Common Mistakes When Starting A Medical Spa

Common Mistakes When Starting A 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Here be Dragons: The current system is outdated and inefficient, relying on a fragmented delivery system of individual physicians (often Plastic Surgeons and Dermatologists but including a growing percentage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, Point 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 self titled medical 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. ( legal discussions regarding medspas and physicians l How to build a legal medical spa )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: ( IPL & Laser discussion area ) 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.

How To Build A Medical Spa Inside Your Existing Practice

The physician’s conundrum

Everywhere, physicians are contemplating or engaged in expanding into the “medical spa” market. Seduced by the industry buzz around this hot new phenomenon, many doctors see the medical spa as a means to boost their income and eliminate the grind and countless headaches of their daily practice. They read about growth statistics, see dazzling new equipment at trade shows, watch competitors popping up, and fear that they may be falling behind the times. With pen in hand they’re ready to sign lease agreements, loan documents and lots of checks in order to catch up with a crowd of savvy entrepreneurs who know where the real action is. And the truth is that they may be right. Medical spas are the natural evolution of cosmetic medicine, and those who don’t join the revolution will watch from the sidelines as their fate is decided.

Medical spas are the forerunner of a revolution in cosmetic medicine. From Galen until now, the primary method of care has been through the skilled hands and individual knowledge of a physician. But that’s changing. The default method of care is becoming technology-based. Just as inn every other market, technologies are developed that replace an individual’s knowledge and skill.

Lasers, IPLs, radio frequency, infrared, personal DNA testing, Point Lift, Liposolve, Clear², PDT, telomere clipping, recumbent DNA technologies, bio-identical hormone balancing, anti-aging drugs, and a smorgasbord of other technologies in development promise to change medicine in the same way that computers, jet engines, and GPS have changed aviation. Technology now enables a technician (under medical supervision) to perform effective medical treatments and places the physician in a decision making and supervisory roll instead of being the primary practitioner. In the near future, physicians will have more in common with Neil Armstrong than the Wright Brothers.

Changing technology poses very deep problems for physicians. Technology allows easy replication and scalability, forces an unimaginably steep new learning curve on overworked doctors, and eliminates many of the barriers and protections that physicians have relied on in the past. And it’s only going to get worse.

Consider this. The combination of markets that medical spas compete in is huge ($40 - $50 billion per year and growing), highly fragmented (individual practitioner model), completely new (technology-based), and up to now, is free of any meaningful national players (yet). Already there are very deep pockets investigating ways to exploit this emerging marketplace. The Wal-Marts and Home Depots of this new medical marketplace are being built as you read this article.

But there’s opportunity here as well. Technology opens new doors for physicians, who can see and manage this new paradigm. That’s why a ready supply of smart and motivated physicians tired of the daily grind of insurance patients are moving into the marketplace and successfully competing. For the first time, physicians outside the default specialties of plastic surgery (cutting and stitching) and dermatology (diseases of the skin) have the potential to earn the income and lifestyle of these two medical specialties. This new market is inevitably giving rise to a new specialty whose focus will be “non-surgical, cosmetic, medical technologies.” You can see the fragmentation today. Many Dermatologists now label themselves as “cosmetic” to distinguish themselves as a subspecialty.

As a physician, you can’t get enough good information fast enough. This is a new business and demands a huge investment of time to make the right decisions. Sales reps will stream into your office armed with charts and graphs with arrows pointed ever upward, advertisers will drop phrases like “top of mind awareness,” and you'll begin to have a creeping suspicion that the market is getting away from you. Go slow. There are a host of land mines in the area and there are some that will be advising you to jump directly on them.

So, how do you build a medical spa inside your existing practice? The good news is it can be done. Surface Medical Spas ( the authors business ) has six locations (with three more in development), four physicians, master aestheticians, technicians, patient coordinators, managers and office staff. Every treatment at Surface is governed by a set of proprietary protocols. As a business, we have advised dozens of individual physicians, managers, and investors around the world about opening and operating medical spas. Be advised this is not easy, but here are a few suggestions.

Physician heal thyself:

This is your business. Consultants make their money by telling others how to run businesses that they don’t or can’t run themselves. Believe me, any medical spa consultant worth hiring would be running their own medical spa. Many of these so-called consultants will tell you that you need to offer massage, retail should be 30%-40% of your gross sales, and you’ll need hydrotherapy, aromatherapy, and maybe a juice bar. Wrong. The day that retail is 30% of our gross sales I’ll eat my left foot. Our retail is around 3% because retail is the least effective and profitable thing we do. If it ever gets to 5% we’ll cut back. If this is going to be your business, make your own decisions.

Find someone smarter than you:

The most important step is good management. Without that, people can, and have, lost everything. If you don't have good management skills, hire someone from outside the medical world. We get calls from interested physicians, investors and businesses around the world and we take the time to talk to them all for free. Successful businesses will be happy to talk to you and give you some advice.

Medical Spa Franchises 

“Turn key solutions.” That’s how almost everything is marketed to physicians. Buy this technology, hire this personnel, run these ad slicks, and everything will fall into place. Sorry. It doesn’t work that way. Most of these medispa franchises are sold as a “we’ve already worked out the kinks” deal. It’s a lie. Franchises focus on the treatments that everybody else will be able to replicate with ease. It’s more a case of, “In the kingdom of the blind, the one-eyed man is king.” You don’t need any of the current franchises. ( Read: What's wrong with medspa franchises & consultants l Inside a medical spa franchise series)

All technology is not created equal:

Despite what company reps will tell you, choosing the right technology will create big differences at the end of the year. Efficacy, cost per treatment, initial costs, usage, and a long list of other considerations should go into technology decisions. Many physicians all too quickly jump and then end up with $80,000 towel racks that they still have to make payments on every month. Used medical devices are readily available from the constant stream of bankruptcies and failed medical practices. Choose your technology carefully.  ( Medspa physician discussion area )

Understand the medspa marketplace:

Medical spas are a luxury business. For most physicians, it comes as an unwelcome surprise that their new patients are more demanding. Long waits, shabby offices, poor communication, and ambivalent staff, are all in the past. If you’re touting yourself as a luxury service, you better act like one. Hire top-notch people that are service-oriented, friendly and courteous. Protocols can be taught easier than attitude.

Rein in your ego:

This is business. It’s not personal. If you feel you must charge twice as much as your competitors because you “deserve it,” get used to empty appointment book.

Do not use “advanced” or “laser” in your name:

The number of “advanced” laser clinics is staggering. Don’t do it. It’s inane, overused, and bland. I actually had a physician ask me if changing his name from Advanced Laser Centers to Advanced Laser Group would get him more business. Nope.

Network with successful medical spas:

Successful business owners are happy to help newcomers to the industry. We have constant dialogue with physicians and investors who are investigating the marketplace and have advised clinics on four continents. Successful medical spas will be happy to build bridges with smart businesses. ( medical spa business discussion area )

Don't look to day spas to solve your problems:

Physicians hear “spa” and immediately think that day spas have the answers they’re looking for. Wrong. Most day spas can’t run themselves. The average net margins for day spas are around 8%. The average physician’s is around 60%. Physicians running day spas are entering a business that they; know nothing about, doesn't make any money, is highly competitive, has no barriers to entry, and is rife with employee and other problems. Don't do it.

Don't base your pay on commissions or percentages:

Commissions sound like a great solution. You save overhead and motivate your staff to grow the business. False. Commissions are used in spas to keep overhead low. But guess what? Staff members working for commission aren’t working for you. Commissions lead to overly aggressive staff, constant drama, and high employee turnover that can hurt your reputation as a luxury business.

Be Frugal:

You may have heard that you have to spend a fortune to “build out” your clinic. Nope. You don't have to start with treatment tables that have your clinics name embossed on them. Spend all your money before you open and you won't be able to spend it where you’ll really need it… getting patients in the seats. A great place to start saving money is our must have business tools for medical spas area.

Stay lean:

Physicians practice medicine based on science. You don't need to offer pedicures and you don't know anything about them anyway. Stick to the basics.

by Jeff Barson, Managing Partner and Co-Founder of Surface Medical Spas