Is this Med Spa/Urgent Care deal a hard pass?

0:00Hey, welcome to Acquisition Onives. This is Michael, your co-host. Today, Heather Anderson and I went through and looked at a deal that was fascinating. It reminded me of being a kid when somebody opened up a restaurant here in San Antonio that served both Chinese food and Tex-Mex food all in one restaurant. Was it good? Was it bad? Well, I'll tie that all together with looking at this current deal, which is located in Heather's neck of the woods down in Orange County. So stay tuned for the episode. See what you think of this deal. And we'll catch you next time. We'll set Acquisitions Anonymous.

0:32Hello, another episode of Acquisitions Anonymous. We don't have 100 % ears anymore. Thumbs down on just the plus inventory. So many founders and operators still use their personal number to talk to customers. And sure, that works when you're just starting out, but eventually it starts costing you time and money. That's where OpenPhone comes in. It's a modern business phone system that lives in an app. You get one number and your whole team can use it like a shared inbox for calls, text, voicemails, all in one place. Somebody reaches out to you, your ops lead can reply. Your co-founder can follow up.

1:09You don't have to be the bottleneck anymore. And if you miss a call, OpenPhone's AI agent picks it up, answers questions, and even logs new leads for you. It's one of those tools that makes you wonder why you didn't switch over sooner. 60 ,000 businesses already have. Open Phone is offering our listeners 20 % off your first six months at openphone.com slash A-A-P-O-D. That's O-P-E-N-P-H-O-N-E dot com slash A-A-P-O-D. And if you have existing numbers with another service, Open Phone will port them over at no extra charge. Open Phone. No missed calls. No missed customers. Heather just coincidentally we're dressed the same as we were last episode it is a coincidence well you're back from putting an offer on that ski resort so yes I went and put in the the summer only ski resort that was pretty cool but this one's even more interesting this title caught my attention yeah when I was going through my list of deals in my pocket I was like oh this is crazy that's perfect for me Heather to riff on today.

2:25So do you want me to pitch you on it? Please. All right. So it's from BizBuySell. It's an urgent care for kids and adults, full service plus med spa, and it's 3 ,500 square feet in Orange County, California. Oh, you're stomping grounds. This is my stomping grounds. Yes. They're asking$8 million. Cash flow is$1.5 million. That is seller's discretionary earnings. So assume that's their salary included in there. Gross revenue is$3.5 million. So asking price is eight, makes$1.5 million, and gross revenue is$3.5 million. They're paying $8 ,500 a month in rent. So that's just shy of$100 ,000 a year in rent.

3:06And it was established in 2021. The business is in a must-see location in Orange County. Urgent Care is a full-service operating on-site pharmacy x-rays, COVID-19 testing, and more for adults and children in South Orange County. It is also a med spa. Conveniently located in the South OC for the beach cities and residents of Dana Point, Monarch Beach, San Juan Crapistrano, San Clemente, Capo Beach, Lando, oh my God, and Mission Viejo. There's like 10 more cities here. A lot of South Orange County, yes. The office features advanced diagnostic techniques, including x-rays to ensure patients get the answers they need team also offers in-office blood testing urine testing and sexually transmitted disease testing and treatments dot exams and covid19 tests also a full service medical spa and the adjoining suite all under one roof for 35 405 square feet not one thing that would be fascinating and we've never done it as a deal type on here is all of the random businesses that are associated with the adult um industry in southern california oh yeah can you imagine yeah well like all the all the performers in those videos um they do like sexually transmitted disease testing like on a monthly basis like they're all tested so there's like two or three labs that they all that they all trust and you have to have your certificates and all this kind of stuff and then there's all kinds of other crazy businesses associated with it but this part of southern California is not that, it's not the valley.

4:34That's the valley you're talking about. The San Fernando Valley. This is the Orange County where people are classy. This is Orange County. That's not going on, I don't think. Classy and conservative. I don't know, but I don't think that, maybe. It's conservative as far as SoCal goes. Let's put it that way. Yeah, true, true. Okay, back to this deal that does not involve digital industry. Just made me think of it. The urgent care provider specializes in customized treatment plans for acute illnesses like bronchitis and other respiratory infections, urinary tract infections, strep throat, and dehydration.

5:04They also provide on-site diagnostics and treatments for colds and flus, allergies, and lacerations, and to satisfy the requirements of employer schools and other organizations, the medical team offers comprehensive physicals, including specialized DOT exams. Then there's a bunch of urgent care here, and I'm not going to read that. The doctor is very semi-absentee. Okay. The medical spa is an aesthetic weight and loss clinic with a physician level services. It unveils the cutting edge medical secrets once reserved for celebrities and world-class athletes through research-based safe physician level advancements in aesthetic sports, obesity, hair loss, and wellness medicine with South Orange County.

5:39They specialize in non-surgical, non-invasive, no downtime, hair loss restoration, aesthetic facial treatment. Oh my God. I just can't. My voice is starting to hurt. Yeah, this is too much. They do everything. The doctor owner is willing to stay in a current role very semi-absentee as the clinical medical director if needed and in the right fit. But the furniture fixtures and equipment are a million dollars. It has 14 employees. It has a lease in Orange County that goes through 2031. And there's two adjoining suites that the doctor spent a million dollars to build out with a 10-year lease with two more five-year options.

6:10There is absolutely nothing like this practice. And then there's some stuff where the doctor will hang around and train the next person. So, Heather, before I make fun of the lack of grammar and punctuation in this listing, what do they do? What is this business? I feel like it started out as an urgent care that needed something to pivot to because it wasn't quite, you know, the urgent cares kind of got overbuilt and maybe ran into challenges also like with reimbursement rates and things like that. And I think this is like an urgent care that pivoted to also offering everything else, including med spa services.

6:52So every possible kind of medical service they could come up with, they're offering, including MedSpot. It seems a little wild. Like everything is going on in there. But I think it started out as an urgent care that maybe struggled in that category and then became a little bit of everything. Yeah. And the broker here is Sia Bosch Ardalan, who has, man, look at all of these certifications he has. He's a business broker serving Orange County and surrounding areas. You can tell he wrote the listing because the same level of punctuation mistakes are in both listings and his seller profile. And his website is redhotproperties.com.

7:35redhotpropertiesca.com. He looks like a sweet man. Look at his face. I feel like I've met him. I feel like I have. Hey, everyone. I just want to tell you that this episode is brought to you by VeriVend, which is the only platform purpose-built for independent sponsors and private market investors who want to move faster and eliminate friction. VeriVend is cool because it combines investment management and secure instant payments into one platform. So that means capital calls, deployments, and distributions, they all work like Venmo. One-click real-time transfers with no transaction limits and automatic reconciliation.

8:09So from raising capital to returning it, VeriVend handles it all. Deal marketing, data rooms, KYC and accreditation for your investors, signatures, capital flow, dashboards for your investors, and even fund administration, accounting, and taxes. So whether you're raising a single deal or managing a full fund, VeriVend gives you the speed and confidence to execute all in one single platform. So you can check it out and learn more at verivend.com. V-E-R-I-V-E-N-D.com. I mean, I've met a lot of brokers in Orange County where I live so uh may have yes um a lot of times they will specialize in in medical and i don't tend to come across a lot of medical the types of clients i work with don't usually have a health care background and so you don't i don't see a lot of it i see a little obviously i've done a lot of med spas but not urgent care urgent care like i said kind of got tough kind of became a tough space to be in a few years ago overbuilt basically but did he give us ebitda there was a lot said there yes cash flow 1.5 sd it looks like the doctor who set this up paid out of pocket for the build out and everything like that and they just basically did sd is equal to ebita which they should be depreciating the build out which they're not yes and you know unless you're a physician that's going to buy this you probably have a replacement salary for the seller so you So cash flow is probably a little bit lower than what's stated here, a million five.

9:41Lop off a physician's worth of salary, so maybe$250 ,000 or more. So maybe you have a million two-fifty, a million three left over, depending on what their other adjustments look like. And they want$8 million for that. Yeah, even if you give them credit for that, it's$1.5 million and an asking price of$8 million. Which is too high. Yeah, what is that like? I can't even do the math. That's like five, six times. It's rough. It's just very expensive. Especially when you've got all these different revenue streams that are listed here and no one of them is kind of declared as dominant. They do this, they do that, they do this, they do that.

10:27So I think that diminishes the value of the cashflow when it's just a little overly diversified And you as a patient or a client kind of don't know, what do I go here for? You know, what is this place? Well, it tends to be a tough thing, right? People, you know, people would try things like a restaurant and a laundromat together. And they're like, well, wait, you know, like that gets us out of any common category. And there's no buyers who want to own a restaurant and a laundromat. And this is kids going into a clinic where STD testing and med spa services, it just seems a little strange. So it's way overpriced.

11:06The listing has a bunch of grammatical errors in it. And it's in a category that's very difficult to transact because it's not a category and they don't own the real estate. And it's health care. So you need a buyer, you know, at least if they're going to get debt, the buyer needs to have a health care background or be a physician. Ideally, lenders would like them to be a physician, but at least if they're not a physician to have some kind of health care background. So, yeah, you're in a tough, tough kind of spot here. It seems to me like the best value that they have in addition to the cash flow stream is the location.

11:45The fact that they did build out, they've got good leases, it sounds like. And South Orange County is an affluent area. They brag about the location. So if it is really in a good strip mall or wherever it is, you know, that's probably the value here is could someone else come along, maybe another physician, you know, and maybe do more with that location. Yeah. But it's why pay that much, you know? You wouldn't pay this price for it. Did he say why the doctor is selling? Doctor owner is willing to stay on in current role, very semi-absentee as, and then it doesn't say. I like the emphasis, very semi-absentee.

12:31Well, it's like, are you semi-absentee? Are you very semi-absentee? Very semi. Very absentee? Are you, you know. It's a lot there. Yeah. At least there's not an over abuse of all caps in this listing. I would say that's the thing that's got going for it. But yeah, Microsoft Word has spelled correct. Grammarly is your friend. You know, that's my recommendation for folks who are writing things these days. There's no excuse to have a bunch of grammatical errors and stuff. Drives people like us crazy. Yeah, yeah. It's a lot here, too. And I think this needed to kind of land the plane somewhere. Like, what is the primary revenue source?

13:11I know they do a lot of things, but tell us a little bit about those things. Is it 50 % urgent care? And then they added on a med spa. just kind of listing exhaustively everything that they do, I don't think is help. It's kind of hurting this listing more than it's helping. Yeah. Well, I mean, I think this is a case of, you know, there's a number of brokers who take listings, who take listings that are just never going to transact because they hope they'll be around, you know, when the seller is ready to be reasonable. Or they maybe get lucky and somebody shows up and pays crazy price for it. But, you know, this is one of those things where I think like, you know, our friend Cleve Fiore does it well.

13:50Like he doesn't take listings that he doesn't think are going to transact. I wouldn't. If I was a business broker, I wouldn't want to put the work into deals that clearly aren't going to transact. But I think what you said just a second ago is really helpful for a lot of early stage buyers who are new and they're used to maybe looking at real estate listings. And all of a sudden they see these prices that, and the first thing they say to me is these are all overpriced. Yes, yes. Most everything is listed too high. And kind of to your point, sometimes it's because brokers are waiting it out to see if the seller will come to a more reasonable valuation at some point.

14:26And a lot of them won't ever. Yeah. That's why this listing's been in my little quiver of listings to talk about on this podcast. And it's been here for six months. Well, Urgent Care Med Spa definitely got my attention. I thought we were going to talk about emergency Botox, and that's not what we talked about. I mean, as somebody who needs emergency Botox often, I'm cool with it. No, you don't. All right. So where are you on this one? Thumbs down. It's a tough one. Too expensive. Really, I mean, needs to be another physician in the area and pay a lot less. Yeah. I think this person needs to feel lucky to get their invested capital out of this, plus maybe a little bit of a return because they've got it set up.

15:14but it feels like it's 250 % too expensive. I don't think it's going to trade here. Yeah, I agree. That's about two cents. All right, on that note, maybe next week we'll talk about a deal you like. You got any more worm farms or pizza boats? Somebody actually, it didn't go very far, but somebody actually did have a deal they were working on that was a worm farm, not in the same area, but it was another worm farm. And I got really excited when I saw it. So they're out there. Worm farm industry is alive and well. that's the way it should go alright well everybody thanks for being here sorry we didn't love this one but there's always the next deal to look at so Heather great job today same