA include practice size, reliance on a single provider, revenue mix (cosmetic vs insurance-based), operational health, and growth prospects. Well-positioned practices can command multiples from 5.5x to 7.5x or higher.
Who are the typical buyers for dermatology practices in Denver today?
The market has shifted from solo-to-solo sales to consolidation. Typical buyers now include private equity firms and large dermatology management groups, which are sophisticated investors offering premium valuations for well-run practices. Solo or small practices may be acquired as ‘tuck-in’ additions by larger groups.
What should I do to prepare my dermatology practice for sale?
Owners should optimize operations to reduce costs, improve revenue cycle management, and ensure the practice is not solely dependent on one provider. It’s important to plan for a smooth transition preserving staff and patient care continuity, and undertake a detailed financial review to identify true earnings and improve the practice’s attractiveness to buyers.
What options do I have for life after selling my dermatology practice?
You can choose to retire immediately or continue practicing with less administrative responsibility. Deals may include cash at closing or equity rollover options to retain minority stakes in the acquiring company. Negotiating the future role, payout structure, and ensuring a smooth transition for your staff and patients is important for a successful exit aligned with your personal and financial goals.