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Common Mistakes When Planning Your Medical Spa

It’s All True: All market indicators point to the markets preference for non-surgical treatments. 2,000 Americans will turn 50 every day (1 every 8 seconds) for the next 20 years. Studies show the number of Americans over 55 will grow by 60% in the next 20 years and their buying power will exceed $2 trillion by 2007. Wow.

In fact, the news gets even bigger. Americans spent just under $9.4 billion on cosmetic medical procedures in 2003. In 2004, American consumers spent $44.6 billion on anti-aging products and services, and the total anti-aging market is projected to reach $72 billion by 2009 (Business Communications Co., Inc., February 2005).

However, there are problems. Right now, Medical Spas are like the Wild West. Physician practices, Day Spas, cobbled together franchise chains, add-on clinics, and even hair salons are taking the title of Medical Spa or laser clinic. So while the opportunity is there, it would be wise to take note of the old cartographer’s adage when marking unknown or dangerous territories on the map, “Here be dragons”.

Here be Dragons: The current system is outdated and inefficient, relying on a fragmented delivery system of individual physicians (often Plastic Surgeons and Dermatologists but including a growing percentage of Obstetricians and Gynecologists, Family Practitioners, and Internists). Physicians are offering "add-ons" treatments to their main scope of practice and competing against their immediate neighbors without a specialty offering, cohesion, or scale. The idea in most cases is to snag patients with some sort of “soft” offering and then kick them upstairs for more invasive procedures. While these new technologies have lowered the barriers to entry in some ways, (evidenced by the growing number of physicians entering the marketplace) the influx of these outside physicians is proof that this is a new market that is not currently "owned" by any existing specialty. This new paradigm of cosmetic medical technologies means that cosmetic medicine is becoming more and more “businesslike”. Those physicians who understand and embrace this new paradigm will survive. Those who do not will watch as the market passes them by.

The increasing development of effective non-surgical medical technologies has made a scalable and replicable solution possible for the first time. IPL (Intense Pulsed Light), RF (Radio Frequency), IR (Infrared) devices, Clear² PDT, Pointé Lift, and other developments mean a steep new learning curve for doctors. What equipment to choose, how to bring in new patients, where to get training, how to compensate staff.

It pays to learn from the experience (and mistakes) others have made. If you’re looking to enter or expand as a medical spa, here are a few tips to consider when planning a medical spa start-up or expansion.

Charts and Smiles: Open a medical spa and your office is a never ending stream of sales reps and advertisers (Always smiling and usually with charts.) who are only there to “help you grow your business”. The charts and smiles crowd will turn you green with envy as they describe how successful all of your competitors are, show you the before and after pictures, and present charts with big red arrows that go up and to the right. What should you do? Educate yourself. No one will ever work harder on your business than you.

Never trust a skinny chef: If it doesn’t make sense to you, it’s probably BS. I’m commonly astounded by the day spa consultants that have assumed the title of “medical spa guru”. Keep your eyes open. Most of these new experts drop lots of names but few phone numbers. Anyone offering consulting services should be happy to give a list of references and more importantly, a list of competitors. The only real medical spa consultants worth hiring are the ones already running successful operations themselves. Call a few nationally know medical spas and ask for recommendations. Successful business owners are usually happy to share their know-how and experience.

Medical means physician: If you are not a physician, you can not “own” this business. You may own the building, you may pay the staff, you may have a franchise with a “medical director”, and you may think you’re in charge. It doesn’t matter. All medical law is designed, written and interpreted to keep a physician independent in medical decision making. That means that if you are a non-physician in this field, the physician providing medical oversight has the power to “pull the plug” at any time. There’s also this to consider. What constitutes adequate medical oversight is decided by state medical boards. The board members making the rules are physicians themselves, some of which may be loosing money to “medical spas”. It’s never a good idea to enter a business where the competition can change the rules at any time, but that’s exactly where the current crop of franchises are. If you don’t have a physician on-site and seeing every patient before their treated, you’re in danger of having the rug pulled out from under you. Hard.

Big dogs eat little dogs: This is not a level playing field. I often tell physicians that this business is like opening a women’s shoe store inside your practice. The market is going to decide who wins and loses. If you don’t have absolutely compelling answers to this question, “Why would a patient choose to come to me over my competition?”, wait until you do. (If your answer is price, start over.) A copy-cat strategy is a no-win business plan. The next five years will see dramatic and disruptive changes in this marketplace. Large, well financed medical businesses with smart physicians and high quality care are going to open up next door to you. If you’re not well established with deep roots, you’ll be gone.

Financing is easy. Financing smart is hard: Speak the words “Medical Spa” as a physician and you’re everyone’s best friend. Banks, lenders, technology companies will all have big smiles on their faces and their hands out, ready to lend or finance anything you need.

The $80,000 towel dryers: Choosing the right technology is one of the things that will let you move ahead a step, or put you in cement boots where you stand. I always think of the way one physician described the pair of IPL that he’d bought; as $80,000 towel dryers. Before you decide on which system to buy you’re going to need to crunch the numbers. How many shots will the IPL heads last for until they need to be rebuilt? How much support is included? What kind of training is provided? Does the device work better than its competitors? Before you sign your next few house payments away, make sure of your technology decisions.
· Leasing is the best way to go if you want to pay for your equipment as you use it while preserving your capital. Many of the technology companies have delayed payment plans as long as six months.

· Buying used equipment is often the best way to save money if cash flow is not an issue. (We purchase used medical lasers and IPLs online from a broker we trust.)
Don’t guild the lily: Cash flow is a problem many start-up medical spas face. Revenues and growth projections are commonly exaggerated in the excitement of a new business. Before you invest in embroidered leather treatment tables, make sure you can pay your bills. One medical spa startup spent $350,000 on build out and didn’t have any money left to attract patients. They were out of business in four months.

by Jeff Barson, Managing Partner
Surface Medical Spas

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Reader Comments (4)

Hi, I am an esthetician seeking to open a spa and wanting to add medical spa services. I am wondering how does a doctor get involved? I have heard that I pay them and I have heard they rent space from me - which is it? Are there any takers in Central Florida?
11.13 | Unregistered Commenterspalady
Is there a step-by-step guide once financed and location secured to open up a day spa somewhere?
When buying used lasers, how do you get a warranty/service on your equipment?
03.21 | Unregistered Commentercossack
It's not easy. Each used laser company gives you a 90 day warranty but it is virtually worthless. They are essentially gambling that your laser won't break down for 90 days. If it does, it then comes out of their gross profit on the sale. Expect your laser to be down for awhile because they do not stock these parts and usually have to go through the manufacturer. The manufacturer then is in no hurry to get these parts out because they make no money. The myth that every laser is alike and any third party service organization can fix your laser is not true. Often these third party orgs. have not been specifically trained on the laser you buy. It's a slippery slope. If in fact the manufacturer of the laser you buy will service the product, and most won't at all, they will charge you a premium for this service. You need to check on this. Don't believe the used dealer. Check for yourself. And get the serial number on the unit to make sure you are not buying a lemon. By the way, I know all of this because it happened to my clinic.
03.21 | Unregistered CommenterDexter

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