The Story of Aesthetic Brokers

Christine (00:04):
Bill, I'm so excited that the day is finally here. We are doing our first Aesthetic Appeal podcast.

Bill (00:11):
So excited.

Christine (00:12):
I'm very excited too.

Bill (00:13):
So excited.

Christine (00:14):
I'm mainly excited too, especially since this is our first one just to kind of start from the ground up and basically some of our viewers maybe let them even, you know, we're Aesthetic Brokers, but exactly how did we come about? What's the story of Aesthetic Brokers, if you wanted to kind of give a little light in that?

Bill (00:33):
Sure. To backtrack, in my previous life, I was on the buy side of private equity backed healthcare services organizations. And in that regard, I got to see hundreds of practices come across my desk, interacted with hundreds of doctors and healthcare providers. And one of the things that I noticed that stood out to me the most, was these were people who spent their entire professional lives caring for other people. And I felt like they were in many cases severely underserved in the most important, the single most important business transaction of their professional life. And when I took a step back, I thought, I, I can do it better. I think we can do a better job of properly representing them and serving them. And so hence Aesthetic Brokers.

Christine (01:40):
Maybe you could just shed a little light on exactly what being on the buy side means for perhaps somebody listening that doesn't know exactly what that means, in the private equity space.

Bill (01:48):
When you look at the healthcare industry as a whole, and you look at the attraction that private equity has had towards healthcare over the past three decades, one of the things that stands out that you'll see is the consolidation of independent individual practices in a particular industry. And having led mergers and acquisitions for one of those holding companies, that gives you a distinct advantage and understanding of what their pain points are and what they need. It also gives you a great appreciation for the pain points of an individual practice and how those two can come together in a very productive, cohesive relationship. On the buy side, when a doctor would have a practice and they'd come in to, come in to have a conversation, I would be the one that is ultimately doing the valuation on their practice from a financial, looking at their operational structure, the strengths of their culture, and putting some sort of a dollar amount on that. Then you take it to a board of investors, get approval to make the investment and cut that check and invest it in that doctor in their practice. And that's the buy side.

Christine (03:17):
And then, so as far as just Aesthetic Brokers, what exactly do we do?

Bill (03:22):
For us, really, we focus on medical aesthetic spas, plastic surgery centers, dermatology practices, and focusing on crafting the best transaction advisory services, the best advice for those owners of those individual practices, or a group of practices, to go to market and drive an open market competitive bid process, to get them the best deal possible in the sale of their practice or their group of practices.

Christine (04:00):
So given your background and obviously, the business that we're in now, why not start a larger, more encompassing M and A company offering other areas of financial assessment or even representation within other healthcare industries? We are specific to aesthetics, but maybe if you could explain why not other areas, why specifically aesthetics?

Bill (04:27):
I've always been someone who believed that focus on one thing, do it better than anybody else. And by being laser focused and looking through the lens of representing aesthetic related practices, I feel like we are better serving our clients, their interests, being intuitive to their needs, and really understanding the marketplace better than anybody else, to be able to be more predictive. By laser focus on the aesthetic space, I think it gives us a competitive advantage and that translates to a better quality product to our clients.

Christine (05:08):
As far as just brokers in the space, are there other brokers out there? And then for business owners that are maybe just hearing of private equity, not necessarily knowing all of the details about it, but what would you say to somebody about who needs a broker? Who doesn't need a broker?

Bill (05:26):
Everybody needs a broker, Christine.

Christine (05:28):
I knew you were going to say that, but if there was a way to say this is who needs a broker and perhaps maybe this isn't who needs a broker yet, what are some of the things that you might say to that?

Bill (05:40):
Well, to your first point about, are there other brokerage firms out there? Yes, there are. In our space, are there many that do it well and are really focused as a primary effort? No, there are not that many out there. It takes a lot of energy, expertise, resources to devote to any one thing. And so there is credible representation out there for you in the market. There's, there's actually an abundance of consultant type organizations and companies that pride themselves on focusing on upgrading your key performance indicator metrics, right? Those KPIs and making certain aspects of your practice stronger. And I applaud that, that's an important thing that is needed in the space of aesthetics, especially when I look at the last three years of growth and new practices coming up through the ranks and emerging. So those services are needed, and we do do those things as well for our clients as you know, that's your specialty.

(06:58):
But more so, I think for us and for I guess the listeners, those consulting type functions for us really more so focus around the idea of listening to our clients, listening to their needs and their wants, and then looking at the numbers and saying, okay, you have this goal of executing a transaction and maybe we need to give you advice on a specific endeavor inside of your practice to help make it stronger so that you are ready to go to market. And I think that's a subtlety that I would place on that as far as a consulting firm versus what we do, which is focusing on taking our clients to a transaction, an end state, if you will. Now, you were asking, I think on the second part of your question about

Christine (07:54):
Maybe who wouldn't need one?

Bill (07:56):
Who wouldn't need a broker?

Christine (07:58):
As much as you'll still say everybody needs a broker, but in the event, what would that look like?

Bill (08:02):
Yeah, so tongue in cheek with that. Look, if you're a practice that is a million dollars of revenue in your single digit margins, and at the end of the day you're taking home 60, 70, $80,000, you do not need a broker. What you need to do is get healthy so that you can do a transaction down the road and maximize the returns on what you've put into your practice to get the best deal possible. Those are situations where do not get a broker, don't go to market. So that, to answer your question. To back up and say, well, maybe answer a question that wasn't asked but is a secondary thought for people as they hear this is well, so what does a broker do?

(08:53):
I always try to use the example of we're a riverboat pilot, right? We're in the dark, we're floating down a very big windy river, and we know all the turns, especially with the buy-side experience that we have inside of the firm. We know where the shallow waters are on the banks, and we know where the rapids come into play, and we know where the river's at its slowest and at its fastest. And I look at it as our job is to just be that riverboat pilot out in front with the lantern, keep the lantern on, keep it bright, keep shining light in the dark corners of your process. And at the end of the day, you've heard me say this, the CEO is the decision maker, and that's the practice owner, right? We're just the chief information officer. Our job is to provide accurate, timely, insightful information so that our boss, our client, can make the best decision possible for them, for their family, for their clients and patients and for their staff because they care about these people.

(10:09):
These are very interactive cultures in these practices. They're very engaging in each other's lives, and because they're independently owned, these practice owners have put an incredible burden on their shoulders of responsibility to bear that weight for all the mouths to feed inside of that individual family for a person who works for them. And they don't take it lightly and neither do we. And that's one of the things I really like about the aesthetic space is that sense of onus to their team and they want to make sure their staff's taken care of too when they go down this path.

Christine (10:48):
I think that's also kind of a good lead into why you as a broker? I think we could talk about all of the financials and everything that you do on that side of the advisory, but could you speak a little bit to some of the practices that are thinking my culture, how does that fit into working with a broker? Is he just looking to sell my practice and someone's just looking to buy my practice? What does that look like in the transaction process?

Bill (11:17):
So one of the things that is I think, imperative about selecting someone to represent you is that they've got to get you. He gets me, Bill gets me, right? That's the goal for aesthetic brokers. They get me. And so we put a lot of emphasis and time on listing intently and violently executing on what our clients are telling us about their practice and themselves and what's important. And we go out and we know, through our relationships in the marketplace on the buy side, who fits their personality, who fits the culture probably the best. And then we aggressively introduce their practice into the market so that the people who have the maximum alignment of vision and values with that practice are brought to the table so that they can all meet and synergize on an individual basis with the practice owner and that potential buyer so that they get the best feel for one another and really can form an educated decision together on is this a great merger, is this a great acquisition, is a great marriage? And so that's on us to make sure that we bring the most qualified both culturally and financially to the table for our clients.

Christine (12:45):
Well, and to your point, just being that chief information officer, it might not be the most highest deal offer necessarily, but if we know that there are certain culture fits that are extremely important, it's our job to lay that out for them.

Bill (12:59):
Yeah, there's a balance there. It may not be the maximum amount of money upfront, but in the long run, is this the best fit for you financially? And when you look at a marathon and not a sprint, it's not a one and done. You've got to click vision and values wise, culturally or else it's going to be a miserable experience and it's not worthwhile.

Christine (13:22):
Well, you're on the same team at some point, right?

Bill (13:24):
That's right. And that's, so thanks for the leading, Christine.

Christine (13:28):
No problem.

Bill (13:30):
One of the things that I tell clients is, look, you could be in multiple scenarios inside of your own organization where you need equal footing for the conversation to take place and be effective. And one of the things that bringing in a broker does, bringing in a quality broker does, is allowing everybody to be heard inside of your organization, both the minority stakeholders and the majority stakeholder. Sometimes the majority stakeholder might be, they might be a silent partner, they might be a non-revenue generating active producer inside of a practice. And then you have two or three people who are actively contributing to the physical production of revenue generation. They all have to be heard. And then outside of the organization itself, listening to that, understanding their needs individually, collectively coming up with a strategy for them, and then going out into the open market and managing multiple relationships and engagements to get the best deal for them. Look, anybody who knows their practice numbers, they could run roost on their deal arguably, but are they really going to the best deal in the nuanced ins and outs of the legal documents when they get to the closing and you only get one shot to sell your practice .

Christine (15:04):
And you might have a great deal, but could you have gotten a better deal in some other form?

Bill (15:07):
Yeah. The last thing on that is it always helps when you have somebody, and I've heard you say this before too, it always helps when you have somebody else being the voice on your behalf because they're intuitively going to fight for you.

Christine (15:23):
Yep. I think it's harder to advocate sometimes for yourself, and so that's your job, right?

Bill (15:29):
Yeah.

Christine (15:30):
This leads me into just maybe talking a little bit about the consolidation space and what that even means and the consolidation of specifically the aesthetic space and where we're at in that and maybe some parallels to other industries just to kind of shed some light on that for some of our listeners.

Bill (15:49):
So consolidation in aesthetics is in its infancy. It takes a lot just to get to this point, right? I always tell people, I think there's three timelines to consider in any deal. And when you talk about consolidation and why private equity is attracted to aesthetics right now is because it's at a big enough industry dollar amount where consolidation is feasible. We're 18 billion dollars of industry, depending on who you talk to, give or take a billion. And when you think of what does that mean to have a reference of earth to the moon, to the sun for triangulation? The dental space, roughly 177 billion industry. Behemoth.

Christine (16:42):
Large.

Bill (16:42):
10 times, right? Well, it's taken 12 to 15 years depending on who you ask to get to, about 25% consolidation maybe in dentistry. And so when you can, again, I go back to laser focus, when you can laser focus on patient care, we get an incredibly increased amount of innovation. We get a better focused solution for the patient for what they need and want, and you become optimized on the business side in the process. So that's why I really like the marriage between private equity backing and aesthetic practices as individuals coming together to form bigger groups. And I think when you looked at three timelines that I talk about, the three timelines are your practice that you've been building, and how long you've been in business, and how long you want to continue to do what you do. Looking at the platform that you're considering becoming a part of, what are the like-minded professionals that you're going to get into a collegial environment with and a professional business partner environment with?

(17:58):
And three, where's the industry at? And if I go back to $18 billion versus $177 billion industry that is dentistry, one 10th the size. Took dentistry about 12 years to consolidate to maybe a quarter or so consolidation. For one 10th the size, it would stand a reason that we're going to consolidate at a faster clip. I don't have a crystal ball. If I did, I would buy a bunch of lottery tickets and I'd have a perfect bracket for the NCAA March madness. But what I will say is it stands to reason that it has the potential because it's a fee for service industry, because it's smaller, because people in a pandemic flash recession prove that it was recession proof. And I don't use

Christine (18:52):
The lipstick effect.

Bill (18:52):
The lipstick effect, I don't use that term lightly either on the recession proof, but people, as a matter of fact, chose to go to their med spa care provider before they chose to go their physician. Right? That's powerful. And so all of those tailwinds lead me to believe that the aesthetic space has caught the eye of private equity and it's here to stay. And consolidation of like-minded individuals into groups, whether it's geographic or product services lines, what have you are going to occur and they're going to occur at a more rapid pace than what I think dentistry has gotten to this point. And if you look at physicians, pharmacists, dentistry, you name it, there's always going to be a tipping point in the consolidation space where people think that they should hold onto their practice forever and a day, and I'm just going to continue to grow and I'm too, I'm in too infancy of a stage of my practice. I'm going to grow bigger and stronger and better, and I'm going to get more money because I waited to grow more.

(20:11):
And there's a tipping point. And when you hit saturation, well then the multiples that you're going to get for that EBITDA at the bottom line, earnings before interest, taxes, depreciation, amortization, after you pay everybody on staff after you pay all the bills, after you pay yourself even as a provider, that bottom line number it gets a multiple placed on, and that's how you get to this total enterprise value of what you're selling. Those multiples regress towards the mean because you get to saturation. If I said kidney dialysis, you would think?

Christine (20:52):
Davita.

Bill (20:52):
Davita. There you go, right? Great example where they've dominated the space, they've done very well, but kidney dialysis is in the 90th plus percentile of consolidation. And so you get groups of groups merging together to just try and find a small efficiency. Whereas the aesthetic space, it's so fragmented, there's so many independent owners that the sky's the limit.

Christine (21:22):
Something that I was thinking about as you're giving an example, to your point, it's so fragmented and there's all different types of business owners. Everybody has a different goal. Some are thinking of retirement, some just got in, some are ramping up. What would you say to maybe those three types of scenarios about getting in early with the consolidation space and what that might mean?

Bill (21:50):
So let me just say kind of in general, going back to the three timelines, because I think it is applicable in this regard. If you own a successful med spa, right, whether it's the early stage, you're in the prime of the practices driving of revenue, or you're looking to kind of taper off a little bit and play some more golf or play some more cribbage at the lake or what have you, one of the things that is important to understand,

Christine (22:23):
I'll look that one up.

Bill (22:24):
We love crobbage, it's lake house time there. One of the things that you need to look at with aesthetics is, again, I go back to the timing of the industry is on the cusp of consolidation. So finding quality platforms that have a private equity backer who knows what they're doing in healthcare consolidation, healthcare roll-ups, that's incredibly valuable. It's overwhelming to try and keep track of that and understand it and know who's done well and who hasn't, and what areas they were strong, what areas they were not so strong. That's a value that a broker is going to bring to the table for you. I want to touch on when you're growing your practice or you're just trying to maintain the status quo, do you have 20 to 30 hours a week to put into your deal to find the best deal and negotiate? It'll take endless amount of time, you just don't have it. So those are some of the nuances that it just can feel overwhelming or you don't even know what you don't know.

Christine (23:33):
I think that's an important part actually, just to kind of revisit it. And again, depending on who you partner with is the key, but I hear so many on the client side, just the fear of am I going to be obsolete if I sell my practice? You can speak more to that, but it's quite opposite. They need you.

Bill (23:54):
Oh yeah, they need you. They want you. You're going to be compensated, for those who are listening that tune in and you haven't really researched a lot into the private equity space. They want you to stay. They need you to stay, and they're going to compensate you for what you produce on a monthly basis to stay. It's really about planning your exit strategy smartly and not thinking in terms of months, but thinking in terms of years, right?

Christine (24:23):
Yep.

Bill (24:24):
It's not uncommon for somebody to ask someone to stay for 3, 4, 5 years and they'll want to compensate you for that additionally on top of your deal, but they want that continuity. Because just like it took a top injector time to get to their top of their game, passing on that knowledge, passing on that education to the next person up in the ranks is vital.

Christine (24:54):
And I think even too, it's funny because then the flip side to that is maybe you are looking to retire, right? And maybe somebody listening is thinking, gosh, I don't know if I want to do five more years. Maybe we can speak to that too.

Bill (25:07):
That's a great point. It's another path that you have to go down in the woods, and that path is a different deal structure. And again, that deal can be a scenario where it's like drop the keys in the mailbox scenario, but you have to understand all the nuances of how do you get the maximum value for your practice in that scenario. And a broker is going to be able to find those buyers that want to do that type of a deal, negotiate the terms that are favorable for what you want, and it's really about communicating across the board to pair up the perfect match and be a matchmaker of sorts and always have your client's interests their best interest at heart in doing so.

Christine (25:59):
Well, I think it builds trust, right at the root of it. Maybe if we could speak a little bit about, just in your past, in your history, some of the clients in the deals per se, that you closed, right?

Bill (26:15):
One of the most enjoyable parts of this business is people. It really is. It's all about people. I love that, I love that I get to probably just because of my personality and what I enjoy, I love that I get to know about their lives and their family lives. And I mean, you end up getting invited to weddings, you get invited to retirement ceremonies, you get invited to graduations, birthday parties, you name it. And it's a cool feeling to be a part of that when you're a client, for me and for us Aesthetic Brokers, you've heard me say it is you're a client for life.

Christine (27:00):
I love that. And I've heard you say to plenty of people, at the end of the day, it's your practice. You're the information officer, right? Ultimate decision is up to them. Maybe if we could talk a little bit about, we've covered a lot of the topics, but even just dispelling, I think in the aesthetic side, a little bit of the boogeyman in the closet, right? Private equity, and that's the goal of our podcasts, we're going to start to educate some of the industry on just what it is. Anything that you want to say in terms of that fear, anything at all that you want to shed light on?

Bill (27:37):
So it's really funny because I did sit on the buy side of it, and so you do get a prejudgment of sorts from people when you're talking to them. And one of the things that I would say is there was an albatross of sorts around private equity's neck that may perhaps have been earned in the eighties and into the nineties. But what I would say for the most part is there were some hard lessons learned, I think, in that space. And what they learned was that culture matters, long-term organic growth, visionary growth matters. And you get that by building relationships and teams and teams of teams and having multiple voices heard when you may have had a preconceived determinant already kind of in your mind, and being flexible to being able to quickly pivot.

(28:41):
And I would say that's one of the things that I think is most important to articulate is there is no monster in the closet. There's no boogeyman under the bed when it comes to private equity. In large part, these people are highly educated, relationship-based people that want to do right by future partners and have a long-term successful business relationship. And so knowing the right ones who are out there is my job for our clients and advising on their track records and their nuances is one of the things that I take pride in about us as an organization.

Christine (29:29):
Maybe we could wrap with even just talking about what's been fun about getting into the aesthetic space?

Bill (29:36):
You've heard me say this over and over, I love investing in technology. I love investing in education. I think those are things that we do as a long-term play that benefit our clients. And part of what I love is that, about the industry for aesthetics you asked, I think it was a pleasant surprise, and I did not expect this when I started researching and looking into the aesthetic space. The aesthetic space is purely American. It is absolutely American. It's an American led industry. It's an industry where people who were not appreciated and not valued in a behemoth bureaucratic organization, were able to see opportunity, just the art of what's possible.

(30:34):
On their own merit, and crafting and honing their own skills to go out and turn something that was a side hustle for a lot of these individuals into a thriving, prosperous, professional business. And that entrepreneurial spirit, that pioneering spirit, the art of the possible, the pull yourself up from your bootstraps to be the boss, to be the owner, to be the leader, that is pure American. And I love that about this industry, and it makes me want to go out and be the best possible representative for them and maximize their value because they've created something on their own, and they deserve, they've earned that right to capitalize on what they've created. And that, as far as an industry goes, is what I really enjoy the most about the aesthetic space.

Christine (31:38):
I mean, I was already motivated, but that just got me motivated. No, honestly, I think it's good. I think a lot of these questions are out there, and I'm very excited that we kind of covered some high level topics, and I'm very excited to continue on with Aesthetic Appeal. So thank you so much for your time today.

Bill (31:57):
I'm excited to continue on too. Pleasure to be here.