Med Spa Due Diligence Checklist for Buyers
Med spa due diligence is the review a buyer completes after agreeing on general terms with a seller and before closing. It is the buyer’s chance to confirm that revenue, equipment, staff, licenses and contracts are what the seller described. In aesthetics, some of the largest deal risks are specific to the industry: who actually owns the devices, how the business is licensed and whether the medical director arrangement will continue after the sale.
This checklist organizes the key areas to review. It is a general guide, not a substitute for advice from healthcare counsel, accountants and qualified compliance professionals. Ownership, supervision and licensing rules vary by state, and nothing here is legal, tax, billing or compliance advice.
Why Med Spa Due Diligence Matters to Lenders
Lenders financing a med spa acquisition rely on the buyer’s diligence as well as their own review. Findings can affect the purchase price, the deal structure, the loan amount or whether the transaction moves forward. A clear diligence file can also help the lender understand risks that are unique to aesthetics businesses. Our overview of med spa acquisition financing explains how lenders evaluate these deals more broadly.
Financial Review
Start with the numbers. Buyers typically request:
- Several years of business tax returns and financial statements
- Year-to-date profit and loss statement and balance sheet
- Bank statements and merchant processing statements to confirm deposits
- Revenue by service line, such as injectables, lasers, skin care and retail products
- Revenue by provider, to measure dependence on any one injector
- Product and supply costs, payroll and commission records
- Any proposed add-backs, with documentation
Our article on med spa EBITDA and add-backs explains which adjustments buyers should verify.
Device and Equipment Ownership
Lasers, body contouring systems and other aesthetic devices can be some of the most valuable assets in a med spa. They can also be the source of surprises. Buyers should confirm:
- Which devices are owned outright and which are leased or financed
- Payoff amounts and any liens on equipment
- Whether leases can be assigned or must be paid off at closing
- Service contracts, warranties and maintenance history
- Whether device software, treatment applicators or consumables require ongoing purchases
- Whether any manufacturer programs or warranties transfer to a new owner, which should not be assumed
An equipment list with serial numbers, purchase dates and financing details can help both the buyer and the lender.
Licensure and Ownership Structure
Because many aesthetic treatments are considered medical procedures, the way a med spa is licensed and owned matters. Buyers should have counsel review:
- Business and facility licenses required in the state
- Professional licenses for each provider
- Whether the current ownership structure fits state rules, including any corporate practice of medicine restrictions
- Whether the buyer is eligible to own the business directly or needs an alternative structure
- Any past complaints, board actions or regulatory inquiries
Licenses generally do not transfer automatically. Our articles on who can own a med spa and med spa medical director requirements discuss these issues further.
Medical Director and Provider Contracts
The medical director agreement is one of the most important documents in med spa due diligence. Buyers should review the term, termination rights, compensation and whether the agreement can be assigned. If the medical director is leaving with the seller, the buyer will need a replacement plan before closing.
Other provider and staff items to review include:
- Employment and independent contractor agreements
- Compensation and commission structures
- Restrictive covenants, which counsel should review because enforceability varies by state
- Worker classification, which should be reviewed by qualified professionals
- Staff tenure and plans to retain key injectors
Clients, Memberships and Prepaid Services
Client loyalty is central to a med spa’s value. Buyers should look at:
- Active client counts and retention over time
- Membership programs and their terms
- Unredeemed packages, gift cards and treatment credits the buyer may need to honor
- Online reputation and review history
- Patient records, consent forms and how records will be transferred, with guidance from counsel
Real Estate and Lease
Review the lease term, renewal options, rent escalations, assignment provisions and whether landlord consent is needed. A short remaining lease term can be a concern for lenders.
Insurance, Vendors and Liabilities
Confirm malpractice and general liability coverage, any claims history and existing vendor agreements. Vendor programs, supplier accounts and pricing should not be assumed to transfer. Identify outstanding debts, including equipment financing, lines of credit and any merchant cash advances, so they can be addressed at closing.
Using Med Spa Due Diligence Findings
Findings may lead the buyer to renegotiate the price, adjust the structure, require the seller to resolve issues before closing or walk away. Sharing organized findings with your lender can also help keep the financing on track.
Working With Your Lender During Diligence
Diligence and loan underwriting often happen at the same time, and the two processes can support each other. Lenders typically want to see many of the same documents a buyer reviews, including tax returns, the equipment list, the lease and the medical director agreement. Organizing those records once, in a shared folder, can reduce duplicate requests and help keep the deal moving.
Buyers should tell their lender promptly about material findings, such as undisclosed equipment liens, an expiring lease or a provider who plans to leave. Raising issues early gives everyone time to adjust the structure, the price or the closing conditions instead of facing surprises at the end. It also helps the lender understand how the buyer plans to address each risk, which can be just as important as the risk itself.
Final Thoughts
Thorough med spa due diligence protects buyers from paying for revenue, devices or contracts that do not hold up after closing. Device ownership, licensure, the ownership structure and the medical director arrangement deserve as much attention as the financial statements. Working with experienced counsel and accountants can help buyers close with confidence.
US Medical Funding helps buyers finance the purchase of med spas and aesthetics practices. Learn more about our med spa acquisition financing.
