Medspa Revenue Formula

Medspa owners often call us asking how they can increase revenue in their practice. Should we raise fees? Maybe. Should we expand our hours? Potentially. Should slash our expenses so we can be profitable without having to increase revenue? Possibly, but that’s for another article.

In order to better answer our clients’ medspa revenue questions, we created a formula to help them understand exactly how a medspa makes money. We, very creatively, call this the MedSpa Revenue Formula, and the best part about it is that it boils down to just two parts. It’s simple, but everything you need to know about increasing revenue in your practice can be broken down into a few numbers.

Interested in hitting your big revenue goals? Let’s hack into the medspa revenue formula:

Medspa Revenue Formula = Hours Worked x Revenue Per Hour

Part 1: Hours Worked

Let’s start with the first half of the formula: hours worked. Most of your revenue is earned by selling your time. You’re selling services, and those services require your time to produce. Aside from retail sales, you’re not selling any tangible things. Therefore, the number of hours you’re producing directly correlates to your revenue.

As a medspa owner, you may recognize these scenarios better than anyone:

• You’re taking two weeks off and closing down? You’ll bring in less revenue.
• Your schedule isn’t full and you’re not producing for several hours in a day? Your revenue takes a hit.

It doesn’t matter if your space is 5,000 square feet if your schedule isn’t full. You have to have patients in the door (or cheeks in the seats, as we like to say) to have productive hours.

Part 2: Revenue Per Hour

The second half of the equation, revenue per hour, is arguably more critical than the first. Consider this example:

Your service mix (what services you offer) is composed of hydro facials and chemical peels. How much do you charge for those? How long do they take you? Let’s say you charge $150, and they take you an hour or so. What’s your revenue per hour for those services? $150.

What about the medspa down the street? They offer body contouring and laser services, and their revenue per hour for these services will likely exceed $1,000. While we realize these services must be performed by different providers, we also know that providers aren’t always maximizing their time. If you are trained and legally able to provide services that generate $1,000 per hour, especially if you already offer these services in your practice, then these are the services you need to maximize. Doing so will increase your revenue per hour, which will increase your overall revenue.

Use the Formula to Achieve Your Revenue Goals

Often, we talk to clients who want to grow to become a seven-figure medspa. But when we look at the math of what they’re offering, it just doesn’t work. There are only so many hours in a day, in a week, in a year. Even if they’re using every single hour available to produce revenue, they can’t hit their goal of a million dollars if the revenue per hour number is low.

To grow into a seven-figure medspa, a client might need to make drastic changes in how they operate their business. They might need to change the hours they’re working or the services they’re offering to make the equation add up to their goal number. The good news is that once they understand why their revenue is what it is, they can figure out how to build a sound financial plan. And if you’re lost, that’s exactly what we do for our clients! Our team at Skytale Group can help you organize your hours worked and revenue per hour, thereby tweaking your formula to match your revenue goals. Get in touch with us so we can start together today.

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