Acquisitions Anonymous - #1 for business buying, selling and operating - Franchise Med Spa Investment Breakdown (2025)

Episode Date: May 6, 2025

This Med Spa in San Antonio Looks Great—But One Location Might Be Holding It Back...Business Listing - https://www.bizbuysell.com/business-opportunity/leading-multi-site-med-spa-franchise-with-high-margins/2345553/Huge thanks to Connor Groce for bringing this deal to the pod!  Always great having you on, and this one was a masterclass. For more information or to connect with Connor head to connorgroce.com.🚨 Episode Sponsors📈 Acquisition Lab — Thinking about buying a business but don’t know where to start? Walker Deibel’s Acquisition Lab has the tools, resources, and community to help you navigate your acquisition journey. Start today: https://www.acquisitionlab.com/💸 Viso Business Capital — Need an SBA loan? Heather's firm works with 30+ lenders to get you the best terms with less hassle. Sign up for a free Q&A session here: https://visocap.net (click Zoom Signup in the top right corner)In this episode, Michael, Heather, and Connor dissect a $4 million multi-site med spa franchise based in San Antonio, Texas. With two operating locations and a third territory for expansion, this business is riding the aesthetics wave—but is it all smooth Botox or are there some unsightly bumps? The team dives deep into the dynamics of injectables, recurring revenue, regulatory hurdles with MSOs, and why this could be a tricky deal despite high-level metrics. This one's packed with insights into the rapidly evolving med spa industry.Subscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

So my suspicion is when you dig into this, location number one is doing pretty good. Location number two is struggling because she, he has struggled to scale. And there's also that effect that caused people to really, you know, take care of their looks and, you know, kind of consider that more of a necessity than a luxury. Can somebody not get Botox? Sure. But will they? I would think once you are on that train, you're inclined to continue. So said Acquisition Anonymous. Another episode of Acclosion is Anonymous.

We don't have 100% beer. anymore. And thumbs downing on just the plus-endatory loan. Welcome to Acquisitions Anonymous Internet's number one podcast about buying, selling, and investing in small businesses. Today, myself Michael, Heather and Connor, we went through and looked at a deal in my hometown of San Antonio, Texas, that is in the med spa space. And it was kind of surprising how we felt about it. So here's the episode. Hope you enjoyed it. We enjoyed making it for you. and stay tuned for the episode after a quick message from our sponsor. Are you ready to take a leap into business ownership but you don't know where to start?

Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business. Founded by Harvard MBA and acquisition expert Walker Dybul, the Lab is your fast-tracked success in the search diligence and acquisition process. With hands-on support, world-class resources, and a community of like-minded entrepreneurs, Acquisition Lab gives you the tools and confidence to navigate every step of the journey. And we're proud to call Walker and Chelsea, the lab's director, long-time friends of the podcast.

They're passionate about helping entrepreneurs like you take the next big step. So don't wait to make your business ownership dream of reality. Visit AcquisitionLab.com today to learn more and schedule your free consultation. And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. How's there be doing? Also, where are you guys wearing the same clothes as last week? I've just been wearing this all week. Yeah.

It's not smelling very good, but I like it. How is weather in Sokow, Heather? Is it crazy again? Have you guys put on the parkhouse because it dropped below 70 or what's up? It was. Yes, this morning I actually said it was freezing and it was like 65. And so, yeah, to me that was freezing. But no, it's actually nice.

We have nice spring weather. The sun is out. Like we're going to the beach to walk on the weekends. It's beautiful. Not too hot yet. This is a great time to visit if anyone's thinking about that. And how close is your whole life to like being the movie point break, like on a scale of 1 to 10? It's not that close.

But we've got beautiful scenery. We can always, you know, if we're having a bad day in Southern California, you can just get outside and see something so beautiful in nature that you go, okay, I guess everything's fine. Connor, have you ever rented a car and gone and drove around SoCal, like doing the same day of LA drive? I have not been to SoCal. I need to get to SoCal. But, yeah, I highly recommended a lot. There's a dry. you could do the drive you can rent like a car in san diego and drive up to l.A but if you go through

orange county there's like a whole foods that's like on a cliff like overlooking the ocean the pacific ocean and like the what's the name of the train the california zephyr is that the oh yeah the train goes right along the coast it's beautiful like you're sitting there watching like the train's coming through there's like whales out there like it's the most crazy whole foods in history and you like just sit out front and whales dolphin seals it's highly recommend it. So, Connor,

you brought a deal. And it's in San Antonio? Are you kidding me? Let's go. That I did. I thought we could find a buyer while we're here. And it's a medspar. So I'm excited.

I'm excited now. Yeah, the heading says leading multi-site med spa franchise with high margins. So the asking price is $4 million. Gross revenue is just over $3 million with $813K of cash flow. They pay $5,700 a month per rent. and it says multi-site, so I don't know if that's combined, or that seems low to be combined, but we'll see. FF and E of 185K and was established in 2022.

So this high-performing med spa offers a unique opportunity for a potential buyer to acquire a thriving business with significant growth potential. The practice has demonstrated impressive revenue growth and has the potential to expand to a new territory. The business operates two locations with a third territory available for expansion, providing a solid foundation for continued growth and a booming market. The practice is focused on injectables as a core offering, coupled with high margin product lines like IV vitamin therapy, positions it well for future profitability. The business benefits from being part of a leading franchise system

offering exclusive training, marketing, support, and a proven business model. This is a great opportunity for a medical professional or entrepreneur with healthcare experience to enter the rapidly growing aesthetic space. So sounds like they have two operations. that are up and running, and then there's a third territory that they own

with the opportunity to develop, which opportunity to develop means obligation to develop typically. Yeah. I'm glad that they said healthcare professional or someone with a healthcare background, because that's the challenge with this industry is in order, there are regulations, especially when they're doing Botox or injectables,

like they said they're doing here, the company that does the billing for that service has to be owned by someone who's licensed to do the injections. So either a nurse practitioner or a physician, whatever the local rules require. And for someone who's a non-physician to own a business like this, they have to set up a workaround, basically, to that regulation. And we call that an MSO or a medical service organization where they basically create a pass-through entity that is owned by the physician. And the revenue just passes through that into the operating business that the non-health care professional can own. But however you slice it, it's a workaround. The regulation still says what it says.

And this MSO situation is sort of a workaround. So it's kind of in a gray area in some states, depending on what the rules are there. Holy crap. I know this broker. I just looked at it. I know this guy, Jason. He's here in San Antonio. Yeah.

He's a business broker. Yeah. I know a lot of the franchise organizations, like they establish relationships with MSOs for that reason, which hopefully that's, you know, a way that, you know, this works to the benefit of being a franchise if they have relationships that have been established that can help work that around. So a couple salient points in here. So the first thing here, it says in support and training, the owner is also willing to continue as a paid injector for up to six months, which that's kind of a sign. that this was a technician who decided to get into a franchise owning his or her own injection kind of franchise, our beauty franchise, med spa franchise here. And then there's another detail here that's pretty interesting. They have two locations, and one is 2,100 square foot that is triple net with a monthly rent of $5,700. And then there's another one, which is location number two, which is just about half the size.

That's 1,200 square feet. And it's a sub lease, which leads me to believe this owner is probably. one of those technician types who has struggled to scale past owning and operating the one flagship location where Shehee works and spends a lot of time being a technician, much less being a business owner and operator. So my suspicion is when you dig into this, location number one is doing pretty good. Location number two is struggling because she, he has struggled to scale. I think you nailed it because that was going to be something I was going to ask is why,

if they just started in 2022 and it seems to be doing reasonably well, well, you know, why are they looking to sell now? But that would check out. Also, when you lose an injector, sorry, whether it's the owner or an employee, you always have a little bit of a drag on earnings when that happens because it's a very personal service. The clients follow the injector to wherever, you know,

other new salon they go to. So there's a little bit of a risk there that they're only going to be around for six months. It's going to lose some of those clients that are only comfortable with that person. Heather, that was my point. I don't know if you guys are aware. I spent a weekend and then several hours of my time recording a YouTube video on the med spa industry and why it's boomed. And a good 800 people watched it, some all the way to the end.

So it was fantastic. But that was one of the points. Like part of the reason why this industry hasn't scaled so much is unlike, say, massage and some of the other kind of semi-health care services, people pick their injector and they stick with them. And because ultimately, like there's a big downside to the injection. And we haven't talked about the B word here, which is most of the business for these types of med spas is Botox. People getting Botox injections. And people, women now are getting a ton more scared about getting Mar-a-Lago face that they stick to their injectors like glue.

So have we talked about Moralago face on the No, but I immediately knew what you're describing there. It popped right in my head. Yeah, it's, yeah, it's, that's real. Yeah. I've heard a lot of my, a lot of my friends go to these like Botox parties too, where they like hosted at somebody's house and have the injector come and everybody sits around and drinks wine and they do it all at once.

Never been to one personally, but I've just heard about that. And so, yeah, I wonder just how different trends, like that could impact how inclined people are to get Botox done at a place like this. So some stats here on Botox. I'm going to pull them out of my head, but I got them from doing my video. Only like 5% of the U.S. population has gotten Botox, but like another 3% is strongly considering it. And the second thing is around this, the med spa growth markets you'll see that like they have a number here that it's 14% Cagger is, uh, is, uh, predicted from 2024 to 2030.

The main driver of those assumptions around this growth rate is not Botox. They think generally Botox is going to stay relatively flat and slightly grow because women, especially, uh, their appreciation of how they want to look is changing the whole Maralago face like and the duck lips, like they don't want to do that. So this whole bet is that things like, Like Wagovi and the weight loss stuff will find their way into these med spas and that's where the growth will happen. This whole growth is assuming that new treatments are coming online and that that will provide the top line growth for medspaws, not Botox and stuff like that. Where does filler fit into that or does it?

Like it's I think it's like a pretty small percentage. Because I guess what I was wondering is my understanding is filler, that's something that you do like. every year, every two, and Botox is what is it every quarter? Three months. Yeah, exactly. Botox is your recurring revenue. And that's why, you know, this is, the valuation on any kind of med spa is going to be higher,

a higher percentage it does of Botox because it's recurring revenue, or reoccurring revenue, basically, where all the other treatments you might find someone only does it once or once a year. And a lot of times I think of those other services as a gateway, to bring them in for the reoccurring revenue for the Botox. But I agree with Michael. There's a lot of anti-aging stuff coming online, you know, all the time. And I think the more successful of these med spas will, you know, be bringing in those new treatments that are sort of cutting edge.

But it's hard to know which ones of those are going to be the reoccurring revenue. Everything else kind of so far seems to be like a one-shot deal or once a year maybe. Do you all know what the, like what is the, like, what is the, the cogs look like in a business like this? Like I have absolutely no idea how much it costs to buy a vial of Botox or whatever. They will usually the manufacturers of the Botox and there's competitors to Botox, I forget what they're all called, but they will provide the inventory, basically, they don't pay for it until they use it.

So they provide it for free on the shelf if they'll use it. And then it's almost like a gas station business. The more they inject of that product, the low, their ultimate cost ends up being. So the manufacturers are trying to provide all these incentives to use their product and to push more of it. There are even analytics companies. I'm going to forget the one I saw the name of it, but a lot of these med spas kind of feed

into the same anonymized billing systems. And you can buy data on what is the most popular drug or product that is being sold at what price point. There's all kinds of really fascinating data on that. Hi, Heather here. When I'm not breaking down deals with these guys, I'm helping people get the right SBA loans for their business acquisitions. Because when you're buying a business, the best financing isn't one-size-fits-all. There's the best rate, fastest to close, the specific loan structure that you need, or a little of all of those things. That's why my company, Vizzo Business Capital, works with over

30 different lenders to find you the best funding in less time and with less friction so you can focus on the deal. Sign up for a free live Q&A session on SBA loans at VizzoCAP. Then click Zoom sign up in the top right corner. That's V-I-S-O-C-A-P.net and click Zoom sign up. I think they run at like 60% gross margins if memory serves. I talked to my buddy who actually is a dermatologist here who did Botox for a while when it first came out. Because that's how Botox started back in the early 2000s was the idea when you could go into your dermatologist and they would do the injection. And there were two problems.

One is the dermatologist started to do what my buddy did, which was he did not like doing the procedures because of what was happening with the clients. And he described to me the last Botoc injection he ever did was a lady who was basically on public assistance coming in and spending $500 on Botox injections that she did not need, in his opinion. And it was her last $500. dollars like she was coming she was like addicted to the treatment and he was just like I don't know why I'm doing this so basically what happened was is the dermatologists like weren't set up for these type of cash patients like coming in and doing that that type of stuff so the lobbying came in from the basically the Botox industry right the pharmaceutical industry to get the laws changed that just these like semi trained injectors could go around just like puffing up people's lips and all that kind of stuff so that's the shift but you know the the dermatologist by and large didn't want to do this stuff because of this like it felt yucky to them um so anyway but he described to me like the the 60% gross margins when he was doing it he would it be a 500 thing and he would pay 200 bucks for the injection got it play that i've seen go well with med spas is to buy a platform you know a good one good size uh well located med spa and then

de novo clinics after that. And the idea being that, you know, this is not yet a saturated market. There's lots of areas of the country where there's not a lot of density of these. And so you kind of find your first one to acquire, but then you grow with de novo startup clinics because a lot of times they can become profitable in less than 12 months. So, you know, acquiring two of these with a third location, kind of doesn't fit that playbook. I think that's one of the things I'm seeing about this one that I'm not loving. I would rather see someone by one that's doing well and think about where they might put some de novo clinics after that.

Yeah. And this is, you know, franchise med spas, there really aren't as many dominant players in the franchise space in med spas as there are in others. And that could be some of the other reasons that you all are mentioning. But there are several that are growing really quickly because I think that there's a lot of folks that are bullish on the industry overall. But yeah, it is interesting how there's not, you know, one dominant name that you would think about like you would in boutique fitness or anything like that. So here's another data point. As of late last year, only 3% of med spas were private equity owned. Pretty small considering like what's the last industry you ran into?

Now, there's a lot of them trying to roll these up. But, you know, it comes back to that fundamental challenge that we talked about, which is people, follow their injector. And like, if you're following your injector, what are you owning as private equity like your entire, you know, private equity is not known for keeping good employees around. Like you ask any HVAC roll up. So to some extent, I think this is still a business is going to remain pretty darn fragmented over time, which is good, like if you're a small entrepreneur.

How do you all think about a business like this in a recessionary environment? Because this to me is an example of how, like I always talk about there are two, you know, is to something being discretionary. It's first of all, can someone cut it from their budget? And second of all, will day? And to me, this is an example of where, like, those two things can differ. Like, can somebody not get Botox? Sure.

But will they? I would think once you are on that train, you're inclined to continue. So, yeah, how do you think about the durability of something amidst macroeconomic turmoil? I think it's pretty durable because it's beauty-related. And actually, I believe they called it the lipstick effect during the Great Recession. The two industries that tended to do well and even grew a little bit were cosmetics and alcohol. And so the cosmetics, both of them made people feel better when things were bad.

And so I think that there is an effect here where people will keep this going. I also think, you know, here we're on screen right now. a lot of people, their work is on Zoom or on screen a lot. And there's also that effect that caused people to really, you know, take care of their looks and, you know, kind of consider that more of a necessity than a luxury. So I think it's a little more durable than a lot of other things might be. I remember that being discussed, like right on the onset of COVID, is that that was part of the thesis, was that people were going to be diverting a lot of the resources

they would otherwise sink into nice clothes and things like that into their, you know, into their facial appearance. I think that's happened. You know, liquor stores where at least here in Texas were considered essential businesses because addicts turns out to addict addicts turned out to be pretty durable customers. And I think a lot of people are addicted to and it's very important to them that they have some of this Botox stuff going on. And I will say that that visits to the salon that our house pays for, it's a, at the

It ain't getting cut. Like we're going. We're declared bankruptcy before that gets cut. What was the other thing I was going to tell you guys about this? I did a whole video about this. It was amazing. Oh, here's the last thing before we kind of start to dig into what we think about this. I think these two salons, at least one of them, is underperforming.

This profit margin. I think we did that one, remember we did that chain of two of these in Vegas, Heather? It was probably two years ago when we did it or a year and a half ago. and like their profit margin was way higher than this like this just to tell the listeners they're making $800,000 on $3 million in sales like that's super I remember the one we looked at was at least over 30 percent it was much better than this I think the standards is at least 25 percent margin so maybe it's okay but yeah I do think the fact that they're saying three locations or I guess two now and you've got to build out the third um it's probably not fully utilized especially

if the owner is one of the injectors. I think you're probably correct about that. Yeah. So before we close, I have a question for you, Connor. The owner wants to be one of your injectors. Would you hire him or her to continue working for you after you buy this? No. I mean, it depends on obviously the situation.

Maybe if it's required to transfer customers and stuff, but no, it would have to be a gym of a human being personality. for me to want the owner in the building every day after I've bought a business. Would you agree? Hiring a newly rich person to come in and work in your business, you either need to give them a very seductive role that's non-critical or you need to let him see the door. That's typically the way it works. Agreed.

It does look like Heather, they have a monthly membership population, I guess, where people are doing subscriptions for Botox. Right. And then that means as a buyer, you've got some prepaids in there that you've got to make sure you include in your in your structure of your deal but I like that the gift cards in some states if they go unused you can take them into income after a certain period of time so there's kind of a little extra bonus there it did say also SBA pre-approved but I want to say if you're a non-health care provider and you have to do this MSO MSO with SBA it can be done but super

difficult most of your banks out there are going to want the the pass-through entity and the physician that's your medical director to guarantee the SBA loan, which is a non-starter. So there's only, I've got a couple banks that we've gotten these done without that, but most banks are going to be very confused. Most SBA banks are going to be very confused by the MSO, and it makes it kind of challenging. Yeah. All right. Before we wrap this, I want up, Heather, where are you?

Thumbs up, thumbs down. Thumbs up. I like it. I like meds spas. Yeah, Connor. I'm a thumbs up with the caveat of understanding if there's another location that's performing and what is the line of sight to improving that and then also understanding the obligation that you have to develop that third location. Where is it? How much is it going to cost you to build

out, et cetera? But I love the space. Yeah. I think I think this has some hair on it. I would probably negotiate them down a good bit. And I like I still would like the deal. Agreed. Yeah. I like the deal. I mean, the price at 5x. Oof. Well, hi. Why isn't it why isn't everything cheaper, Heather? Why is everything so expensive? I tell people, don't worry what the list price is. Nothing ever sells for that. That's what I'm talking about. All right, guys.

We'll see you next week. Thanks everybody for being here. If you enjoyed this episode, send it to a friend, and we'll see you next week.