Why MedSpa Equipment Debt Matters When Selling Your Business

When a MedSpa owner begins exploring a sale, the headline number often captures their attention — “I want to walk away with $3 million.” But what many sellers don’t realize is that equipment debt directly impacts how much they actually take home at closing.

Equipment is delivered free and clear of liens. Any loans tied to lasers, body contouring devices, or RF platforms must be paid off at closing. This payoff is deducted from the seller’s proceeds.

Example:

If the practice sells for $3,000,000 but has $170,000 in equipment loans, the seller’s net proceeds become:

$3,000,000 – $170,000 = $2,830,000.

Sellers should maintain an updated equipment inventory, obtain payoff statements, understand lease obligations, and ensure their accounting accurately reflects debt.

Key takeaway: Equipment debt reduces net proceeds—understanding this early prevents surprises and improves deal outcomes.

Working Capital Requirements in a MedSpa Sale: What Sellers Need to Know

Working capital plays a major role in the financial structure of a MedSpa sale. In this industry, working capital primarily refers to inventory: toxins, fillers, skincare products, supplements, and consumables.

Buyers expect one month’s inventory so the practice can operate immediately post-closing. If inventory is too low, buyers deduct the cost of replenishing it. If inventory is too high, buyers avoid subsidizing excess and reduce the purchase price.

Many MedSpa owners don’t perform physical counts or track inventory on the balance sheet. During diligence, buyers validate inventory and adjust pricing based on discrepancies.

Sellers should conduct monthly counts, record inventory properly, and avoid overbuying or depletion before a sale.

Key takeaway: Buyers assume normal working capital levels. Proper tracking helps sellers avoid negative adjustments.

Deferred Revenue: The Silent Liability That Reduces Seller Proceeds

Deferred revenue includes gift cards, prepaid packages, memberships, and surgical deposits—payments for services not yet delivered. These amounts are liabilities and must be deducted from the sale proceeds.

When buyers take over a MedSpa, they inherit the obligation to deliver all prepaid services. Therefore:

Net Proceeds = Purchase Price – Deferred Revenue.

The problem: Many MedSpa accountants do not reconcile deferred revenue or track actual package usage. This leads to inaccurate liability balances and major adjustments during diligence.

Sellers must reconcile deferred revenue monthly, match accounting with practice management system data, and clean up records before going to market.

Key takeaway: Every dollar of deferred revenue is a dollar deducted from seller proceeds. Accurate accounting prevents unwanted surprises.

Accrued Liabilities: The Overlooked Accounting Issue That Can Cost MedSpa Sellers

Accrued liabilities are obligations for goods or services already received but not yet paid. Examples include manufacturer invoices on 30–90 day terms, marketing services, payroll, rent, or utilities.

If the MedSpa received the product or service, the liability must be recorded—even if payment is due later. Buyers evaluate businesses using accrual accounting, so any unpaid liabilities reduce the seller’s proceeds.

Buyers scrutinize vendor statements because many MedSpa owners have incomplete bookkeeping. Missing or under-recorded liabilities always surface during diligence.

Sellers should record liabilities when goods/services are received, reconcile statements monthly, and fix discrepancies before selling.

Key takeaway: If you owe it, it affects your sale proceeds. Accurate accrual accounting protects your financial outcome.