At some point or other in the journey of most aesthetic business owners, there comes a point where they decide that they need to try and extricate themselves from the day to day constraints of running a business. This could be for health reasons, wanting to spend more time with the family, or on hobbies and other interests. Or it may be that the enjoyment that they once experienced in running a business has been overwhelmed with some of the stresses and strains that can come as part and parcel of life as an entrepreneur.

Depending on the structure of your business, there are different options that can be explored – however, extracting maximum value out of your business, that you feel you might be due for all the hard work and effort that you have put into building it, does requires a flexible approach, an understanding of tax implications (always talk to a tax advisor) and a certain realism concerning what an investor is prepared to pay.

If the business revolves solely around you to generate the income – you don’t really have a business that you can sell to the more sophisticated investors seeking to buy into, or expand their profile in the aesthetic market. A practical approach to extract some value may be to find another practitioner who you can train to take over your client base with some form of ongoing revenue over a defined period after you have left the business.

If you have a clinic with staff who are generating income in the business apart from yourself, a similar plan could be implemented. If you work daily in the business as a practitioner, or in any other role, and want to leave straight away and get as much cash out as you can in a lump sum – you need to be realistic about the valuation if you extract your earnings in dividends as these will not show up in the post-tax profit figures.
Investors will need to calculate the cost of your replacement’s wages and deduct this from the profit figure before applying any multiple to calculate valuation, as businesses are often valued on a multiple of the gross annual profits. This could be between 2 and 5 times annual profits, depending on how critical you are to the business. The valuation essentially relates to the amount of time (2 to 5 years) that it would take an investor to recoup his/her investment in your business.

In reality, if you want to sell a business and generate the maximum value, you need to plan well ahead. If you are a practitioner delivering treatments, you need to build a structure of employees or practitioners with practicing privileges to replace you – so that you are more of a figurehead and less responsible for the actual earnings in the business. This makes it easier to convince an investor that the profits generated by the business are sustainable upon you leaving.

Pruning unnecessary expenses and maximising the return on investment of your marketing budget over a period of a couple of years can give a prospective investor a healthy-looking set of accounts showing a trend of good growth in sales and profits. An investor will also need to see the potential for future growth in the business in order to offer a higher multiple.

To get the maximum value out of your business you need multiple suitors and multiple offers – and there is a process to marketing your business to get multiple bids that is outside of the scope of this brief article.

Having been through the process of building and selling 3 different businesses myself, I’d be happy to have a “virtual coffee” (just go to the contact page of my website) to give you any help that I can if you are considering selling your business in the next 5 years (its best to plan well ahead!).