Med Spa Success Key No. Two: It Takes Money!

In an attempt to perhaps encourage a shift of the current focus of this blog to helpful suggestions for business success (rather than focus entirely on problems with one particular franchise and equipment and clinical issues) I am continuing my post with a discussion of a number of the myriad factors that will make the difference between your success or failure in this enterprise....

Key No. Two: It Takes Money to Make Money.

 
Everyone knows that it takes a fairly substantial capital investment to start any business. We have all heard stories about businesses being started with an initial investment of only about $200.00 years ago (the Curt Carlson (Radisson Hotels, TGI Fridays, etc.) legend), but that doesn't happen very often in today's world. If you don't adequately capitalize your business from the outset, you will not be able to properly take care of any of the 15 keys to success and you will fail. Start up expenses are important, but equally important is your ability to provide an adequate cash flow for the business during the first several years to keep the boat afloat as you make the mistakes along the way that we all make-- no matter how well prepared or well funded we are.

Many of us think nothing of spending $500,000 or more on our education, but then try to start a business on a shoe string. For your med spa, even a single room with adequate equipment and supplies may set you back from $100,000 to $300.000 depending on whether you lease or buy your equipment and how many devices you decide to purchase. Oftentimes you will be able to negotiate a substantial portion of your build out expenses with your landlord, and even roll a certain percentage of these costs into your lease. For a larger med spa, many physicians have financed over a million dollars for the proper set up (my build out of 2800 sq. feet -- for example-- was $250,000 and my equipment retailed for over $500,000). Once you are established you will face difficult decisions each day about how many employees to hire, how much to spend for equipment and product, and how much to allocate to advertising and promotion. As a general rule, the more you spend on advertising and promotion the higher your gross revenues will be-- provided you have adequate staffing and your personnel are well trained, motivated and suited for the task. Since sales of aesthetic services and products are 100% discretionary-- as opposed to traditional medical services which are largely paid by insurance and are generally more of a necessity-- the difference in sales results with an excellent and properly trained staff as compared to a mediocre and poorly trained staff can be astonishing.

A big mistake that many med spa owners have made is that as expenses rise and profits shrink they often panic, throttle way back on advertising, and try to "get by" with a smaller staff. The end result of this scenario is that the clinic gets into a "death spiral" which oftentimes leads to insolvency or bankruptcy.  Don't allow this to happen to you. Start with a sound business plan and adequate financing for at least twelve months. If you sell treatment "packages", don't succumb

Comments

[bunny vreeland]

Great post thanks for the comprehensive info. Will visit again thats sure :-)

[dexter]

thanks for the great post.

what do you mean by 'if you sell treatment packages, don't succumb'.

dexter

[med spa guy]

Sorry about that. the very end of the post. I wanted to finish with the following comment: "Don't sucumb to the temptation to sell treatment "packages" and treat the revenues you bring in today as real income. Think of these pre-paid fees as a "retainer" paid by your patients for the right to receive treatments in the future. Lawyers aren't allowed to use retainers for current operating expenses. They need to keep it in a separate account and hold it until the services are provided. You should do the same." If you can discipline yourself to do this for the first year of operation, you should have a nice "nest egg" to work with the following year (rather than thousands of prepaid treatments to deliver for payments made long ago).

[Mark]

Looking forward to the rest of your posts med spa guy.

Let me add one quick short cut for those people looking to make a quick million dollars in the medspa industry. Its really quite simple.....are you ready..... here it comes..... start with Three million dollars.

Happy New Year
Mark

[MEDSPA Mgr]

Does anyone have any experience with adding LipoTherapy or LipoDissolve to their medspa? What are the pitfalls?

Thanks.

http://www.pamedspa.biz