Med spa business owners have a lot on their plate, between scheduling, marketing, hiring, and keeping the business afloat. Finances can loom in the back of a business owner’s mind as a necessary evil for profitability. But in Season 2, Episode 23 of Aesthetic Record’s podcast, Maven’s Founder and CEO Jessica Nunn shares five financial tips for med spas to simplify the way you think about the bottom line. Watch the podcast below or read on to learn how business owners can measure the right numbers, set up a pay structure, incur smart debt, and keep track of inventory to ultimately benefit your med spa.
Measure the Right Financial Numbers
A common mistake business owners make is spending too much time measuring all the wrong numbers. Benchmarks that are helpful for a retailer or tech company may not be as helpful for your med spa. Jessica suggests the following practices to collect data you actually need:
- Use your software correctly. Input determines output. Thus, the data you enter needs to be right because it predicts future performance.
- Predict your revenue. Revenue is the driver behind your med spa’s success, so calculate various revenue benchmarks like revenue per hour and revenue per provider.
- Cost of goods sold. How much does it cost your practice to do the job and care for the patient? This can include general expenses like equipment and interior aesthetics. Expenses also include big items like service discounts, payroll, and rent. If your discounts are too high, your team members aren’t bringing enough business, or your rented space is ill-equipped, it’s time to reconsider your investments.
There’s no point in having data that isn’t informing your strategy. That’s why we create processes and reporting around the specific data our clients require to allow them the freedom to watch their business grow.
Set Up a Successful Pay Structure
Every patient has different payment needs, so set up a system that makes payments easy and affordable for them! Some methods include online payments and payment plans. For example, if you have an annual appointment with a patient where you suggest their treatment for the year, you can then enable them to set up an automated monthly payment.
Also, understand your fees in relation to your costs. Industry fees a decade ago were not the same as they are today, and your med spa should reflect the current standards. You may need to raise fees in the current market based on rising cost of goods sold, employees’ expectations for raises, etc. And don’t worry–patients aren’t as sensitive to fee increases as providers often think. Their relationship with your provider combined with the hassle of switching practices makes them unlikely to leave because of a relatively small price raise.
Lastly, don’t underestimate the value of re-care. Dental practices have perfected the method where a patient doesn’t leave the office without scheduling their next appointment. Keep patients in the doors by scheduling their next meeting ahead of time, enabling them to schedule online, or personally calling them. Remember that it costs more to acquire new patients than to keep current ones. Instead of fishing in the pond next door, take a look at your own pond and how you can better retain your loyal customers!
Don’t Be Afraid of Financial Debt
Many people shy away from debt, but it can actually be a useful tool when growing a business. The key is to acquire debt responsibly and with a plan. Buy things that make sense for your practice. Whether you conduct industry research, ask your marketing department about Google search results in your area, or have a number of patients requesting a service, it’s critical to know whether your audience wants the investment.
Do keep three to six months’ worth of working capital, but a stable practice with monthly recurring revenue can and should get a line of credit for the future. It takes risk, but so did starting a business! Risk comes with reward. If you believe in your investment and can finance it wisely, then do it.
A tip about smart financing is to accept smaller payments over a longer term. Having more capital available to you each month is likely worth more than the incrementally smaller interest rate you would get by making bigger payments over a shorter term. You can put down a significant investment in the beginning if you’d like, but free your practice in the future by not overcommitting to a high monthly payment.
Keep Track of Inventory
Jessica offers a few simple instructions in regards to med spa inventory:
- Don’t keep too much supply of inventory that will expire. Unless your practice is in a remote area, it’s easy to order supplies. Take advantage of bulk ordering if you must, but don’t load your shelves with items that have a too-short shelf life.
- Implement a system to track what’s on the shelves, what it expires, and what’s being used. Track your inventory and use your software correctly.
- Assign a specific person to order inventory or make sure all the employees ordering are in communication. Once a duplicate order is placed, there’s often no going back.
Remember that even with the smallest item, everything adds up. With many hands in the pot, it can be hard to see what’s happening in inventory. An effective tracking system and good communication will ensure supplies stay in stock and do not expire.
Work With Maven to Manage Your Finances
As Jessica says in the podcast, our goal at Maven is to help aesthetic practices overcome the intimidating aspects of finances. We digest the numbers and tell the financial story in a way business owners can understand. To schedule a complimentary analysis, contact us today!