Valuation Multiples for a Medical Spa
Medical spas have become popular as consumers seek specialized cosmetic procedures, skin treatments, and wellness therapies. As such, operating a medical spa can be very profitable. Whether you are buying, growing, or selling a medical spa, a business valuation is essential. As part of a medical spa valuation, valuation experts often apply valuation multiples for a medical spa to determine its value. Understanding these metrics can give you a deep understanding of your medical spa’s fair market value. In addition, a business valuation for a medical spa will provide key insights to help you maximize the value and performance of a medical spa.
This article discusses some of the most common medical spa multiples that Peak Business Valuation uses when valuing a medical spa. Please note, that the values presented in this article are only averages. For specific guidance, it is best to secure a professional valuation for your medical spa.
At Peak Business Valuation, business appraiser, we help clients across the country who are buying, growing, or selling a medical spa. We are happy to provide you with a medical spa valuation. If you have questions about valuation multiples for a medical spa or how to value a medical spa, schedule a free consultation with Peak Business Valuation today!
Valuing a Medical Spa
When performing a business valuation for a medical spa, business appraisers typically use the market approach. The market approach is a popular valuation method that relies on multiples to estimate a medical spa’s value. The sections below explore the most common valuation multiples for medical spas. For more information, see How to Value a Medical Spa or reach out to Peak Business Valuation!
Valuation Multiples for Medical Spas
Below is a summary of the average medical spa valuation multiples. To determine which multiples are applicable for your medical spa, consider receiving a medical spa valuation from Peak Business Valuation. We are here to answer your questions and provide a comprehensive valuation report. Schedule your free consultation to start today!
Disclaimer: These multiples are for educational purposes only. The information provided does not constitute valuation advice. The multiples shared here do not represent the valuation opinion of Peak Business Valuation or its professionals. Instead, we recommend seeking the guidance of a qualified business valuation professional for advice on any matters covered in this article.
What is a Valuation Multiple?
Valuation multiples are key metrics used by valuation analysts to estimate the fair market value of a medical spa. Multiples calculate a spa’s value based on financial performance indicators like earnings, cash flow, and revenue. For example, SDE multiples are frequently used to determine the value of a medical spa based on its seller’s discretionary earnings (SDE).
For instance, a medical spa has $320,000 in seller’s discretionary earnings. It is valued at a 2.52x multiple. In this case, the implied value is $806,400 ($320,000 times 2.52x). If the same medical spa receives a 3.15x multiple, its estimated value would be $1,008,000 ($320,000 times 3.15x).
As a professional business appraiser, Peak Business Valuation is experienced in working with medical spa valuation multiples. The next sections cover SDE, EBITDA, and REV multiples for a medical spa. Keep in mind that each medical spa is unique, so the actual valuation range may vary.
SDE Multiples for a Medical Spa
Average SDE Multiple Range: 2.72x – 3.25x
Based on Peak Business Valuation’s data, medical spas generally transact at an SDE multiple between 2.72x and 3.25x. Business appraisers use this multiple to calculate the fair market value of a medical spa. The formula is as follows:
SDE X Multiple = Value of the Business
For example, if a medical spa generates $340,000 in seller’s discretionary earnings and transacts at a 2.98x multiple, the estimated value would be approximately $1,013,200.
$340,000 X 2.98x = $1,013,200
Peak Business Valuation, professional business appraiser, commonly uses SDE multiples to value medical spas. To determine SDE, a business appraiser will adjust the operating profit by adding back certain expenses. This may include non-recurring costs or personal expenses that a new owner is unlikely to incur. This process helps establish the spa’s cash flow potential. For more details, read Understanding Seller’s Discretionary Earnings.
EBITDA Multiples for Medical Spas
Average EBITDA Multiple Range: 3.53x – 3.99x
On average, medical spas transact at an EBITDA multiple ranging from 3.53x to 3.99x. Valuation experts apply this multiple to the spa’s EBITDA to estimate its value using the formula:
EBITDA X Multiple = Value of the Business
For instance, a medical spa generating $275,000 in EBITDA would have an estimated value of $1,045,000 if it transacts at a 3.80x multiple.
$275,000 X 3.80x = $1,045,000
EBITDA multiples are especially useful when determining a medical spa’s return on investment (ROI). Business appraisers at Peak Business Valuation may use EBITDA multiples for medical spas because they allow for the normalization of financial differences. This makes it easier to project future earnings and compare the spa with others in the industry.
REV Multiples for a Medical Spa
Average REV Multiple Range: 0.53x – 0.98x
Medical spas typically transact at a revenue multiple ranging from 0.53x to 0.98x. Business appraisers calculate the value of a medical spa by multiplying the revenue by the selected multiple. Refer to the formula below:
Revenue X Multiple = Value of the Business
If a medical spa generates $1,450,000 in revenue and transacts at a 0.73x multiple, its estimated value would be $1,058,500.
$1,450,000 X 0.73x = $1,058,500
Revenue multiples measure the total income a medical spa generates. However, these valuation multiples are less reliable than cash flow multiples like SDE and EBITDA. During the valuation process, business appraisers will determine which medical spa multiples are most appropriate for your medical spa. For more guidance, read The Valuation Process and schedule a consultation with Peak today.
Summary
Whether you are buying, growing, or selling a medical spa, it is important to obtain a professional business valuation. This process allows you to make strategic decisions and set goals more effectively. By learning more about valuation multiples for a medical spa, you can better understand the medical spa’s value and potential. To learn more about medical spa valuation multiples or how to value a medical spa, reach out to Peak Business Valuation.
At Peak Business Valuation, business appraiser, we work with medical spas throughout the United States. We are happy to help you with a business valuation for a medical spa! In addition, Peak can answer your questions on valuation multiples for a medical spa. Get started today by scheduling your free consultation with Peak Business Valuation below!