Are you a med spa or MSO owner wondering how to use finances for your success? We’ve got you covered. Check out these best financial processes for med spas from our team of experts.
Create a Proforma, Budget, and Financial Goals
A proforma is a way to forecast hypothetical finances for your med spa. With a business plan in order, you should be able to project and budget for revenue, start-up costs, and ongoing expenses.
A budget is one of the most important financial tools a business owner has—whether you’re just getting started or in your twentieth year of operating. Your med spa will not be able to set or achieve financial goals if you don’t start tracking them in the first place. Whether you’re hoping to achieve profitability, scale, or retire on a beach somewhere, it all starts with setting a budget.
To create your proforma, start by setting revenue goals. You can project your collections by considering how many patients you’ll see on a daily or monthly basis, and multiplying that by each patient’s average transaction.
For example, how many patients will you need to see in order to generate a goal of $100,000 in collections each month? As you move forward, you’ll be able to know how to pivot when revenue falls short because you’ve been tracking and budgeting. Will you need to see more patients? Open more hours? Increase fees? You can make informed decisions because of your budget.
Next, consider your expenses. Since you’ve already created a business plan, you’ll be able to estimate the big ticket items and how much cash you’ll need to get started. Then, you can track expenses (payroll, rent, inventory, and more) on a monthly basis to calculate your revenue—and eventually your profit.
Understanding when you will be profitable will allow you to estimate the amount of working capital you’ll need to get started. Be conservative in your estimates. We know you’ll crush it, but it’s always better to underestimate your income and consider all expenses. Round up when you don’t have exact figures.
If you’ve established an MSO, the MSO will likely pay for business (not clinical) operations. You’ll need to establish a management fee so the clinic can pay the management company. You’ll also need to identify your medical director, determine the medical director fee, and ensure there is enough cash flow to support both the clinic and management company.
Build Your Financial Processes for Med Spas
Now, it’s time to put the systems and processes in place to help your business run efficiently and successfully.
We like to start with financial processes. You should have already fine-tuned your business plan and proforma. You mapped out revenue, expenses, and start-up costs. As you move forward, how will you keep track of these numbers? How will you work with your accountant to prepare monthly financial statements?
We recommend using Quickbooks Online and hiring a bookkeeper (or using your accountant) to track your monthly transactions. The bookkeeper will prepare a profit and loss statement and balance sheet each month. Having these financial statements available timely and frequently will allow you to identify overspending or other opportunities with profitability.
You can then compare your actual results to your budget to see how your business is progressing and make adjustments if necessary.
Key Financial Questions to Ask
Here are a few more financial process questions you’ll need to answer:
How will you pay the bills? You can go old school and write checks, you can utilize online bill pay through your bank, or you might consider an accounts payable software like Bill.com to manage the expenses of the practice. Either way, have a clear process that requires your approval for every dollar that is spent.
What about payroll? Quickbooks Online has an easy and cost efficient payroll tool. Or, you could use a payroll service that includes a human resource package, and even benefits for your employees. Consider who will approve hours and run payroll and how will you calculate bonuses.
What software will you need? You’ll need to select an electronic medical records (EMR) or point of sale (POS) system, or both. Tracking each sale as you check out patients will allow you to calculate revenue per patient, revenue per appointment, and revenue per provider data. Comparing those results to your revenue goals will ensure you’re growing as fast as you expected.
Will you review other Key Performance Indicators on a regular basis? Consider hiring a fractional CFO well versed in aesthetics to review your financials and KPIs with you on a monthly basis. Having clear financial strategy and staying close to your numbers will be essential if you want to know the direction your business is heading.
Put in Place Other Operational Procedures
You’ll need a marketing plan and budget, especially as you get started. Have a strategy to launch as well as a system to manage communication with patients (CRM) as you move forward. For instance:
- What will you spend on your website, branding, and outreach so you can hit the ground running when you open your doors?
- Have you reached out to local business partners?
- Have you signed up clients before you open?
- Is your business searchable on Google?
Of course, you’ll need processes for your medical providers. Create standard operating procedures (SOPs) for inventory and supplies, room turnover, patient follow-up, and so on. Together, you and your providers can avoid inefficiencies and set standards moving forward.
Lastly, you’ll need systems for all of your back-end operations—payroll, reception, accounting, training, hiring, and more. Sure, systems and processes will evolve as your practice grows. But opening day is much more likely to go smoothly if you and your team have a plan in place.
Enlist the Help of a Financial Partner Like a Maven
Congratulations! Now you know when you can expect to be profitable, and have enough money available to get you there. With clear processes in place, you will reduce frustration and inefficiencies.
But you don’t have to go through the process alone. Finances are tricky—that’s why partners like Maven step in to help. For more information about our fractional CFO services for med spas that are just starting out or have been in business for years, contact us today.