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.

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Vin Wells

Vin Wells, MHSA,  is the President and Founder of RockBottomLasers.com and has over 11 years experience in the aesthetic laser industry. Mr. Wells started his own chain of aesthetic clinics under the brand name Skinovative and opened his first medical spa in Boise, Idaho in February 2001. Mr. Wells continued to grow and operate aesthetic clinics for over 8 years.  Since 2008, Mr. Wells has focused on selling used aesthetic equipment to physicians and medical spas.

Mr. Wells received a masters degree in Health Services Administration from Arizona State University (1995) and has extensive practice management experience, working with a number of different hospital and outpatient care systems.

Mr. Wells has developed a number of business operations systems that help aesthetic clinics to maximize their profitability, including: Aesthetic Consultation Training, Medspa Management Training, Medspa Business Plans, Medspa Operations Manuals, and Front Desk Operations Training.  These products can be found at: SkinSalesTools.com

Mr. Wells completed received his bachelors of Science degree at Brigham Young University in 1991 and continued his education at Arizona State University, in Tempe, Arizona, receiving a Masters in Health Services Administration in 1994.  He has worked for a number of different health care organizations including as a Program Director for group of primary care clinics (Arizona Association of Community Health Centers), a Health Care Manager for a hospital network group (Arizona Healthcare Federation), and as Associate Director for the Arizona Council for Graduate Medical Education.

Mr. Wells has devoted considerable time in research the latest cosmetic trends and treatment modalities. He stays current on the cutting edge of such research and uses this information to make strategic decisions for the company.  He has a broad understanding of lasers and has been certified in laser biophysics and theory.

Mr. Wells was successful in developing a Laser Certification Program that was approved by the Arizona Radiation Regulatory Agency, the agency that oversees the use of medical lasers in Arizona. The program involves 40 hours of laser didactic curriculum as well as hands-on laser training.