The Worst Med Spa Money Myths Holding You Back

Jessica Hunter (00:09):
Welcome to Aesthetic Appeal. I'm your host, Jessica Hunter, head of Consulting for Aesthetic Brokers. Thanks so much for listening today. Today's fun topic is debunking some of the most common money myths that are associated in the medical aesthetic industry because we know money is such an emotional target for most of us, and it's very, very overwhelming to kind of understand finances and what they mean and what you should do with them. I think there's a lot of myths that come from money in the aesthetic industry. So myth number one that we're going to talk about, I'll be profitable within a few months. So here's the reality and the hard truth that I hate to break all of your hearts, but the longer that you do something, the better you're going to be at it. That is the truest statement I think when it comes to medical aesthetics and having your own med spa, it is going to take you time to understand your demographic, how to sell to them for what you're offering, how to be really strategic in what you're offering to how to make things profitable and for your offers to make sense for profitability, how to hire the right team and have them be long-term.

(01:26):
How to compensate them correctly for them to grow and stay with you. And so to be profitable in a few months, regardless of what you bought, how much your loan is, it doesn't matter to me. It is just completely unrealistic for most of my clients. I would love to see you profitable in 18 to 24 months if you're really diligent on understanding your metrics, focusing on your own growth and no one else is. And thinking about how am I maintaining consistent revenue month over month, and how am I focusing on my most profitable offerings? I can. So be prepared that it's a long-term game, it's a marathon, not a sprint. And you'll find that the longer that you do this, the better, more efficient and better understanding you're going to have of your own business, especially in this industry. Myth number two, med spas are easy money.

(02:22):
So for those of you that are coming maybe from an acute care setting, hospital setting, and you're like, I'm going to get into owning and operating a med spa because it's easy money, or I'm a provider who works at a current practice, but I want to open up my own practice because it's super easy money. Well, truth be told, it is one of the most competitive industries out there, and our margins are smaller than I think that you would probably anticipate if we're talking about a real true med spa business. So aesthetic services, injectables, laser treatments, medical grade skincare, those margins are between 15 to 20%. Now, with our new categories of wellness and weight loss, those margins can increase significantly because we're adding things in that have higher margin reoccurring revenue sources, and so they allow for our margins to increase, and so those margins can go, I've seen all the way up to 40%, which is a really nice healthy profit margin for a business.

(03:20):
But make no mistake that you're going to be in a service-based business that is not going to be easy because you're managing a team who you are relying on providing a service for somebody and that you also have cost of goods that vary. Prices vary from vendors and that have a lot of high ticket prices for what you do. So is it easy money? Absolutely not. Alright, myth number three. My margins are getting better as I grow. So will your margins get better as you grow? Well, no. I mean everything that you do today will still be the same tomorrow, and so you're still going to have to pay your staff for the same amount of time, for the same amount of service. So your margins don't just grow magically over time. As you start to understand the business and understand to focus on the things that make you money, yes, you could potentially make more money, but for example, your overhead costs, your fixed cost to operate your business will stay the same.

(04:24):
My clients have the exact same numbers in there from 2023 to 2026. Our cost of goods will fluctuate, and maybe as your business grows, you'll be able to get better discounts. But every single year, I see our consumable costs as industry go up anywhere between two and 4% just flat out. So no, your costs will rise, and so your margins, will they get better as I grow? No, only if you focus on the things that are going to make you grow, which of course is being more efficient in a smaller amount of time, right? We're in the service-based industry as we do more in a smaller amount of time, that helps and as we know where we're trying to focus our time and attention, but they will definitely not just grow organically over time. It does not work that way, right? Revenue and profit are two different things, so always keep that in mind and know that that's not going to happen overnight for you.

(05:14):
Myth number four, if I buy this device, I'll make more money. Oh man. Oh man. This is like the most common comment I think every laser rep is going to tell you, and God bless, I love, Hey, I love all my laser reps they're great, but the reality is when a client brings me a device and it's $250,000 and they say, should I buy this device? Well, the answer is always like, I don't know, maybe because the reality is if you want to invest in a piece of equipment, you should already have a client list ready. You already have that base of people that are ready and willing to give you money for that service regardless of what it's, if you have not already done that and you don't have that, the isn't even on the table. It's not even a question, okay? And if you haven't already decided that you have money for the device, devices isn't on the table to take out a lease where I've seen some that are seven years, for example, you're paying so much interest you guys on that device, you're paying 50, 60, $70,000 on top of the actual cost of that device, and all of a sudden a $200,000 device is close to 300,000.

(06:25):
And you have to understand the math on that because if you can't actually afford the device and you don't know how you're going to make money from it, it's not even an option today. And for most of you, if you are not at 80, 85% capacity of what you're currently offering, it's not even an option because you have not maxed out what you currently offer to bring on something new. It's the same advice I would give when you're looking at a new location. Are we at capacity at the old location? Well then no. Then why would we open up another location? You're just going to incur double the amount of expenses and have double amount of the problems. And so if you haven't figured them out on the first time, why would you replicate that and do it again? So same sort of thing about the device.

(07:07):
The device does not generally make you more money just by purchasing a device. Okay? Myth number five, cutting costs will make me more profitable. This is sort of true and not true. The reality is if you go through your expenses and you want to sort of decrease some of your laundry expenses, if you want to increase some of your credit card processing expenses, yes, I mean essentially you'll be paying less expenses, and so it should go more down to your net profit. That would be a really realistic point of view. But the reality is, is that our operational expenses in this business aren't as significant as your two big line items, which is cost of goods and of course our payroll. So if you're really going to try to impact the business in that way, and you were trying to be more profitable, you would make more effective, efficient compensation plans that allow you to keep someone long-term, motivate them to do more.

(08:03):
That would be the ideal thing. And then of course, you would take a look at your consumable costs and obviously try to get the best prices for you. But in both of those scenarios, we have to pay a service provider for their level of expertise in what they do, and we're going to have to buy the cost of goods to be able to perform the service. And so cutting costs isn't our number one answer, right? Just like when I'm going to say to you is that making more revenue is not always your answer. You need a combination of these things. You're always trying to obviously generate more sales in a way that are profitable. And so you have to think about those two things, but it's just cutting money on some of your small expenses or things like, is it going to help? Not really.

(08:48):
So if you are someone listening to this podcast right now while you're driving to work or working out in the morning and something I've said has really resonated with you and you feel like that you can relate to your business, your practice, or your role at a med spa, reach out. I'm happy to have a conversation, learn a little bit more about your practice, some of your constraints, and see if we can partner together to resolve them and give you some of the tools to be successful in whatever your long-term goals or objectives are. Reach out to aestheticbrokers.com. And I'm Jessica Hunter, and let's talk more.