5 Reasons Why Growing Your Medical Spa Business Is FAR More Powerful Than Cutting Expenses

Think about it this way; It's much easier to grow your clinic's revenues than it is to cost-cut your way to profitability.

Let's face it. You can't cut your way to long-term wealth or success.

While you'll hear a lot about how to minimize costs and maximize efficiencies and productivity in your clinic (and I'm a big fan of that too), that's only one part of having a successful clinic or medspa that's throwing off mountains of excess cash and expanding multiple revenue streams. Growing your revenue is the most powerful strategy you can use and the only one that will give you the resources to build a business that supports the lifestyle you want, rather than building a soul-crushing hamster-wheel job.

Here are 5 reasons why growing your clinic's business and revenue is more effective than simply cutting costs:

Most businesses, especially clinical physicians, can't simply turn on a switch and earn more. Your medical spa can.

If you're a clinical physician you're trading time for money — a 'job' business model — you can't just start seeing more patients or cram more hours in a work day. (Few physicians ever try to actually earn more money except by working more hours.)

One of the reasons that you opened a cosmetic practice or medical spa is that you're able to leverage technology and secondary providers (physician extenders) to deliver your services. In most palaces you can hire others to perform the actual IPL or laser hair removal treatments under your license and you don't have to push the button on every treatment. That model allows you to extend your license and 'scale yourself' using technology and labor.

There's a catch of course. You have some pretty high fixed costs that are in the tens of thousands of dollars with laser leases, rent, financed equipment and salaries. Those expenses are something that you can mitigate if you're smart (group buy filler injections, used cosmetic lasers, etc. ), but the hard truth is that those costs are part of the business model. Scaling back too far is actually dangerous to your business - cut too deep and you're into the muscle that powers your clinic operations, customer service and employee motivation.

Many docs first thought is to keep monthly costs low and move to commission-based compensation, room rental, or add other low-level services like massage or aroma therapy to try to gain patient flow while not spending anything. While it may look like it's a low risk strategy it's a fools errand because of the distractions and opportunity costs.

Other mistakes like cutting the cost of your Botox treatments as a 'loss leader' (total B.S.) or relying on discounted Groupon traffic... simplistic tactics that waste your time at best, and can cripple you if things go wrong.

The revenue streams I'm talking about may actually involve real business decisions and create an asset that you own - permanent makeup, massage and 'aroma therapy' provided by someone who rents a room in your clinic doesn't.

If you're frugal and want to be sensible, great! Combine earning more with the automation strategy for implementing systems into your clinic, and you have a powerful financial combination. Start by setting sensible short term revenue goals, buy your next IPL or cosmetic laser used, start implementing systems in your clinic, and cut costs mercilessly on commoditized products like taking advantage of group buy injectibles if you can. Do these things and you’ll be ahead of 99% of other cosmetic physicians.

But that's only the savings and productivity part. To be successful you're also going to have to grow.

When you focus on growing your medical spa and creating a bigger pie, you'll benefit from disproportionate and compounding rewards that most other physicians and clinics can't match.

Here's why:

1: There's a limit to how much you can save, but no limit to how much you can earn. Ok, there may be some theoretical limit somewhere but for how big an profitable a cosmetic clinic can be, but it's far easier to add another $10,000 a month in gross revenues than it is to cut $5,000 from the spend. And it's much more fun.

2: The effects compound. If you're bumping along the bottom and have cut all of the fat from your budget, where do you go? You've starved yourself of the ability to grow.

As your medical spa's business grows you gain access to a larger patient network, and the network works harder for you. It's like compounding interest and gives you scale to reach an ever larger audience that's limited only by your ability to execute and lead. You'll also find it's a better message to patients and staff to be able to tell a growth story. Once you learn how to turn the dials and grow your first $10,000 monthly bonus, it’s relatively easy to turn the dial to make $15,000, or $20,000.

In every market the top 3 or 4 clinics take 90% of the revenue. Everyone else fights for scraps.

3: It improves your teams morale and your patient experience. Have you ever seen a clinic that is just barely getting buy? It's a bummer.

Growing your income let's you provide your patients with a much better experience, and moves your clientele upstream and away from bargain hunters that come with headaches and no profit margins.  Moreover, since payroll is the biggest cost you have it's a target for clinics that are cutting costs and novice business leaders often try to skimp on staff.

Growing revenues means that you can attract and pay for a skilled staff that can be trusted to help build the business, not just see you as a stepping stone to the next gig.

4: It allows you to focus on big wins rather than minutia. As a clinic owner you should be focusing on the big wins instead of trying to save money by eliminating what doesn't matter. Earning more is one of the biggest wins you can have. And by reducing the number of things to focus on — and picking major, important items like increasing revenue — you don’t need to worry about trying to keep your staff working at minimum wage. If you’re handling your major goals, the minor details fall out of that. Whether it’s taking a CME course with polar bears, putting your clinic on autopilot, or building other lifestyle businesses on the side, you can manage your lifestyle the way that you want.

5: It forces you to compete on price, which will kill you. If you're competing on price you're in a losing battle. A patient who comes to you for price will leave you for a lower price just as quickly, and there can be only one lowest price. It's a downward spiral which leads to a miserable existence.

6: It gives you options. Growing your sales lets you move from what you have to do to survive, to what you want to do. It gives you options, and opportunity. Personally, I want to live a rich life, and that means spending money on the things I love. Ask yourself whether you'd rather bump along the edge of going out of business and grinding out another payroll, or spend some time earning money so you could live the lifestyle you want. I'm betting you'll answer earn more 100% of the time.

“The way to get started is to quit talking and start doing.”

— Walt Disney

So what actions should you take right now?

First, you have to be convinced that it's possible. You need to adjust your mindset from one of scarcity, to one of opportunity. You need to be convinced that you can step forward in a slightly different direction than you're headed, but with dramatically better results. You're going to need to educate yourself.

The good news is that you're in a fantastic market. Most businesses, especially clinical physicians, can't simply turn on a switch and earn more. With a cosmetic practice you can.

There are three main areas where you can take immediate action to begin increasing your sales and income; getting more patients in the front door (marketing), raising your conversion rates (consultations), and streamlining your clinic operations (systems). Increase any of these and your revenue will increase. Ignore them and your opportunities will slowly be throttled, wither and die.

While we don't yet (as of this post) have our training course on marketing available, we can immediately address the other two areas where you can increase your conversions and streamline your operations.

Whatever you do, take action right now and begin.

Why Medical Spas Fail Reason #8: Lack of Cash Flow Planning

One common pitfall for medical spa owners is the failure to properly account for prepaid services, such as discounted packages of laser or light-based facial treatments.  If you sell a package of treatments up-front, you can have obligations against those treatments for up to 8 months out (e.g. Laser Hair or IPL).

If you spend all of the money from those packages now, then you will have future expenses against revenue that has been long-spent.  This places you in a negative cash position which requires that you play catch-up, although it is difficult to ever catch up if you manage your cash flow in this manner.  The only potential solution is to offer higher revenue, single treatment procedures such as laser lipolysis or fractional CO2 resurfacing so that you can obtain significant revenue from single, one-time treatments that will offset the money spent in commodity-based treatment packages (Laser Hair & IPL).

The best solution is to never get into this situation and maintain an adequate cash reserve at all times.  You can help keep track of outstanding liabilities by using an accrual-based accounting versus a cash-based method.  By doing so, you will quickly realize all of the up-front money received from laser packages has liabilities against it for up to 8 to 9 months out.

Maintaining business liquidity is extremely important because you will have months in which you are offering promotions and selling packages, and follow-up months in which you are fulfilling the packages that have already been purchased from months prior.  You need adequate cash to offset the expenses you will face down the road when it comes time to deliver the services clients have paid for in advance.

Used Medical Laser Financing

Once you have found the used medical laser you want to buy, you have three ways to pay for it:

1. Cash.  Need we say more?  Money talks, you know-what walks.  If you can close quickly on a laser purchase you can normally negotiate a larger discount.  Cash is the fastest way to close on anything and can save you significant dollars if you have it available to buy a laser.  If you have the liquidity, you can bring down the price by promising to pay same day or next day.  The ability to buy quickly from the seller always gets their attention and is an excellent way to save money.
2. Credit Card / PayPal.  Not all laser brokers accept credit cards, but if they do, this is the safest way to go because you can dispute a charge if you’re having trouble with the laser or it isn’t what you were promised.  Always ask the laser broker if you can pay by credit card.  If you can’t pay the entire amount, perhaps you can pay some percentage of the payment with a credit card, sometimes up to 25 – 50%.   In my opinion any reputable used medical laser broker should accept credit cards for all medical laser purchases.  It is one of the key ways of showing they are reputable and that they stand behind the lasers they sell.
3. Third Party Leasing.  You will typically pay a higher rate of interest if you choose to finance a used laser, in upwards of 12 to 18%.  You need to personally guarantee most laser leases, which isn’t fun, and you normally can’t pay off the lease early without a prepayment penalty.  You need to carefully review any type of lease agreement, especially for pay-off terms.  Ideally you would like to have a lease that is similar to a loan in which you can pay it offer early without any interest penalties.

It can be difficult to secure a lease, especially with the tightening credit markets.  Capital equipment makers, who had seen aggressive growth and comfortable margins before the economic slowdown, were hit hard when tight credit left few physicians available to buy big-ticket items.

Care Credit Tightening Their Belt

Well, here we go again! Care Credit is trimming the fat again cutting available financing funds to anyone who is not a dermatologist or plastic surgeon (when it comes to non-dental aesthetic procedures). First they limited non-core physicians who didn't meet certain practice criteria, now this!

Awhile back I posted on Care Credit and a follow up post on the difficulties we have been experiencing when trying to obtain financing for our patients. A good friend and colleague, Dr. Alex Covey tipped me off with an email that he received a letter limiting available funds to only $3,000. Your patient can be approved for $8,000, but can only spend $3,000 of it at your practice. This is totally not conducive to a practice such as ours when 80-90% of what we do is laser lipo, ultrasound lipo or water-jet lipo. Sure enough, we received the letter (note both of our practices are owned and operated by internists performing 100% aesthetic procedures, 100% of the time, and on-site 100% of the time).

The only way we can be reinstated is if our physician becomes a Fellow of an organization who, unfortunately, will not accept an Internist as a Fellow to begin with.

After arguing and pleading our case extensively with the folks at Care Credit, their criteria is set in stone always quoting their higher up corporate folks as the culprits. Perhaps their decision makers are in bed with RealSelf (sorry, I still hold a grudge there too)? Regardless, it's hugely discriminatory and insulting.

Not that we're not used to blows like this in our highly competitive industry, but it just gets exhausting to have to keep dodging roadblocks that are continually put in our way for absolutely no valid reason whatsoever.

So, anyone know a good finance company that's "color blind"?

Financing for Your Medical Spa Patients

Perhaps it is true that the medical spa aesthetic industry is beginning to bounce back, as indicated by the post on Allergan's increase last quarter.

I do know that in our practice we have seen an increase in patient flow. However, while the patients are gaining interest and beginning to come in for consults, one major problem still exists for some.  Financing.

With the credit card companies raising interest rates for some, and all out cancelling accounts for others, the method of using one's credit card for paying for aesthetic procedures is not as easy as it once was.

Awhile back I posted on Care Credit sending "Dear John" letters to many practices. The practices that Care Credit retained found that the criteria in financing approval had been increased making it difficult, if not impossible, for some patients to finance their procedures. I do have to say, though, that I am beginning to see Care Credit lax their criteria a bit as more of our patients are beginning to receive financing.

We use a couple of finance companies who have imposed these new credit limits on our patients. I had sent out emails to colleagues in the industry inquiring as to who they're having more success with. I ended up adding a brokerage finance company, MyMedicalLoan.com, who delivers a patient's financial application to a variety of finance companies. Our representative told me that if they can only get the procedure amount partially financed with one company, then they will propose the remainder of the balance of the procedure to the other companies. In some instances, there may be two or three finance companies involved with the patient making one payment to MyMedicalLoan.com.

How has it worked out for us so far? On average, for every five patients we send them, approximately two or three receive financing. As it is now, we have more patients waiting for better financing options.

So, the patients are beginning to come in again and we are faced with providing sufficient financing options. I encourage anyone to share their experiences with others on financing options that are truly benefiting their patients and their practice.

Paula D. Young RN runs internal operations and training at Young Medical Spa and is the author of the Medical Spa Aesthetics Course, Study Guide, and Advanced IPL & Laser Training course for medical estheticians and laser technicians.

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