For owners of dermatology practices, Sacramento’s thriving dermatology market presents a prime opportunity. The decision to sell is one of the most important in your career. It requires careful planning to turn your hard-built practice into a successful financial outcome. This guide provides a clear overview of the market, key steps in the sale process, and how to think about valuation, giving you the confidence to move forward.
Market Overview
The Sacramento market is not just healthy. It is booming for dermatologists. This creates a compelling environment for practice owners considering a sale. The data shows a clear picture of high demand from a valuable patient population.
Unprecedented Patient Demand
Local interest in dermatology is surging. Online search volume for dermatologists in Sacramento grew by a staggering 161% in the last year. More importantly, 82% of these bookings are from new patients. Buyers see this as a sign of strong, sustainable growth, as these new patients often become loyal, long-term sources of revenue for your practice.
A Stable, Tech-Forward Market
This growth is built on a stable foundation. In California, 89% of dermatology appointments are booked using commercial insurance, signaling a reliable payer mix that sophisticated buyers look for. These patients are also comfortable with technology, with many booking appointments online outside of standard business hours. A practice with modern, efficient booking systems is seen as more valuable and easier to transition.
Key Considerations
Beyond market statistics, a potential buyer is looking at the story and trajectory of your practice. They are not just acquiring your current patient list and equipment. They are investing in future growth. Buyers in today’s market value practices that demonstrate an entrepreneurial spirit. This does not mean you need a massive expansion plan. It means showing a clear view toward continued growth, efficient operations, and a forward-thinking approach. There is always an opportunity to sell a well-run practice, so the goal is not to rush into a sale. The goal is to prepare your practice so that when the time is right for you, you can command a premium value.
Market Activity
The demand for dermatology services has not gone unnoticed by investors. Both private equity groups and larger strategic health systems are actively looking to partner with or acquire successful practices. This high level of buyer interest creates a competitive environment, which can be a major advantage for a prepared seller.
Here are three key trends driving market activity today:
1. Demographic Tailwinds. The aging population provides a long-term growth driver for both medical and cosmetic dermatology, making practices in this specialty a safe and attractive investment.
2. Investor Competition. With many buyers looking for a limited number of high-quality practices, we are seeing competitive tension that can lead to more favorable deal terms and higher valuation multiples for sellers.
3. Focus on Profitability. Buyers determine value using a multiple of your practice’s adjusted earnings (EBITDA). Practices with over $1M in EBITDA can often command multiples in the 5.5x to 7.5x range, or even higher for larger, well-run platforms. Timing the sale to align with peak profitability and market demand is critical.
The Sale Process
Selling your practice is not a single event. It’s a structured process designed to protect your confidentiality while maximizing your final sale price. While every deal is unique, most follow a proven path. An unsolicited offer might feel flattering, but it rarely represents the best deal. A competitive process almost always yields a better outcome.
Here is a simplified look at the stages of a sale:
| Stage | What It Means | Where an Advisor Helps |
|---|---|---|
| Preparation | Gathering financial data and preparing a compelling story about your practice’s growth and potential. | We help you clean up financials and frame a narrative that attracts premium buyers. |
| Marketing | Confidentially approaching a curated list of qualified financial and strategic buyers to create competitive tension. | We run a discrete, professional process with our proprietary database, ensuring you see multiple offers. |
| Negotiation | Analyzing offers, negotiating key terms (not just price), and selecting the best partner for your goals. | We manage negotiations to get you the best structure, terms, and cultural fit. |
| Due Diligence | The buyer thoroughly inspects your financials, operations, and legal standing before closing. | We manage the data room and anticipate buyer requests to prevent surprises and keep the deal on track. |
Valuation
The most common question a practice owner has is, “What is my practice worth?” The answer is more complex than a simple rule of thumb. Sophisticated buyers value your practice based on a metric called Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This isn’t just your net income. It is a measure of your practice’s true cash flow. To calculate it, we start with your net income and add back owner-specific expenses like an above-market salary, personal car leases, or other benefits. For example, a practice with $500,000 in net income might have a true Adjusted EBITDA of $700,000 or more once normalized. This higher number is then multiplied by a market-rate multiple to determine your enterprise value. Your multiple is influenced by factors like your provider mix, growth rate, and reliance on a single physician. Getting this calculation right is the foundation of a successful sale.
Post-Sale Considerations
A successful transaction is not just about the final price. It s about what you do with it and what your role looks like after the sale. The best deals are structured to meet your personal and financial goals long after the papers are signed. Thinking about these issues early in the process is one of the most important things you can do.
Structuring Your Payout
Many owners are surprised to learn that they don’t always receive 100% of the sale price in cash at closing. Modern deals often include components like rollover equity, where you retain a stake in the new, larger company. This gives you a “second bite at the apple” when that company is sold again in the future. The structure of your sale also has major implications for your after-tax proceeds. Planning ahead can make a significant difference in what you ultimately take home.
Protecting Your Legacy
What happens to your staff and your name after the sale? For many physicians, this is just as important as the price. The right partner will be one who respects your clinical autonomy and is committed to taking care of the team you built. Negotiating these protections into the deal from the start ensures your legacy is preserved and your transition out of the practice happens on your terms.
Frequently Asked Questions
What is driving the high demand for dermatology practices in Sacramento, CA?
The Sacramento dermatology market is booming due to unprecedented patient demand, with online search volume for dermatologists growing by 161% in the last year. Additionally, 82% of appointments are from new patients, indicating strong potential for sustainable growth.
How do buyers typically value a dermatology practice in Sacramento?
Buyers use Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to value dermatology practices. This adjusted cash flow metric considers normalized earnings, excluding owner-specific expenses, and applies a market-rate multiple (often between 5.5x to 7.5x) for practices with over $1M EBITDA.
What are the key steps involved in selling a dermatology practice in Sacramento?
The sale process generally includes four key stages:
- Preparation – Collecting financial data and crafting a growth narrative.
- Marketing – Confidentially reaching out to qualified buyers to generate competitive offers.
- Negotiation – Assessing offers and selecting terms that align with your goals.
- Due Diligence – Providing detailed practice information for buyer review to finalize the deal.
What post-sale considerations should dermatology practice owners keep in mind?
Post-sale, owners should focus on structuring their payout, as deals often include components like rollover equity allowing continued stake in the company. They should also negotiate protections for their legacy, such as safeguarding staff and maintaining clinical autonomy to ensure a smooth transition.
How does the Sacramento dermatology market’s payer mix and technology usage impact practice valuation?
In Sacramento, 89% of dermatology appointments are booked using commercial insurance, providing a reliable and favorable payer mix. Additionally, a tech-forward approach with efficient online booking systems enhances practice appeal and value, as buyers see it as a sign of operational efficiency and easier transition.