The Profitable Exit Strategy Most Beauty Owners Miss

[0:01]

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(SKYA) I am so excited for this episode because I feel like this is such a big trend, especially for medspas, is the private equity and people prepping to sell their business or potentially franchise or go more corporate. So I'm really excited to chat with Cameron. He has a wealth of knowledge setting up those exit strategies and what KPIs and numbers you need to get really solid and be able to show when you are getting ready to sell. So I think there's gonna be a ton of good info on that. 

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(JOZ) Yeah, I feel like there's gonna be a wealth of knowledge, 'cause one thing that we've talked about in different conversations is the lack of business acumen that a lot of business owners have. So, I feel like, for business owners who are looking to have that exit strategy in place, as they're preparing to launch their business, this is gonna be a critical one for them to listen to, to gain that insight. 

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(SHANALIE) Yeah, we did some great content last season, too, with Randy, more on the hair salon side of like, what's your end game? Right? How are you getting out of this one day? So I think folks get really looped in on launching, sustaining, growing. Those are all very important. But how are you bringing this to a close? Is someone gonna take over your business? Do you have someone that you want to give this to when you're ready to retire? But what does that look like? So I think this is a really cool one. And especially if you wanna scale, do you go the PE route? How does that work? I think this is gonna be a good one. 

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(JOZ) Well, I feel like the majority of our conversations when we're speaking with owners of different businesses, that is part of the conversation. What is my exit strategy? Am I going to start franchising? What does it look like to know that I'm ready to even franchise or go to a second or third location? So I am excited about this, and it's something we're definitely gonna be able to learn from ourselves and then have that content go to who we're speaking with when we're within our Boulevard roles.

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(SKYA) Yeah, and I think it's really exciting, even for our other industries. Like Shanalie said. whether you're a salon spa, medspa, barbershop, you're not gonna be doing it forever. You're gonna get to the point where, it's a physical job if you're a provider. It's a stressful job if you're an owner/manager. So I think regardless of what role or vertical you're in, it really is applicable to all of the different facets that we work with. So really excited to dive in. 

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[2:29]

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(SKYA) Today's guest is a visionary, entrepreneur, and leader in the medspa and healthcare space, empowering businesses and providers to achieve success through technology. He is the founder of Growth 99 and the Medical Millionaire podcast. I'm grateful to be catching up with Cameron Hemphill.

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[3:09]

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(CAMERON) In the next five years, I think that 5, 10, even 15% could be owned by PE 'cause they're attracted that frequency. But there's a couple of numbers that the practice owner needs to understand If you guys wanna sell. Most people wanna sell when they're at the $1 million to $1.5 million range. That's the average practice revenue today in the nation. So they're not ready yet. They're operating at 25, 30%, hopefully. Some of 'em are not even making any money. And they're buying EBITDA. They're not buying the revenue, they're buying the EBITDA. And so it's so important to understand profits.  And when they trade, they're trading at a certain multiple of the EBITDA, not the top line revenue. 

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Practice owners need to understand that as these guys come in, some of them I think are trying to sell too early and they're leaving chips on the table. Utilization rate is 50% on average, five-zero. And then they wanna go open up location number two (so that's capacity for the listeners).

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So it's like, okay, if I have this practice and I have like six rooms, for example, and only three of them are filled and the other ones are empty, and then you're gonna go open up practice number two. This is weird, right? You gotta get at full capacity first. Don't let a private equity firm come in and buy you at 50% utilization;  you have okay retention; you're like right below the threshold. That's where you're attractive to them. They come in, they just put the sprinkle dust on. They align the marketing correctly, the tech stack that correctly, get your utilization rate up to 80, 90%, and then flip out and make more money than you did from your grinding hard work.

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(SKYA) Yeah. They come in and get that exponential return just by tweaking a couple things, tweaking numbers, investing in small things, whether it be tech or staffing, whatever it may be. And then they see that utilization pop up to 80, 85% 

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(CAMERON) And then trade out there. And I think that money should go back to the practice owner. So for the listeners out there, I think if you guys are looking to sell at some point, hey look, there's always an expiration date. You're gonna sell to private equity, strategic, or you gonna close your doors or you're gonna pass it down, or whatever. There's an end point and I'm a firm believer that if you're gonna put your hard work, you wake up every day, you grind your a** off, and you have cried as an entrepreneur, you have experienced like moments in your life of a very dark environment. I've been there. I know what entrepreneurship's like.

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This is not easy. There's a reason why you make a sports car with two seats; it’s because it's lonely at the top. It's lonely. And, I hate to see practice owners sell too early and leave chips on the table. And then a very good finance person comes in and acquires it and make more money than you.

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When you sell your practice, you should run it how a private equity would run it. Makes you run it more efficiently. And then when you sell it, they'll actually buy it for more than you think, you know? I just want you guys to make more money at the end of the day. And I think there's opportunity for everybody and private equity.

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[5:54]

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(SKYA) I agree. I think it's very hard for an entrepreneur who owns their own business to transition to that private equity mindset. But it's important if that's your plan, if you're gonna sell, like you've gotta buckle up for that. I would say even like years in advance of planning to sell, because you're right, there has to be an end game.

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No one wants to be doing that forever. We eventually all wanna retire, go play golf every day in Florida. Like that's the goal, right? So I think that's something really important for businesses, that is their end goal to be thinking about. Anything else? I know you talked to me a little bit about Perk. That was something I haven't heard of. I feel like I know all the happenings, so I'm excited to hear about it. 

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(CAMERON) When I left day-to-day operations at Growth, and this is quite recent, it's a interesting world to live in, because you worked on your baby. I've worked on this for 10 years, and when I left, I was like, dude, where's my identity? I kind of lost it for a minute. And practice owners and other people listening in that have sold a business or a practice, you'll go through that. You think that there's this light at the end of the tunnel, which there is from a financial standpoint, but this baby of yours, whether it's XYZ, medspa or XYZ tech platform, there's a big identity behind it.

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And so you gotta be prepared for that. And when I was leaving, I just was doing research in the industry. I'm always curious. I'm a curious person. Like I was pretty curious in school. I was always like, why does it work this way? I would question things. 

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This was just a taste of everything covered in our full episode. Keep the conversation going on Last Client of the Day, now streaming wherever you get your podcasts.

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