The Chicago Med Spa market is strong, with private equity interest and high patient demand creating significant opportunities for practice owners. Selling your practice here, however, involves navigating a unique regulatory landscape that can impact your valuation and the structure of your deal. Understanding these local complexities is the first step toward a successful and profitable exit. This guide explains the key factors you need to consider.
Market Overview
Chicago’s Med Spa market reflects the booming national trend. The industry is not just growing; it is thriving, creating a seller’s market for well-run practices. Average annual revenues for single-location med spas now approach $2 million, with efficient practices seeing profit margins between 20% and 35%. This financial health has not gone unnoticed by larger buyers.
A Strong Patient Base
Demand in Chicago is strong. Women make up the vast majority of clients, with the 35-54 age bracket leading the way. However, we are seeing significant growth in treatments for patients aged 18-34, ensuring a long-term pipeline of clients for any new owner. This established and growing demand is a key selling point for your practice.
A Market of Independent Owners
The landscape is dominated by independent, single-location practices. This creates an environment ripe for consolidation by private equity groups and larger strategic buyers looking to build a presence in the Chicago area. For an independent owner, this means your practice is likely an attractive target, but you will be negotiating with sophisticated buyers.
Key Considerations
When selling a Med Spa in Chicago, your biggest consideration is a state-specific rule: the Corporate Practice of Medicine (CPOM) doctrine. This is not a minor detail. it fundamentally shapes who can buy your practice and how the sale must be structured.
In Illinois, only a licensed physician or a physician-owned corporation can own the clinical side of a medical practice and collect revenue from medical procedures. This means a non-physician or a private equity fund cannot directly buy your entire practice outright. We find many owners are not aware of how this impacts their exit.
The common, and correct, solution is a Management Services Organization (MSO) structure. In this model, the clinical assets are sold to a physician-friendly entity, and the administrative and management assets are sold to the buyer’s MSO. Getting this structure wrong can attract penalties from state regulators, who have increased their scrutiny recently.
Market Activity
The Chicago market is not just theoretically attractive; it is active. Both strategic buyers and private equity investors are actively seeking to acquire or partner with profitable Med Spas in the area. This competitive tension is a great advantage for sellers who are properly prepared for the market.
Here is a snapshot of what we are seeing:
- Real Transactions Are Happening. In early 2023, Chicago’s own Trouvaille Med Spa was successfully acquired by the national group MedSpa Partners Inc., showing that major players are targeting our city.
- Valuations Are Strong. Recent listings show how profitability drives value. One Chicago Med Spa with over $350,000 in earnings was brought to market, while another in Lincoln Park with nearly $300,000 in earnings was listed for $1.2 million.
- Private Equity is a Key Driver. The biggest trend is the rise of private equity investment. These groups are looking for well-run practices to use as “platform” investments to build larger regional groups. This competition for the best practices is pushing valuations higher.
Sale Process
Many owners think selling is a single event, but it is a multi-stage process that starts long before the practice is listed. If you are thinking of selling in the next 2-3 years, the time to begin preparing is now.
The first phase is preparation. This involves organizing your financial statements, ensuring your legal structure is compliant with CPOM, and documenting your operational procedures. This is where you build the story that will attract premium buyers.
Next, we confidentially market the practice to a curated list of qualified buyers. This creates a competitive environment to drive up the price. After negotiating offers, you enter the due diligence phase. This is an intense period where the buyer verifies every detail of your practice, from financials to patient records. Any issues discovered here can threaten the deal. The final stage is closing, where legal documents are signed and the transition to the new owner begins.
Valuation
Many owners mistakenly believe their practice’s value is based on revenue. Sophisticated buyers, however, value your Med Spa based on its profitability, specifically its Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
We calculate this by taking your net income and adding back non-operational or owner-specific costs to find the true cash flow of the business. This Adjusted EBITDA is then multiplied by a number called a “multiple” to determine the total enterprise value. While a practice with under $500K in EBITDA might get a 3x-5x multiple, a practice with over $1M could command 5.5x-7.5x or more. The key is that not all practices are worth the same multiple.
Your specific multiple depends on several factors:
| Factor | Lower Multiple | Higher Multiple |
|---|---|---|
| Provider Model | Relies solely on owner | Associate-driven, low owner reliance |
| Services | Basic aesthetic services | Diverse, high-margin services (injectables) |
| Growth | Stagnant or flat revenue | Consistent year-over-year growth |
| Systems | Owner-run operations | Documented, professional systems |
Post-Sale Considerations
Selling your practice isn’t just an ending; it’s a transition. What happens after the closing date is just as important as the deal itself and should be planned for during negotiations. Your role, your team’s future, and your final financial outcome are all on the table.
Many deals, especially with private equity, include a transition period where you may stay on to ensure a smooth handover. This can be structured with an “earnout,” where you receive additional payments for hitting performance targets post-sale. Another common structure is an “equity rollover,” where you retain a minority stake in the new, larger company. This gives you a “second bite of the apple” when the larger group is eventually sold again.
Structuring these agreements correctly is critical. It allows you to protect your staff, preserve the legacy of the practice you built, and participate in the future success of the business. Thinking about your personal and financial goals for the next chapter of your life is a key part of designing the right exit.
Frequently Asked Questions
What is the current market demand for Med Spa practices in Chicago, IL?
The Chicago Med Spa market is strong and thriving, with high patient demand particularly among women aged 35-54, and growing interest in the 18-34 age group. This creates a seller’s market with many buyers seeking well-run practices.
How does the Corporate Practice of Medicine (CPOM) doctrine in Illinois affect selling a Med Spa?
The CPOM doctrine restricts ownership of the clinical side of the Med Spa to licensed physicians or physician-owned corporations, meaning non-physicians and private equity funds cannot directly buy the entire practice. Sellers must use a Management Services Organization (MSO) structure to comply, separating clinical and administrative assets.
What factors most influence the valuation of a Med Spa practice in Chicago?
Valuation is based on Adjusted EBITDA (profitability), not just revenue. Factors affecting multiples on EBITDA include the provider model (owner-driven vs. associate-driven), range of services offered, consistent revenue growth, and whether professional systems and documented operations are in place.
What is the typical process involved in selling a Med Spa practice in Chicago?
Selling involves multiple stages: preparation (organizing finances, legal compliance, operational documentation), confidential marketing to qualified buyers, negotiation and due diligence, and finally closing the deal with legal transfer and ownership transition.
What should sellers consider regarding post-sale arrangements in Med Spa practice sales?
Post-sale considerations include transition periods where the seller may stay on (often with earnout payments based on performance) and equity rollovers allowing sellers to retain minority stakes. These arrangements help protect staff, preserve the practice’s legacy, and provide continuing financial benefits.