The Med Spa market is booming, presenting a significant opportunity for practice owners. If you own a practice in Tennessee, however, selling involves navigating a unique regulatory landscape that can complicate the process. This guide provides insight into the market, key state-specific considerations, and the steps to a successful sale. Understanding these factors is the first step toward capitalizing on the current market and achieving your goals.
Market Overview
Your Med Spa is part of a rapidly expanding industry. The market is driven by high demand for non-surgical aesthetic treatments and a growing focus on wellness. This creates a favorable environment for practice owners considering a sale.
A Market of High Growth
The global medical spa market is projected to grow from over $18 billion in 2023 to nearly $50 billion by 2030. This incredible growth attracts significant interest from buyers looking to enter a profitable and resilient sector. For many owners, this means the timing for a potential sale has never been better. However, a sale in Tennessee is not as straightforward as in other states.
The Tennessee Exception
Tennessee has a strict ban on the Corporate Practice of Medicine (CPOM). This law dictates that a medical practice, including a med spa, must be owned by a licensed physician or a physician-owned company. This single regulation shapes the entire M&A landscape in the state.
Key Considerations
Preparing your practice for a sale is the most important step you can take. Addressing key issues before you go to market can prevent delays and protect your valuation. For Med Spa owners in Tennessee, the focus is on compliance and organization. Here are three areas to review.
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Your Ownership Structure. Because of the CPOM law, your practice ownership must be fully compliant. If it is not, a restructuring may be needed before you can even begin a sale process. This is the first thing a serious buyer will verify.
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Operational Compliance. Buyers will check that you have a properly licensed Medical Director overseeing all medical procedures. They will also confirm your registration with the correct Tennessee licensing board. Clean compliance demonstrates a low-risk, well-managed operation.
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Financial and Legal Readiness. A buyer will conduct deep due diligence on your practice. You should have organized financial statements, tax returns, and key contracts (like your lease) ready for review. Clean, accessible records make the process smoother and build buyer confidence.
Market Activity
The demand for high-quality Med Spa practices is strong, but Tennessee’s CPOM law defines the market. Understanding the active players is key to positioning your practice for the best outcome.
Who is Buying Med Spas in Tennessee?
Because of CPOM rules, the most direct buyers are licensed physicians and existing physician-owned practice groups. These buyers are often looking to expand their footprint or enter the lucrative aesthetics market. They understand the clinical side of the business and can move quickly if a practice is well-run and compliant. This makes them a primary target for many sellers.
The Rise of Strategic Partnerships
There is also significant interest from private equity and other large investors. They cannot own the clinical practice directly, so they use a Management Service Organization (MSO) model. In this structure, the investor buys the non-clinical assets and manages the business side, while a physician-owner retains ownership of the clinical practice. These deals are more complex but can often result in higher valuations.
The Sale Process
Selling your practice follows a structured process. While every deal is unique, understanding the typical stages can help you prepare for what lies ahead. Running a professional process ensures you maintain confidentiality and create competitive tension among buyers to achieve the best terms.
| Stage | What It Means for You |
|---|---|
| 1. Preparation & Valuation | We work with you to organize your financials and legal documents while determining your practice’s market value. |
| 2. Confidential Marketing | We present your practice to a curated list of qualified buyers under strict confidentiality. |
| 3. Negotiation & LOI | We manage offers and help you negotiate a Letter of Intent (LOI) that outlines the key terms of the sale. |
| 4. Due Diligence | The chosen buyer conducts a deep review of your practice. Your earlier preparation is critical here to prevent issues. |
| 5. Closing | Final legal documents are signed, funds are transferred, and the ownership of the practice officially changes hands. |
Valuation
Determining what your Med Spa is worth is more than just looking at your tax return. Sophisticated buyers value practices based on their true profitability and future potential. A professional valuation is the foundation of any successful sale strategy.
The Core Formula
Most Med Spas are valued using a multiple of Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization). Think of EBITDA as a proxy for your practice’s cash flow. “Adjusted” EBITDA adds back owner-specific and one-time expenses, like a personal car lease or above-market salary, to show the true underlying profitability. For well-run Med Spas, this Adjusted EBITDA figure is often multiplied by 4x to 7x to determine the enterprise value.
Beyond the Numbers
The multiple a buyer is willing to pay depends on more than just profit. Factors like the stability of your staff, your client retention rates, your reputation in the community, and the diversity of your service offerings all play a role. A strong growth story can convince a buyer to pay a premium multiple.
Post-Sale Considerations
A successful exit is not just about the price you get at closing. It is also about structuring the deal to meet your personal and financial goals for the future. The best deals are planned with the post-sale period in mind from the very beginning. Here are three things to consider.
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Your Financial Future. The way your sale is structured has major implications for your after-tax proceeds. Planning for a tax-efficient transaction can significantly increase the amount of money you ultimately keep. This planning needs to start long before you close the deal.
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Your Continued Role. You may not have to walk away completely. Many deals include an “earnout,” where you receive additional payments for hitting performance targets post-sale. You can also retain a portion of ownership through “rollover equity,” giving you a second payday when the new owner sells the larger platform down the road.
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Your Team’s Legacy. You have likely spent years building a talented team. A key part of the process is finding a partner who shares your values and will continue to provide a great environment for your staff and a high level of care for your clients.
Frequently Asked Questions
What makes selling a Med Spa in Tennessee different from other states?
Tennessee has a strict ban on the Corporate Practice of Medicine (CPOM), meaning a Med Spa must be owned by a licensed physician or a physician-owned company. This unique regulation requires practice owners to ensure full compliance with ownership rules before selling.
Who are the typical buyers for Med Spas in Tennessee?
The primary buyers are licensed physicians and existing physician-owned practice groups due to the CPOM law. There’s also interest from private equity and investors who use a Management Service Organization (MSO) model to manage non-clinical assets while a physician retains clinical ownership.
What key preparations should a Tennessee Med Spa owner make before selling?
Owners should ensure their practice ownership structure complies with CPOM laws, have a properly licensed Medical Director, maintain operational compliance, and organize financial statements, tax returns, and contracts. These steps help avoid delays and protect valuation.
How is the valuation of a Med Spa practice typically determined?
Valuation is usually based on a multiple of Adjusted EBITDA, which reflects true cash flow by adding back owner-specific and one-time expenses. For well-run Med Spas, this multiple generally ranges from 4x to 7x adjusted EBITDA, but factors like staff stability, client retention, and growth potential also influence value.
What should sellers consider about their post-sale situation?
Sellers should plan their financial future with tax-efficient strategies, consider their continued role through earnouts or rollover equity, and find a buyer who values their team’s legacy and will maintain quality care and staff environment after the sale.
