The market for selling dermatology practices in Utah is active and full of opportunity. National industry growth is strong, and private equity investors are increasingly targeting successful practices. For practice owners, this means potential for premium valuations is high. However, navigating this new landscape requires careful planning to achieve your personal and financial goals. This guide provides a high-level overview of what you should know as you consider your next steps.
Market Overview
Utah’s strong economy and growing population create a fertile ground for dermatology practices. The demand for both medical and cosmetic services is high, supporting healthy revenues and profit margins. Understanding the two major forces shaping today’s market is the first step toward a successful sale.
A Growing and Profitable Field
The dermatology industry is expanding rapidly. Nationally, the field is projected to grow substantially by 2026. This growth is reflected in strong practice revenues. In 2019, the median revenue per full-time physician was $1.3 million for medical dermatology and an impressive $1.8 million for cosmetic dermatology. This profitability makes well-run practices in Utah attractive acquisition targets.
The Rise of Private Equity
In recent years, private equity (PE) firms have become major buyers of dermatology practices. These buyers are looking to invest in and grow established practices. While this trend creates significant opportunities for sellers to achieve high valuations, PE buyers have specific criteria and sophisticated methods. Navigating a conversation with them requires a different level of preparation.
Key Considerations for Utah Sellers
Beyond the market numbers, a successful sale depends on your practice’s specific story. Buyers don’t just purchase assets. They invest in a future. Your unique mix of medical and cosmetic services, your patient demographics, and your potential for growth are all part of the value. It’s also important to consider your staff and your legacy. Many owners we work with start planning 2 to 3 years before a potential sale. This gives them time to organize financials, strengthen operations, and craft a compelling growth narrative that maximizes value when the time is right. Preparation pays off. Buyers pay for proven performance, not just potential.
Current Market Activity
The market is not just theoretical. It’s active. Consolidation is the dominant trend, driven by different types of buyers with distinct goals. We have seen local Utah practices successfully sell, like a Salt Lake City dermatology practice with $900,000 in annual collections that recently found a new owner. The key is understanding who is buying and what they are looking for. Running a confidential, competitive process ensures you connect with the right type of buyer for your specific goals, not just the first one to make an offer.
| Buyer Type | Primary Focus |
|---|---|
| Private Equity Firm | Scalable platforms, high EBITDA, growth potential |
| Regional Health System | Geographic expansion, patient referral network |
| Local Physician Group | Acquiring market share, adding a new provider |
The Sale Process at a Glance
Selling your practice follows a structured path. While it seems complex, we can break it down into four main stages. It starts with Preparation, where you and your advisory team assemble financial documents and define your goals. Next comes Marketing, where your practice is confidentially presented to a curated list of qualified buyers. The most critical stage is Due Diligence. Here, the chosen buyer will thoroughly inspect your practice’s financial, legal, and operational health. Many deals encounter unexpected challenges at this stage. Proper preparation is your best defense. The final stage is Closing, where the legal documents are signed and the transition plan is initiated.
How Your Practice is Valued
So, what is your practice actually worth? The most common metric buyers use is Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). This isn’t just the profit on your tax return. It’s your profit after “normalizing” for owner-specific expenses, like a car lease or an above-market salary. We often find this number is much higher than owners expect. This Adjusted EBITDA is then multiplied by a “multiple” to determine the practice value. Here are four factors that drive your multiple:
- Scale & Profitability: Higher and more consistent EBITDA reduces buyer risk and increases the multiple.
- Provider Mix: Practices less reliant on a single owner command higher values.
- Growth Story: A clear, believable path to future growth is highly attractive to sophisticated buyers.
- Service Blend: A strong, balanced mix of medical and high-margin cosmetic services can boost your valuation.
Planning for Life After the Sale
The transaction is not the end of the story. It is a new beginning. Thinking about what comes next is a critical part of the process. You need a plan for your tax strategy to optimize your net proceeds. You also need to decide on your desired level of involvement. Some sellers want a clean break, while others prefer to stay on for a period of time. Structures like earnouts or an equity rollover, where you retain ownership in the larger new company, can offer continued financial upside. A well-designed sale process protects not only your financial future but also your legacy and the dedicated staff who helped you build it.
Frequently Asked Questions
What is the current market outlook for selling dermatology practices in Utah?
The market for selling dermatology practices in Utah is active and full of opportunity due to a strong economy and growing population. High demand for medical and cosmetic dermatology services supports healthy revenues and profit margins, making these practices attractive acquisition targets.
How does private equity influence the sale of dermatology practices in Utah?
Private equity firms have become significant buyers of dermatology practices, seeking to invest in and grow established practices. This trend can lead to premium valuations for sellers, but requires careful preparation as private equity buyers have specific criteria and sophisticated acquisition methods.
What factors determine the valuation of a dermatology practice in Utah?
Valuation primarily depends on Adjusted EBITDA, which normalizes profits by excluding owner-specific expenses. Key factors influencing the valuation multiple include the practice’s scale and profitability, provider mix, growth story, and the blend of medical and cosmetic services offered.
What are the key steps involved in selling a dermatology practice in Utah?
The sale process includes Preparation (organizing financials and defining goals), Marketing (confidentially presenting the practice to buyers), Due Diligence (comprehensive buyer review of financial, legal, and operational aspects), and Closing (finalizing legal documents and transition plans).
What should sellers plan for after selling their Utah dermatology practice?
Sellers should focus on tax strategy to optimize net proceeds and decide on their level of future involvement. Options include a clean break, earnouts, or an equity rollover to retain some ownership. Planning should protect the seller‚Äôs financial future, legacy, and the staff who contributed to the practice’s success.