As businesses’ very own financial maven, our team member, Christin Trujillo, was invited to share what the most profitable med spas are doing in 2022 with AmSpa. Watch the video below or read on to learn how YOUR med spa can profit this year with these tried-and-true tips.
The most effective way to run profitable med spas is to increase profit without cutting expenses. Med spa owners often look for budget line items to cut and grow their bottom line. While this can be helpful, we instead suggest focusing on increasing revenue by measuring two important KPIs.
Overview of Key Performance Indicators
The number one piece of advice we give to clients is to start tracking these two Key Performance Indicators (KPIs): revenue per hour and revenue per appointment. When you track these numbers for each provider every month in 2022, you can keep an eye on goals and course correct if needed. Use these formulas:
- Revenue per hour = total revenue earned ÷ total hours worked by provider each month
- Revenue per appointment = total revenue earned ÷ total number of appointments by provider each month
Knowing which financial numbers to track is key so you aren’t buried in useless data. Read on to learn about the implications of these two KPIs.
Increasing Your Revenue Per Hour
Knowing how profitable your med spa is for every hour of operation helps more than cutting costs ever will. And the revenue per hour formula can be measured at the practice level, room or chair level, and provider level. Compare these numbers over time to get a granular view of your practice’s success. This number can tell us the following things about your business:
- If your providers are performing at the same level as other providers in other practices. The average revenue per hour for a provider is $500, but a high performer can bring in up to $1,200 per hour.
- Whether your services are priced appropriately.
- If your treatment times are too long, providers are taking too long in between patients, or the front desk is staggering patients too far apart.
- Whether your team is providing comprehensive care and adding on treatments.
Areas to Focus on for Profitability
Once you’re tracking revenue per hour each month, you can zoom in on certain aspects that need improvement. Here are four areas to address that increase med spa profitability and revenue:
- Service mixes. Are you offering too many low dollar procedures that take longer to perform? While you want to provide a variety of services to patients, you also want your service mix to be profitable. Identify and market your most valuable procedures. Also, focus less on services that use up providers’ valuable time without being as profitable for your business.
- Fee schedules. Set a competitive price for your service that equals the value and expertise you’re providing to patients. Consider the experience they get in your practice versus other practices. And target the type of patients you would like to bring in your doors. If you set low prices, you’ll get patients willing to sacrifice quality to save a buck–and that may not be the ideal clientele.
- Streamline appointments. How well is your team managing their time and schedule? Put the right staff in the right place at the right time to drive efficiency and profitability.
- Operational optimization. This usually comes from faster treatments and shorter appointment times. We often suggest hiring a medical assistant to help you achieve this. Medical assistants lead to quicker transitions between patients and treatment rooms. They do the prepping, cleaning, and charting so physicians don’t have to. This way, your higher-paid providers can focus on offering profitable services instead of spending 15-20 hours a week doing administrative work.
Improving Average Revenue Per Appointment
In tandem with the KPI above, you also want to measure average revenue per appointment. This number helps you understand the comprehensive value of every patient. Each appointment is a chance for your team to provide the highest level of care. Thus, look for ways to improve value per appointment with the following three factors:
- Raising fees. This is a quick and efficient way to increase revenue. Regularly assess the competition and increase fees as needed. If you keep up with market trends and demand, you can condition patients to regularly expect fee increases instead of surprising them several years down the road.
- Treatment planning. When a patient calls to ask about one service they know about, also share information about other treatments at the time of booking. Educate all staff members to know every treatment and uncover the patient’s needs.
- Additional procedures and products. Depending on the season or event, you can offer less routine procedures that benefit your bottom line. This includes laser hair removal in the spring and moisturizing services in the fall.
Patients trust you to provide comprehensive care. So don’t leave revenue on the table by neglecting to tell patients about all the ways you can serve them.
Impact of Increasing Revenue
Increasing revenue by month can have an impressive impact by the end of the year. For example, when your med spa hosts 150 appointments per month at $500 average revenue per appointment, you bring in $75,000 per month. But when the average revenue goes up to $600 per appointment, you bring in $90,000. That’s an additional $15,000 per month and $180,000 per year!
You can expend the same effort with greater results by focusing on financial KPIs. Over time, watch your revenue increase and grow your med spa’s profitability.
Maven Financial Partners helps med spa owners in the following ways:
- Understand: unlock data to predict your performance.
- Plan: set goals to carry out your business vision.
- Budget: create accountability to drive growth.
- Measure: use KPIs to track progress and drive revenue.
- Manage: track every dollar flowing in and out of your business.
- Grow: forecast future profit and growth potential.
Contact us today to learn how we can help your med spa profit in 2022!