Med Spa Industry Trends and Predictions for 2023

1. Med SpaIndustryTrendsand Predictionsfor2023 Med spa owners, we’ve got good news for you—you’re in the right place at the right time. The aesthetics industry is thriving. And investors are primed for med spa M&A. We’re sharingSkytale’stop trendsandpredictionsfor2023below,andyoucan checkoutour latestpodcast onthemedspaindustrytolearneven more!

2. What’sHappeningintheMedSpa Marketin2023? When askedabout the stateofthe aesthetic industry, Skytale’sTeddVan Gorden mentioned afrothymarketandhighinvestordemand. Bothof these variablesare conduciveformedspaM&A. Forone,the industry is expandingwhileotherhealthcare industriesflatlineordecline. Thankstoconsumerdemand, the medspaspace is expectedtogrowby$10billionby 2027,withanaverage of11%growthperyear. Andinjections, whichare just one facetof themedspaservicemix,areexpectedtogrowevenmore—12%overthe next 5years. “That’s an incredible amount of growth, especially in comparison to some of these more established healthcare industries that a lot of investors are already saturated with,” says Tedd.

3. Why Are Medical Aesthetics Practices So Attractive to Investors? With such impressive top line growth, it might seem obvious why investors are hungry for medspaM&A.Butthereare severalotherunderlyingpositivefactorsofthemedspaspace: • Private pay.Medspasgenerally don’ttake insurance,so customerspay with cashorcredit • card.Thisisveryrareinhealthcareandsavesmedspasthe hassleofdealingwith insurance companies.Plus, itmakesfor amplecashflow. • Recurringservices.Oncea customerreceivesaservice,theyusuallyreturn. Apositive • customerexperiencewith injections, facials,andthelike canmakealoyalcustomerfor yearstocome. • Highlyfracturedandunconsolidatedindustry.Becausemany medspasoperate independently, there’sabigopportunityforinvestorsto partnerwith existingownersand buildaplatform. • Increasing culturalacceptance.Thepopularityofwellness, healthy aging, andmen’s participationinaestheticshasmadethatregularvisittothelocal medspamuchmore commonplace. • Aesthetics are exciting!Unlikevisitinga normalhealthcarepractice, patientsoftenlook forwardto theirvisittoa medspa. Andprovidersareexcitedtowork there, too. Thisenergy makestheindustryfeelmorepositivetoinvestin.

4. WhatAre Buyers Looking forinaMedical Aesthetics Practice? At Skytale, we meet many investors who inquire about med spas available for M&A. And while every investor has their own idea of due diligence, here are some common themes amongwhat investorsarelookingfor: • Cashflow.It’sabinarytestfor a company. AsBenHernandezsharedabouttheDNAofa • beautifulbusiness,“Asimple buttrustworthy evaluationofa medspa’svalue comesfrom • calculatingitsEBITDA…thebusiness’sfreecashflow.” Thisfigureisall aboutwhatthe businessisproducingandmakesyoumorecompetitive. • Service mix.Each servicehasadifferentprofitability. Ithelpsindicatewhatcustomertypes andseasonality thebusinessfaces.Aretheservicespricedatapremium, affordable, or membershiplevel?Here’sahint: Ifyou canattractcustomerswith premium pricing, that’s gold. • Numberoflocations.While notanecessity forM&A, havingmorelocationsdoesindicate moreopportunityfor aninvestor toscale. Italso showsthatyou haveasecretsauce. • Investorsmayfeel thatbuyingupmultiplelocationsislower risk withhigherreturn. • Utilization.Thismeansthatyourbusinessisgettingthemostoutof theresourcesyou have—likeemployeeefficiency,clientbookings,anduse ofexistingretailfootprint. • Owner story.“Investorswanttoknowaboutyou astheowner,”Teddsays. “Whydidyou startthisbusiness? Whatdo you thinkaboutyour business?Whatisyour day-to-dayimpact onthebusiness? Whatareyour rolesandresponsibilities?” Buyerswantto seeif their

5. interestsalignwith yours. They’realso gaugingifyou’regoingtostick aroundfor another decadeortransitionoffafter afewyearsor months. How DoI PreparetoSellMy MedSpa in 2023? If you’re worriedthatpreparingtosellyourmedspawillrequirealong to-dolist,hang on—mostgreat med spas areactuallyalready doingtherightthings. Thefollowing suggestionsare smart movesforrunninga greatbusiness,regardlessof whetheryouwant tosellnow,in10years,ornever. Hereare afewstepstoconsidertakingtoget themost valueforyourmedspa. Have a clean balance sheet. Show cash flow and be smart with how you finance growth and approach debt. Most buyers will want you to be debt freeat closing. Investindataand good processes arounddata.Marketingdata(page views,clicks),financial data(accounting),and operationaldata(numberof clientsperdayandperprovider)iskey.“Byhavingtherightsystemsand processesinplacetoaccuratelycapturethisdata,businessownerswillbe abletosift through thenoiseandanalyzeanddisplayitinan understandable format to see the complete picture of their business,” Ted explains. Surroundyourselfwithawell-functioning team.Fromnewbiehiresto seasonedveterans,allteam membersshouldbegrowing inthesame direction.Italsohelpstheinvestornot besolelydependentonyou,the owner. Findtrusted advisors.Trustedadvisorscouldincludea goodlawyer,CPA, consultant,andM&A advisorlikeSkytale.They’reoutsidepeoplethatyou havefaith into givegoodadviceandperspectives. Finally,knowwhoyouare andwhatmakesyour business special.Bringthisvisiontolifeandcommunicateittostaffandbuyers. Investorslookat hundredsofdealsperyear,but youonlysellyour businessonce.So helpyourbusinessstandout. Keep in mind thatthesearen’t thingstoonlydo right beforeyougotomarket. These strategieswillhelp yourun yourbusinessforthe next 40yearsifyoustart now.

6. Join Skytale at the MedicalSpaMergers and Acquisitions Summit Areyouready totakeyourlearningtothe next level?Whetheryou’reapractice owner planningtoscale orexit, orapotentialinvestorlookingtoengageinoneof the fastest growingindustriesinthe U.S, theMedicalSpaMergersandAcquisitionsSummitwillhelp you take thenext step onyourmedspajourney. On February 2, 2023, Skytale teammembersand otherpanelguests willdiscusstopicslike the state of the industry, seller and buyer viewpoints, five phases of a deal, wealth management, maximizing the value of your practice, and life cycle of a med spa. You won’t wanttomissit!Grabyourspot today atmedicalspashow.com/skytale.