When it comes to selling your practice, many doctors are going at it alone. But deals can get emotional, and someone needs to give clear-headed advice to protect you and maximize your return.
Bill Walker and Tyler Terry discuss:
- What the top aesthetic entrepreneurs are doing differently
- How to prepare yourself now, so you’re ready to sell when the time comes
- Strategies to scale faster and improve operational performance
- Why investors are snapping up aesthetic practices and what they’re looking for
- The key elements of due diligence and what to expect from buyers
- What questions buyers typically ask post-acquisition
- Current market values for aesthetic practices
- Critical insights for doctors being approached by private equity
- Why it’s risky to rely on just one modality or provider
This episode was recorded live at the 2024 ASPS meeting in San Diego, California.
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Guest
Bill Walker, Founder & CEO
Aesthetic Brokers
Bill Walker is a seasoned mergers & acquisitions executive and former Marine. As the founder & CEO of Aesthetic Brokers, he helps medical spas, cosmetic dermatology practices, and plastic surgery centers find investors or sell. With experience in due diligence and M&A, Bill has facilitated deals worth millions.
Learn more about Aesthetic Brokers
Connect with Bill on LinkedIn
Follow Aesthetic Brokers on Instagram @aestheticbrokers
Host
Tyler Terry, Director of Sales, MedSpa
Nextech
Transcript
Announcer (00:06):
You are listening to the Aesthetically Speaking podcast presented by Nextech.
Tyler Terry (00:11):
Hey guys, welcome back to the Aesthetically Speaking podcast presented by Nextech. I'm Tyler Terry, your host, and we're here today live at ASPS in beautiful San Diego, live on the floor. And I'm here today with my guest. His name is Bill Walker. He is the founder and CEO of Aesthetic Brokers. Welcome Bill. So honored to have you here.
Bill Walker (00:34):
Tyler, welcome to San Diego. You're in my backyard.
Tyler Terry (00:37):
Wow, that is amazing. And I'm so jealous right off the bat.
Bill Walker (00:41):
We've got the Padres winning for you guys on purpose. Everybody's jazzed, we're going to go to the playoffs like you're here, the sun is shining, the birds are singing, the Padres are in the playoffs.
Tyler Terry (00:52):
They are, they are I saw they celebrated at Dodgers, I'm a huge Dodger fan. They celebrated on our field right after they won. I was like, that is disrespectful. Just kidding. No, they had to do it. They had to do it.
Bill Walker (01:03):
Ohtani made us look so bad during that series. He's making everybody in the league look bad.
Tyler Terry (01:09):
I know 50/50, right?
Bill Walker (01:11):
That's right. The 50/50 club. But we'll, we'll take it. Very proud baseball heritage here in San Diego. We're very excited you guys are here today.
Tyler Terry (01:20):
Well, thank you. Thank you. And I'll say this, knowing now that you are a Padres fan, Petco Park is definitely my favorite baseball field. And if you haven't been there and you're listening to this podcast, go schedule a time to take your family to beautiful San Diego and take them to a Padre game. Make sure that you play some wiffle ball out in center field, right?
Bill Walker (01:39):
Yes, yes.
Tyler Terry (01:40):
They have a little wiffle ball field out there. They do. And then there's a beachy area where there's sand and you're watching the game. It's so cool.
Bill Walker (01:47):
Petco Park is really a classic American ballpark. It's not a stadium, it's a park. There's a special feel to that and we're very, very proud of that. And it is definitely a staple in the community. So I'm grateful anytime anybody in the country gets to come and experience it.
Tyler Terry (02:03):
Oh, that's amazing. That's amazing. So let's start off with just talking a little bit about you. I'd love for you to share with our listeners your background and just tell us how you started your company.
Bill Walker (02:15):
Sure. Well, I think when you go back to the idea and impetus for Aesthetic Brokers, it really came from my experience on the buy side of private equity backed healthcare. I spent previous time in the acquisition mode really going to massive scale on a DSO platform. Learned a lot about what's really important to private equity funds that want to invest in healthcare practices. I also saw how much of an advantage you have when you're seeing hundreds of deals and hundreds of companies and hundreds of profit and loss statements. And usually the clinician who's the sole owner has spent the last 20, 25 years building their practice and they're doing one deal and they're doing one transaction. And so I saw how fragmented the aesthetic space was and I recognized that it was going to be an attractive and interesting investment for family offices and private wealth type funds to inject their capital to really help it grow. And I felt like there would be extreme value for representing the sell side for those owners to have quality advice and representation when they are thinking about preparing or actually doing a transaction. So that's how we started Aesthetic Brokers in 2023. And it's been a whirlwind since.
Tyler Terry (03:42):
I bet. I bet, especially with so many new practices starting up and practices that are preparing to eventually sell their practice and they need somebody to represent. So when you're looking at the market, who is your ideal client and what is it about them where they have this pain and they need your assistance?
Bill Walker (04:02):
That's a great question. So the ideal client is the avatar is so transformative because really at their core, I think the most successful people in the aesthetic space as far as a practitioner owner type perspective, or even the business owner who is just really passionate about aesthetics, that person's quality is entrepreneurialism because the entrepreneur spirit that's very American in nature, of course is always constantly in a growth mindset to learn. And the people that I interact with that are the most fascinating and it drives me to realize they are so successful, what they've built in their practice is they were entrepreneurial because aesthetics in and of itself from plastic surgery all the way to hormone therapies now, it is a frontierism type mentality of finding something that's a better solution, a better result for patients. And they research, they do their homework, they really put a lot of energy and passion into figuring out what works well and what's the best result.
(05:20):
And because they're so well educated on that, they get an uncommon result. And that's kind of where the aesthetic space has become so viable. I think the biggest pain point for those entrepreneurs that I'm speaking about is, look, I can't walk into an OR and do a procedure for a patient that is not my specialty. The amount of time and energy and devotion that it takes to be good at that and be exceptional is significant. And so where I think we add a lot of value is you don't have to worry about trying to figure out, am I doing my deal, my one deal in my entire life the right way? Am I able to even manage the time commitment that it takes to do that one deal? I mean, you're talking a 20 hour a week type of commitment for a big practice, right, to go through a significant transaction to do it successfully.
(06:18):
So do you have the extra 20 hours a week to run your deal? And then you have to ask yourself, gosh, can Aesthetic Brokers bring a competitive market to my doorstep so that I get the best deal? And I think that is what everybody wants. Buyers want the best practices, sellers want the best buyer terms for both culture fit and for the monetary unlocking of their wealth. Because until somebody is willing to write that check, a practice is worth what it's worth on paper. And so that's I think probably a secondary result of the pain point of helping them in that process is really helping them in advance to prepare to go to market so that they don't make mistakes at the five yard line. We help them clean up those mistakes at midfield so that when they get down inside the 20, they're scoring touchdowns and not field goals.
Tyler Terry (07:16):
So what would you say to an aspiring entrepreneur who's getting out of a practice where they want to go and open up their own? Let's say, this is very common, we have a lot of successful celebrity injectors who crush it for their med spa. And if the med spa isn't taking care of them, they decide to go and open up their own practice. These two to 3000 new med spas coming online, a lot of them aren't just startups, a lot of them are injectors starting their own practice. So what would you say to somebody that's listening right now who's like, I'm not interested in selling my practice. I want to just be in control of my destiny for the foreseeable future. What should they be doing so that when an opportunity comes knocking at their door, they don't have to wait two or three years or they're not behind the ball and they can actually sell?
Bill Walker (08:09):
Alright, so let's unpack a couple of things in there. So when I hear people talk about, this is a great point you bring up, it's very poignant, the super injector, right? The celebrity injector I tell all of my clients candidly up upfront is don't get to a situation where somebody on your staff is the sole critical key pin in your organization that if they were to walk out the door, you're completely devastated. You as an owner, you want to take care of your people, you pride yourself on taking care of your patients, you pride yourself on taking care of your people. All of the owners that I meet are exceptionally giving and caring to their team and their staff, and that's likely what's helped drive their success. And so I think the separation from that risk is you just never know when the avalanche is going to come. Sometimes you're skiing down the mountain, you think everything's great, we got pure powder. It's like the sunny day, this gorgeous, and then you're like, there's no way my best provider would ever leave me. And the avalanche shows up and now you're racing to shelter, and you're trying to recover.
(09:26):
And so one of the advice points that I give is never let yourself be overly exposed in any one modality or any one provider. The second thing I would say is there are going to be people because this is an entrepreneurial industry that are exceptional care providers, whether the super injector or what have you. And for those people it's a natural progression for them to want to be an owner, to want to be in charge of their own practice. And so for that provider, my advice to them is it's okay to step outside of your comfort zone and want to be an owner, but you can be an owner in multiple ways. I think one of the most fascinating ways that's been emerging over the last couple of years has been these pathway to partnerships that the private equity firms that I've seen are investing in these practices.
(10:24):
They're putting actual equity shares in the super producer who's maybe the associate doctor or the nurse practitioner who's a high performer kind of D1 super athlete that can play shortstop, second base, pitch a little, play center field. They're like, this is a super superhuman. And so they're investing in those people as actual owners. So I find that to be very attractive for some people because you have this sense of ownership in the success of the company in this multiplicative future, but you don't get a lot of the headaches that maybe come with that early stage entrepreneurship. For the people that like that conventional pathway that want to go out on their own and they want to set up shop and go from one treatment room to three treatment rooms and they want to negotiate the lease and they want to do the payroll and they want to do the accounting and they want to negotiate the vendor contracts.
(11:20):
All of those things you can do and it can be a fulfilling and rewarding piece of it. The advice that I have for them is know your numbers, seek out counsel, give me a call. I will give you some free advice and coach you through the first few steps because everybody's always paranoid. I can't afford to do this. I can't afford to buy this advice and buy that advice. Look, it's beneficial to the entire industry, in my mind, to give people straightforward, solid advice and it's good karma. So if you ever have a question, just ask somebody. Ask somebody who's in a position to give you some good advice and they'll give it to you. And then once you get your feet under you, then come and talk to me because we can help you scale faster probably. And then ultimately coach you through, if you've been around for a couple of years, coach you through that 20 yard line into the goal line.
(12:17):
I think the last thing I'll say on the topic that you brought up is for people thinking I want to hold onto my practice for like a 10 year horizon. I can understand that. I think look introspectively and then extend your scan out on the horizon so that your wings are level when you're flying and say, okay, I'm wings level, now I've thought about this while I'm flying straight and level. Is this really what I want? Is it 10 year or do I want to be successful now or in the near future at the same intensity and the same level that I would be if I were 10 years from now? And if I can get to my success story at the 10 year mark in three or four or five years, then you need to do it, because this is still a relatively small industry.
(13:08):
It's $18 billion, dentistry is $177 billion. If you think that the consolidation space and the attractiveness and all the buzz that goes around the investment strategies of these firms is going to last for a 25 year horizon, that's not realistic. And so the way to think about that is how do I accelerate my success so that I have the choice of whether or not I want to partner with a private firm for investment, whether I have the choice to go down to one or two days a week of working, vice working three or four or five days a week. And so it's all about choice and giving yourself the most options on the buffet. But at the end of the day, the last couple of years, what it's taught investors is operational excellence. And so what I think you'll see as a byproduct of that is the support, the emphasis on support from these investment firms is going to rest on the operational excellence of how can we provide more support? How do we get a better alignment between the people that are driving the revenues in the door, and driving the outcomes for the patients? And that, in and of itself, I think is going to bifurcate even more and you're going to see more investment in the technologies that are going to drive better results for patients.
Tyler Terry (14:29):
So when we talk about this operational excellence, I'm going to relate this to when you're working with the provider that owns the practice, a lot of times the owner of the practice is also the provider. Right? And so when you're working with that individual, how do you shift their mindset from working in the business to working on the business?
Bill Walker (14:50):
I think the alignment comes for them and the comfortability comes through repetition of conversation. I can say something to a client and when you hear something the first time, you capture a little bit of it, you say it the second time, they capture a little bit more. Eventually, that's why it's so important to form this relationship with our clients is because we've got to get that information baked in to an understanding of, a lot of times they're going to get equity in this deal and that equity from an elemental level builds alignment and builds buy-in. They're committed to their practice, and now they have this, they're not on an island by themself. I always tell 'em, look, you want as many people on an island with you because you're stronger as a tribe. And so that's one of the things I think is really good about the consolidation space is if you pick the right partner, if they pick the right partner, and it's my job to bring those suitors to their kissing couch and have 'em sit out in the lobby and everybody file in and pitch their best case on why they should be able to go to homecoming with them, well, you pick the right partner, it's going to be exciting because you're going to be aligned with all these other phenomenal clinicians that are around the country that you can share ideas, collaborate and grow as a group.
Tyler Terry (16:16):
So let's talk about these suitors. Who are they? Who is actually buying the aesthetic practices and the med spas and why are they buying them?
Bill Walker (16:26):
Well, I think the more right of the middle off of right tackle buyer is the private equity firm that's in the small cap micro cap, right? They're financial professionals that understand how to analyze the financials of a company. They oftentimes are specialized in healthcare because they really understand what drives a support for those practitioner type functional areas. And aesthetics is such a burgeoning industry. They love being at the forefront of something at the very cutting edge. The second category of investors that I see are private wealth funds, family offices of sorts. So you might see a billionaire fund or even a couple of a hundred millionaire funds that come together under two family offices and want to invest. A very core entrepreneurial spirit is the entrepreneur by acquisition. So think of a younger post MBA individual who wants to run a business and has that energy and excitement to run it and they go out and get some financial sponsorship or they might take out an SBA loan.
(17:40):
So those are the most common type of buyers that you'll see. I still see doctors that come to us and say, Bill, can you help me find a med spa in my city that I'd like to buy? And so those are probably the more one-off cases that we'll take on that client to help them because it's still very much aligns with our ethos of supporting the individual doctor, supporting the individual PA, the individual nurse practitioner, the individual CRNA. That's at our core, what we value supporting. And so if I get an individual doctor who's like, I want to own my own med spa, we'll sit down and talk with them too because I think that hits the button for us of feeling good about who we're helping.
Tyler Terry (18:25):
So what are they typically looking for and what would be some things that would make them walk away from a deal?
Bill Walker (18:32):
For these savvy investors, they want to see redundant replicable program processes. They want to know that it's not just hinging on one person who shows up every day and just makes magic happen in the back in the kitchen and then out comes a cake. They want to know that if you're out skiing and you run into a tree and you're laid up in the hospital for several months, that the practice is going to continue to do well. And that comes from having overlap of modalities for energy-based devices, for lasers, for neuromodulators, for your prescriptions that you're writing, if it might be a semaglutide. They want to know that there's redundancies there. They want to know that they have a process in place, that regulatory compliance that you're paying attention to, those are the people that fetch the outsized returns. And that's what I always tell people is you've got to inspect what you expect. If you expect to do well in your practice, if you've got to inspect it. So you've got to know your numbers. They want people who know their numbers. They want people who know the dollars and cents behind those numbers, and they want people who know their people. That's what makes them very attractive.
Tyler Terry (19:51):
So if a practice was only in business for three years, but they've got all of those things dialed in that are replicable, could they sell at the three-year mark?
Bill Walker (20:02):
Absolutely. I would tell them it's to their advantage to. If you look at the consolidation timeline, this is not the end all be all. However, what I will say is that you need to look at the consolidation timeline of any healthcare industry. There's a great movie with Jeremy Irons, it's a Wall Street type movie. He says, you can either be first, you can be smarter or you can cheat. And there's somebody always smarter than us and we don't cheat. And so the point of it is be first. If you are the first, if you're in the early stages of consolidation, you are postured for much greater probabilities of multiple equity returns. Those liquidity events when the platform that you've joined has now multiplied out, there are not three or four or five practices in the organization, there's 35 or 45 or 55 practices in the organization. And that group has successfully sold to the next bigger investment firm in the cycle, the lifecycle, your shares of stock, your shares of your units in a privately held company, they're unlocking and you're getting another multiple of cash on that value. And they're going to have you leave someone the table and you'll roll it forward and then you go through another cycle again for another four or five, six years. So if you go early in the cycle, you're getting compounding multiples on that, if you're picking a smart partner that's disciplined, that knows how to provide operational support for excellence, that knows how to provide back office support, and they'll build intrinsic value and organic value, and you're way better off in the earlier stages of a life cycle.
Tyler Terry (21:52):
So as an owner of a practice, what would a buyer ask of me after an acquisition typically?
Bill Walker (21:58):
I love that. That's a good question. Well done. Alright, Tyler. So they're typically, most of the deals I see are multi-year requests for staying on. They want alignment, they want the face of the practice. They want the face inside the practice with the team to stay on for usually about five years, sometimes a year or two less maybe. They're willing to consider, sometimes you stay for a year or two years. It's just the value of the deal changes. So you can have a great deal if you're at the tail end of your practicing, whether it's 50 or 70 or 80, you can say like, Hey, I want to be done. I want to be done in a year and a half and I can help, my team can help structure those conversations with investors to say, this is a quality practice. You definitely want to invest in it. This is a good buy and here's a stipulation for them. And then we help set expectations of what does that offer look like from a monetary perspective. So that's typically what I see.
Tyler Terry (23:04):
So when we're talking about due diligence before the deal's done, what does it mean to do due diligence back on them as a buyer? For somebody that's listening and they don't really know about it, maybe they have a friend that went through it, but they're like, what is that? That sounds scary. What is it?
Bill Walker (23:18):
Okay, so this is something that we pride ourselves on at Aesthetic Brokers is we provide an executive summary and a prospectus on all of the buyers that we bring to the table, and we do our homework on the buyers, so that you don't have to. And we go through every single one of them and tell you about the pros and cons. And I always think of things, this goes back to my previous life, but I think of things how the CIA assesses risk and it's never a percent, it's probability and severity. And so I look at risk in the deals and I say, what's the probability of failure and what's the severity of that failure? What's the probability of success, and what's the severity of that success? How outsized of a return can that success be, both from a cultural perspective and a financial perspective?
(24:11):
And so when we go through that together, it's very important because you need to listen to what's important to these owners of these practices, because it's going to be different for everybody. I've never met a single deal that was the exact same. I've never met a single client that was the cookie cutter client. If you are, you're not listening hard enough as a representative for them. And so look, we're going to sit down in person and meet. It has to happen. I got to see your practice, or one of my executives has to see the practice, but we got to sit down and go to dinner and talk about what's important to you because then we can help with the strategy. And ultimately, I like to have management meetings where we have the investor core come in and sit down and break bread and talk to the seller and say, tell me about you guys as people.
(25:05):
Tell me about you all as an organization. Show me an example. Tell me an example of what you just told me that's important to you as your core values. How can you articulate that to me in an example of a deal you did? I'll tell you something that's interesting on the buy side that I found was very fascinating was there was a doctor who had an early onset condition that was going to impact their ability to have a steady hand. And that was extremely concerning to them. And one of the things that I was most proud of was the fact that that dialogue can occur between the buyer and the seller. And there were measures put in place that didn't devalue the deal at all, but there were measures put in place ahead of time to check the boxes so that the doctor would be covered on their deal and the business would be covered on their deal to have other providers come in and be a part of that.
(26:10):
And so I think never be afraid of any aspect of your deal. I found that almost every single hurdle that you're scared about can be overcome through teamwork and candid conversation. But it's probably better to go through that conversation with somebody like us first until you get to a letter of intent and then you tell 'em, because we can help you manage that expectation, and then we'll find the buyers to come into the management meetings that you can sit down and ask the tough questions of. And that's where the rubber meets the road for the client.
Tyler Terry (26:45):
I love when you talk about breaking bread with a practice and actually getting to know them. I feel like that's a lost art these days of remembering the importance of having somebody actually sit down with you in person or come in and take a look at my practice, experience it firsthand as a patient, and even more so, I respect so much that you care to know the practices and partner with them before you take it to the next level and go and represent them. So that's huge.
Bill Walker (27:13):
Well, this is a year long process for some people. I mean, it's a six month to a year process for just about anybody. So I mean if you're going to be in somebody's life on a weekly basis to help lift a significant load on a very important topic for them, probably the most important business topic they'll ever come across, you need to need to care. You need to care about people's families. You need to care about people as an individual. And sometimes I'll even get told things about an individual and what they're really like for their goals and their personal aspirations in a very, it's a very private setting for them because there's something about a credible stranger that they can unload and be like, I'm really worried about this Bill. How do I make sure that I get this? Is this going to change on me? And they may not share it in front of their spouse. Because they have this load that they're trying to put on their shoulders for their family, to take care of their family. They don't want to stress them out and worry them. They're like, I'm really worried about this Bill. How do we deal with this? And the answer is like, all right, I got your back. Let's talk to it and we'll come up with a strategy that works.
Tyler Terry (28:23):
That's cool. I love that. And I love that they can trust you to go to you, and that's such a great point. I mean, I would probably do the same thing. I probably wouldn't share that and stress out my wife or my family, and it's great that I could voice that to you, and then you've been there, you've done that with so many practices where it might even be somethin
