Building Sustainable Scale and Investor Readiness in a Rapidly Growing Medspa Market

The healthcare industry has seen significant change over the last several years, and practices have been forced to evolve how they provide care and most effectively run their business. While different sectors grapple with the shifting healthcare landscape, Medspa practices find themselves in an optimal position as demand increases for non-invasive aesthetic treatments. 

The Ziegler 2025 Physician Practice Management Outlook [1] foresees significant growth for the Medspa sector over the next ten years. The Medspa industry is expected to reach over $70 billion in market size by 2034 [2], underscoring strong demand and revenue potential. Increasing consumer demand for aesthetic and wellness treatments, coupled with expanding demographic adoption, is propelling projected growth. 

There are currently over ten thousand Medspa practices in the United States, and a majority of these locations are privately owned. While there has been considerable recent private investment activity across over 30 sponsor platforms with a focus on the sector, only 10% of the Medspa practice market has been consolidated to date, indicating plenty of opportunity for continued investment to scale business operations. With this surging demand and runway for growth, practice owners must be prepared with sustainable strategies to scale their business.

How can practice owners attract investment opportunities while navigating challenges in the broader healthcare and economic landscape?

High-performing Medspa practices realize value by cultivating the highest-level focus on customer experience, fostering a very strong internal culture and proactively managing all compliance requirements. Courtesy of DragonImages at Adobe StockEvolving a Practice Group into a Platform

While Medspa clinics are growing rapidly in size and number, only a few are able to achieve the level of a fully optimized platform. Unlike standalone clinics that operate within the confines of their practice walls, a robust platform features a multi-location reach across key markets and/or state lines, a diverse array of high margin service line offerings, operational capabilities to drive growth and efficiency, and a culture dedicated to demonstrating success in delivering the highest quality clinical care and customer experience. These qualities are key to attracting investors, who are looking for a practice platform large enough to fit within their scalable model and opportunities to drive premium value through combined partnership strategies. 

Establishing a practice group as a platform is essential for maximizing profitability. When evaluating opportunities for growth, it is best to consider all options at your disposal. Are there new service lines into which you can expand? Is there an option to establish a de novo clinic to ramp up your reach into a new market? Where can you leverage a loyalty program to retain existing customers and enhance member loyalty?

There are a few priority ways to increase revenue in a Medspa practice, including: 

• Organic growth driven by net new provider additions and de novo clinics
• Optimizing pricing strategies by adjusting pricing to match market trends
• Increasing high-margin services by promoting treatments with higher profit margins
• Enhancing patient retention through loyalty programs and post-treatment engagement
• Increasing patient volume through marketing and referral programs
• Improving provider productivity by up-selling and maximizing scheduling efficiency
• Focusing on retail sales; bundle and promote medical-grade skincare products

When Medspa practices look to leverage these different market opportunities, it is also important to consider areas for expense saving, including re-evaluating supply and labor costs, in addition to utilizing offshoring of administrative capabilities. 

With the overall growth rate of the market on a fast trajectory, scaling towards a platform model is critical for practice groups, as it puts them in a strong position to broaden and strengthen their overall market presence and position themselves as an appealing asset for investors.

Key Performance Indicators and Industry Benchmarks

Once practice leadership has identified and prioritized opportunities to execute on the practice growth strategy, it is important to establish a set of key performance indicators (KPIs) to focus on developing and optimizing, as well as understand how investors will evaluate these KPIs in benchmarking your practice’s performance. 

Some of these high-value KPIs may include: 

• Revenue per location and growth rates
• Revenue per invoice
• Patient retention and repeat visits
• Provider capacity and opportunity to optimize utilization
• Provider compensation and incentives, ensuring consistency with industry standards
• Patient acquisition costs & conversion rates
• Margin per treatment and consolidated EBITDA profitability margin

High-performing Medspa practices realize value by cultivating the highest-level focus on customer experience, fostering a very strong internal culture and proactively managing all compliance requirements. In order to have satisfied, incentivized providers while upholding industry standards, practice owners must create a supportive work environment where providers feel valued beyond financial metrics. These cultural strategies will directly impact KPIs and drive significant value creation for the practice. 

As Medspa practices continue to build platform value across growth initiatives and focus on operational KPIs, there are a few best practices to follow to best prepare for an investor transaction, such as: 

• Providing the highest clinical quality services
• Offering a set of diverse, high-margin services
• Emphasis on provider training & professional development
• Building a strong brand and market reputation
• Effective patient acquisition and retention strategies
• Membership programs to build customer loyalty
• Schedule optimization and resource utilization
• KPI tracking & data-driven decision-making
• Technology innovation and AI enhancement

With all the change we have experienced in the healthcare industry over the last few years, it can be difficult to consistently adapt to best practices and strategies for growth. By distilling the rapidly changing market into a few priority updates and benchmarks for success, Medspa owners will be best equipped to scale their business and position themselves for private investment opportunities, while also prioritizing sustainability and resilience against a rapidly evolving industry landscape. 

References: 

1- https://www.ziegler.com/what-we-do/investment-banking/healthcare-organizations/healthcare-services-outsourcing/physician-practice-management-white-paper-download/

2- https://www.globenewswire.com/news-release/2024/03/14/2846439/0/en/Medical-Spa-Market-Projected-to-Surpass-US-70-648-2-Million-by-2034-with-a-6-80-CAGR-Growth-Forecast-Future-Market-Insights-Inc.html 

About the Authors:

Andrew (Andy) Colbert joined Ziegler in 2006 as a founding member of the Healthcare Investment Banking practice. Colbert specializes in advising physician groups on a spectrum of strategic and financing alternatives including mergers and acquisitions, capital raising transactions and partnership development. He has completed numerous M&A and capital raising transactions for healthcare companies across a wide spectrum of healthcare subsectors including healthcare information technology, physician groups/MSOs (radiology, emergency medicine, anesthesia, hospitalist, etc.), telemedicine, wellness, managed care, provider and payor outsourcing, and revenue cycle management.  

Drew Braucht joined Ziegler in 2019. He advises healthcare services and healthcare information technology companies on strategic and financial alternatives including mergers and acquisitions, capital raising, joint ventures, and strategic partnership development. Prior to joining Ziegler, Braucht was a Vice President at Evercore where he focused on M&A and corporate advisory across a range of public and private transactions. Earlier in his career, Braucht worked in healthcare strategy roles at TPG Biotech, IQVIA, The Lewin Group, and the National Institutes of Health (NIH).