3 Tips Analyze Business Performance In Your Medical Spa

By: Christin Trujillo

When making a decision in your medical spa, it’s important to look at what story the data is telling you. Whether trying to grow your medspa, add more locations, determine if you’re spending too much on medical supplies or payroll, or understand if you can afford to make a marketing switch or an equipment purchase – all of these things and more can be answered by analyzing your business performance.

  1. Create a Scorecard

When we’re working with practice owners, one of the first things we do is extract and look at all of that really great data just sitting in the practice management software (PMS). The PMS hosts a wealth of information showing where your revenue came from, who produced the revenue, and how busy each of your providers are. It’s not helpful to look at one month or even one full year of data, it’s most helpful to track these metrics by month over time. This allows you to identify trends, pinpoint areas of opportunity, celebrate and repeat successes, and also allows you to indicate goals for your practice based on historical performance. The bottom line is, every practice performs differently and when you understand what YOUR numbers are, you can understand what causes the numbers to be the way they are and focus on actions that course correct or increase the numbers if that’s your objective. 

  1. Review and Track the MVP Key Performance Indicators (KPIs) 

Let’s be honest, there’s a million reports sitting in your PMS and a million more things for you to focus on as a business owner so do yourself a favor and pull and track the data that will give you the most bang for your buck (and time). When determining the best KPIs for your medspa, these five metrics tell me the most about the practice: Total Net Revenue, Total Collections, Revenue by Provider, Revenue per Hour Worked, and Utilization %. Net Revenue tells you the production and retail sales amount less any discounts, while Total Collections tells you how much cash you brought into the practice that month. Looking at these metrics over time, you may see there are peaks and valleys but adding the last three metrics, allows for additional insight into why your Revenue and Collections ended up the way that it did. If you look at Revenue by Provider, you may notice additional trends that help fill in the gaps for what happened in the total practice. Maybe one provider did more, while others did less and consistently perform lower. 

Once you have your Revenue by Provider, you can then calculate your Revenue per Hour worked. You’ll want to pull a report or the schedule that shows how many hours your providers were seeing patients. You will then calculate your Revenue per Hour Worked by taking the Revenue by Provider divided by the Hours Worked for each provider. This metric can tell me so much about a practice regarding efficiency, if the providers are comprehensively planning treatment, and if the providers are performing at the same level as other providers in other practices. 

Calculating the Utilization % is almost done, all you need now is to divide the Hours Worked for each provider by their total Hours Available to see patients. If your providers are at 60% Utilization, that means they have 40% open time and it may not yet be the right time to add a new provider. It could also indicate a need to add marketing to increase your Utilization. 

  1. Keep Your Financials Updated and Review Often 

The rule of thumb is to at least review your Profit and Loss Statement and Balance Sheet monthly so you can understand the financial implications of the total business. As a medspa owner, if you also look at this each month and build a spreadsheet that shows your monthly trends, you’ll be better equipped to identify if your costs have gone up, if your payroll spend is reasonable, or if your profits allow for that new piece of equipment you’ve been eyeing. What’s most helpful is that you not only look at the dollar amounts of your revenue and expenses, but that you also view them as percentages. Knowing that you spent $45,000 on payroll last month doesn’t tell me a lot, but knowing that the $45,000 spent was 25% of your revenue does. Plus, no one likes to do math, am I right?  If you use Quickbooks there’s actually a quick and easy way to add percentage of income to your Profit and Loss Statement each month so you don’t have to do any math. 

As a medical spa fractional CFO, we’ve worked with hundreds of practice owners helping them make sense of the data, track performance, and plan for the future. If you’re interested in learning more about how we work with medspa owners or what a medspa CFO does, click this link