#156: Why Knowing Your Numbers Is Essential For MedSpa Success

Hosted by Cameron Hemphill. With over a decade of experience in the aesthetics industry, Cameron has supported thousands of practices and providers, working with some of the biggest names, most well respected brands, and elite industry thought leaders in the field. If you're ready to level up your practice and become a true medical millionaire, this is your podcast. Here's your host, Cameron Handpill.

you and to help take your practice to the next level. Guys, I have been consulting in working with some of the most well recognized practice owners all over the country for years. I see medspas killing it, crushing it, practice owners having fun, and I see other ones that are falling by the wayside, and I want to get into something that's super important today. It's been on my mind a lot lately, and it's essentially talking about why knowing your numbers is so important

for a practice owner. And I'm going to get into some of the details here, but the most successful practices that I have worked with continuously try to understand and know their numbers. They create benchmarks, they create goals. They know if they're falling behind forecasting, if they're ahead of their plan that they've outlined for the year or the quarter or the month. They have accountability to these numbers.

And so if you don't know what your numbers are, and I think that's like a broad statement, right, like know your numbers, well, what does that mean? Right? You should really when we're talking about that it's getting into the financials, getting into exactly what your revenue streams are. Where is the revenue coming from, what products is it coming from, what specific tool sets is it coming from.

In terms of equipment that you have, how much is your retail producing and you should have this broken down in each specific category, guys, so you know exactly what products that you are acquiring that are creating the most profit for the practice. So it's getting into the financials, like as a practice owner, as a business owner, it's

your fiduciary obligation to understand finance. You're an entrepreneur, you're a practice owner, and if this is an area that you struggle with, go learn it, read a book, get on YouTube, hire an industry expert. They are out there. I'm telling you that there is people out there that know medical aesthetics and can help you understand how to know what knowing your numbers actually mean. Okay, and once you figure out what your numbers are, this isn't something

that's set in stone. Your numbers are going to go through peaks and valleys as the market changes, seasonality changes, and it's really important to understand as a practice owner what the trends look like like over time, so you can obviously plan accordingly on expenses, personnel expenses, marketing expenses, tool set expenses, equipment expenses, product purchases, those types of things. Okay, so again, like understanding your numbers is absolutely critical as

a practice owner, and many metspot owners are. They focus on marketing, aesthetics, and patient care, but they truly ignore the financials, which is the true backbone of your business. Now, you obviously have to know marketing, you have to focus on it. You've heard me say it over and over again. The most successful practice owners are the best marketers because

they bring patients into the door. Now, the ones that actually bring the best service and the best value and retain those patients at a high retention rate percentage, those ones win. Then when you get into understanding the financials, what will happen is your business starts to be become a mathematician exercise. It's dials and numbers and financials. And that may sound like a little bit too institutionalized in a way, but think of it this way, as you

actually are a mini institution of your own. You own your own destiny, and so if you don't understand your numbers, and how much it costs to acquire a patient, how much it cost to service a patient, how much it costs to retain a patient, how much it costs to acquire your product, and what your net profit is and what your gross profit is. You really have no understanding of how to scale your practice and are you running

a healthy organization or a sick organization? You should know if you have been in business long enough, you should know exactly how many new patients you need, want desire to acquire this month, this quarter, six months this year.

You need to understand that you need to understand the cost that it is to acquire these patients and can you service them mechanically in a way that's going to give them the patient experience and give you the loyalty that you deserve and build that bond and that relationship. So I can tell you right now it's way more expensive to acquire a new patient than it is to keep an existing patient.

don't quote me on that, but I'm pretty damn close. Right, We're talking a pretty significant industry, and I truly feel that we are we have a long way to go. We are uncovering things on the wellness side, the cognitive side, the regenitive side, in ways that we never have before.

And I think there's a lot of practice owners that we don't even know how to monetize these particular patients and treatments and new discovering of healthcare yet right like everybody's jumping on the GLP one bandwagon right now, which I totally get. It's hot, it makes sense, it produces revenue, it produces results, patients are happy, and it's as the wellness industry continues to grow, you're going to find so many ways to monetize your practice and create new revenue streams.

But you need to pay attention and you need to be quick to act. Right, So, I know that there is a lot of practices out there that have not started implementing wellness into their practice, into their aesthetics business, and I truly feel like you will be falling behind. I mean, just go pull up social media, just go read, go do your research. Like everybody's talking about wellness, they're talking about longevity, they are trying to reverse aging. We

all are. And I don't know if this is like a a ramification of COVID or what, but it feels that everybody is on this same mission to feel good and look good. And maybe it has to do with like what happened in COVID and then maybe tying that into social media and how like the whole world is like spread apart because everybody moved. You know, I can't really like stamp it, but I do know that people

are truly wanting to feel good and look good. And so my point on that, coming back to this seventeen billion dollar industry, I think that this is peanuts, and I think what you're going to see by twenty thirty five, I would peg this to be a thirty billion dollar industry. And so if you're just starting out as a practice owner, you're not late to the game. Don't compare somebody else's journey with your new entry point journey. I would not

look at this and say competitions everywhere. It's a saturated market. The market is changing so fast and the patients are getting so educated that you are at the tipping point. And I truly think aesthetics and wellness is one of the coolest industries ever to be a part of because you truly are helping people build confidence and health and age reduction. I mean, it's amazing, and it's something that's

like AI cannot destroy that. Sure, you can make a video on Instagram TikTok and upload it to some filter and make yourself look younger whatever, but that's just something on video that's not like true face to face and true how people feel. Right, So if you can support making people feel good, think better, act better, desire to look younger, feel younger, get more confident, it almost like

supports the entire world economy. Right. If everybody feels good and look good, everybody's gonna work harder and actually get more done. So, like when you really start to peel back the layers of like why I am so bullish and excited about this industry and I love to be a part of it and I've been here for over ten years, it's because, like start peeling back the layers

and understand what the main mission and purpose is. And then when you think seventeen billion, Wow, this is huge, Like we're this thing's going to go to one hundred billion in our lifetime. Right, So it is in this generation, there's no there's no stopping it. There's going to be certain years that it's going to slow, like grow slower than others. We saw a tremendous amount of growth over the past five years, and you're going to see material

growth continue. So zoom out, look at a thirty thousand foot view and make sure that you understand what's really happening. And I think some people can get caught up in like current economic conditions and make emotional decisions instead of zooming out and just taking that thirty thousand foot view footprint. Okay, there are over ten thousand medical spas in the US.

Ten thousand with single location spa is generating an average of like one point one million bucks single location owned practices generating one point one million that's top line revenue. Top line revenue. Right, A healthy practice needs to be pegged right around like twenty five to thirty five percent bottom income. That means, let's just take the worst case scenario twenty five percent net, and I'll make the numbers easy and say you're doing a million bucks, you're making

two hundred and fifty thousand dollars in profit. And that was that stat was actually pulled mostly out of the esthetic side, mostly from the actual like the surface side. You could take your million dollar practice to a two million dollar practice very fast by bolting on a very sophisticated wellness environment to your esthetics practice. But before you do that, you have to know your numbers. You have to know what it costs to acquire a patient. You have to be a great marketer, you have to be

great at your treatment. You have to be great at running a console, building a treatment plan, having great technology, having a great process. And by the way, I feel like it's possible to run a two million dollar practice as a solo provider. If you have the right systems, the right marketing, the right brand, the right location, you could actually do this. And I don't think you'd have to work yourself, you know, like fifty hours a day.

Obviously not possible, but you get what I'm saying. I truly do, And I think like if you look at ways to monetize your practice. You can easily expand in services that create revenue streams like never before. Okay, And you know, it's a great exercise to pull yourself out of the day to day operations and work on your

business versus work in the business. And I've said this on previous episodes, but if you're not taking the time to do that, you're going to get caught in the day to day just doing your job, doing your job over and over and over and over and over again. And that's fun. You're trading patients, your you know, revenues coming in, but you have to look at the big

picture and you have to see what's taking place. Okay, So beside despite this ten thousand MEDSPA plus single location, you know, practices that are generating over one point one million, many struggle with profitability due to poor financial management, many of them. And it's like it's it's it's kind of sad in a way because you're actually generating, you got seven figure earning business and you don't know where all the money's going, and you don't know how all the

income is coming in. You know it's coming in, but you don't know where it's coming from. And you really need to take the time to strategize and know your numbers and study finance. Studying finances. It's not boring at all. In fact, it's one of the funnest things you'll ever do as a business owner. Learn how to navigate quick books like. You can connect it to your accounts, your credit card accounts, your bank accounts. You can hit buttons, it pulls in all the feeds, you can categorize it,

you can outsource it to a bookkeeper. It's not a hard tool. And there's a lot of AI and stuff that they've released too and too it owns it, so they've done a great job. Guys, if I can learn it, you can learn it right. I'm not a CFO or controller by any means, but I can tell you I

am a business owner. I have started companies. I have started companies from zero that have gone to eight figures and valuations, and I have exited those companies, and I've acquired a tremendous amount of real estate over those years. And if I didn't understand finance, I would never be able to do what I have done. And this isn't just like look at me, see what I've done it's just me telling you a story that is making sure you truly understand Studying finance is a critical role of

being a business owner. It's probably the most important role, so you can actually have the mechanical instruments and know where you're going to drive to okay.

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per visit, multilocation five hundred and ninety per visit. And my thesis around that, it's not much of a big delta really, but my thesis around that as they've just kind of figured out systems and processes and they have more expenses, so they've up to it. I think multilocation per visit should be more like seven hundred and fifty bucks. So I truly look at this like we're under selling ourselves. We truly like the average spend per visit five hundred

and twenty seven bucks. It's it's not a lot of money to make someone feel good and look good. It truly isn't right. Like, look, if you are given, you're changing the shape of who they are and how they feel. I think it's very very wise to charge the appropriate amount. So here's a tip. Increase patient spend per visit through add ons, memberships, product sells. So if you're below this

five twenty seven are you're right? Kind of rite at it, like, think of ways where you can increase the spend per patient. And this isn't a sell them more thing type of like update for you give them the information. There is so many times guys that I have gone to buy something, and I know you've experienced this as well. You've gone to buy something you didn't have all the information. You

would have spent more if you knew the information. So you, as a provider, it's your duty to give us patients the understanding of how we need to invest in longevity, Like give us the information you're the expert, right and most people that are coming to you, they're coming to you for like advice on longevity, looking younger, feeling better, and so put them on a success journey. They're going to be so much more loyal, they're gonna spend more money,

they're gonna come back and see you like. That's the playbook for you, for sure. The other component that you must track is your CPL which is your cost per lead. For those of you that have tuned in, you know, I talk a lot about cpls, and I also talk about customer acquisition cost. I put the spin on it and I call it patient acquisition cost because we're talking about patients here. You need to know this stuff like

very important if you are running marketing campaigns. If you're spending money on marketing, which my gosh, I hope you are. Most people are underfunding their marketing like by a massive amount. It's actually quite scary, especially when you're operating at about fifty percent of fixed costs and you have rooms that are empty and hours that could be sold. You just turn the marketing on and you get more patients. But

I'll save that topic for another day. I want you to understand your CPL and understand the difference between customer acquisition cost patient actual acquisition costs versus CPL. So, to acquire a lead is, let's say you go spend ten thousand dollars this month on marketing. Okay, it's all coming in, and let's say that you know x amount of patients came through the door. You just need to understand the mouth, what is the spend and how many leads were created

from the spend. Okay, that's the CPL. Now when you compound the actual effort to convert them to a patient, that's where you get the patient acquisition cost. Okay, understand those The industry benchmark is one hundred and thirty two dollars per patient acquisition. Your cpls have to be lower than your patient acquisition right. That's just like knows that some of you on the call may say duh obviously others like the whole purpose of this episode and podcast

is to educate everybody. Okay, And this isn't data that I just pulled out of a hat, guys. I have captured all of the industry data, the latest and greatest data from AMSPA, all the EMRs, the CRM companies. I follow al Ergain, I follow Banav, I follow Galaderma, like I have SkyTel's report that they put out, so like people that are doing M and A and PE and like. I have captured all of this, studied it, dissected it, put it into my little AI program, and I have

the data. So I've done the hard work for you. I'm just giving it back to you through a nice little voice outlet for you. Okay, So, industry benchmarks one thirty two, I'd love for you guys to be below that. Optimized marketing spend and focus on repeat business will help reduce that. The next thing I want you guys to understand is profit margin and expense breakdown. The average MEDSPAH profit margin is right around twenty to three thirty percent.

Kind of talked a little bit about that earlier. Okay, the expense breakdown. Understand your expense breakdown, not just your profit margin. What is your true expense breakdown? On average, thirty percent goes to payroll, thirty percent goes to cogs, costing, goods, treatment supplies, et cetera. Those types of things, nine percent

to rent, and seven percent to marketing. In some cases, most practices I talked to are actually only spending about like two to three percent on marketing, which is like way low. Your your rent should be lower than nine percent. Your marketing should be anywhere from ten to fifteen percent at this point in time. If you're looking to capture patient demand. Okay, so here's a tip. Reduce your fixed costs, negotiate vendor contracts, and automate processes to improve your margins.

Super simple. Make sure to do it. The other component here, guys, is patient retention and memberships. Patient retention and memberships is absolutely extremely critical in order to understand how to keep your patients with you. You need to keep your patients with you. The typical lifetime value is about three years, and I think people should exceed that. Okay, that's the average about three years. I think people should say with you for four or five unless, like you know, they

move or something like that. You know, But the patient retention, if you're north of seventy percent on your patient retention, that is a key KPI that private equity or strategic buyers look at. They want to know your attention rate. They want to know your utilization rate and your attention rate Like these are probably the two biggest things. Then they can just run mathematics and say, oh, they have great retention or poor retention, and they have terrible utilization

or great utilization. We just need a marketing playbook or we need a basically a sales and a treatment plan playbook. When you combine those two with a great brand, like, you got a recipe for success right there. Okay, So memberships, I think you guys could look at these and get a little confused, like how do you create the memberships?

What's the best memberships? Like beauty banks are fantastic giving somebody just like a monthly automatic debit that goes into a bank where they can come in and pick and choose what they want a service or use a tool like use a piece of tech right or PTMD has great ones, and there's other great EMR companies that have some as well. But I think you know, having this type of stuff is actually cheaper to acquire and roll out versus not too Some people could look at acquiring

software and saying I don't like the monthly fee. I look at it and say, it's a critical component to your tech stack, and if you're looking to increase your patient retention and increase your patient like velocity and monthly reoccurring revenue it's acquired. In fact, if I owned a practice, it would be one hundred percent required for us to have a very robust membership plan and a very robust rewards plan because I know like people that do have that,

their attention goes up. And so I would drive my practice as if I'm going to sell it one day, even if I never plan to, Like obviously there's always an expiration date, but if you never plan to run it as if you are, because then you're you're running it exactly how an institutionalized financier would acquire it. And

that's what's going to make you even better. So if you have it into like an M and A conversation in a conference, like go to conferences and go to the finance ones and the M and A conference discussions. Ben Hernandez with skytell Group he's awesome. He puts on like some of the great greatest talks ever. Shout out Ben if you're tuning in, but go study this stuff and then start to engineer your practice this way. Okay, moving on why medspot owners struggle with financials. It's simply like,

we don't want to look at it. We almost like are afraid to. We don't, we don't want to know, right, It's like, eh, I don't, I don't want to know. I'll kind of get to it when when I want to. But many just lack financial literacy and don't track their numbers. Like and this is why it's so important if you if you're just like I'm just not a numbers person,

become one. Go become a numbers person. There was a day in time where you obviously weren't a person that knew how to ride a bike, and then you figured out how to ride a bike. Right, there was a person that you were not an injector, and then all of a sudden, you were an injector. Right. If you're a mom, there was a there was a world you lived in where you're not a mom, and all of a sudden, the baby came home and now you're a

mom and you have to figure it out. Right. So, like, if you're one of those that's afraid to really get in the nitty gritty of your numbers and it drives you crazy, go learn it because you don't want to just rely on like bookkeepers and CFOs to run your numbers and tell you information that you don't comprehend. Go learn it. You'll find it fun over time, Like just

right through the barrier. Okay, you just need to understand your profitability for service, like not using proper finance strategies, charging too low versus market rates that can just give a bad patient experience, that can give a bad brand, that can just like eventually have turn and burn, give you kind of the the type of medical asthetics practice where people go for a quick fix and never come back.

Just not the type of business you're looking for, right, So failing to allocate enough for marketing and acquire the right patient is it's also a big issue I see time and time again like practices, they do not spend enough on marketing because we're looking at it through the wrong lens. And this is why a medspot owners struggle with the finance is. Everything that you're looking at and

I'm going to talk about marketing on this site. Everything you're looking at on the marketing side is you're looking at it as an expense. Guys, it's more expensive to not do. And let's just like let's look at your website for a second. Hey, how much does it cost to build a website? How long does it take should I build one? Do websites even matter anymore? Do you realize when you really think about that, your website is a digital asset. It's a digital piece of real estate

that is in cyberspace. It's on the Internet. You can literally go spin up a piece of land which would be a domain. You can build your house on it, which is your brand and your actual physical website, the content and all that stuff, and then you could put signs up all over the place and people will come visit you in a digital world. Right in the science of it, that's obviously the analogy of like the marketing aspect, the SEO, the ads, all that stuff. Isn't this amazing?

Like it's the cheapest piece of real estate you can almost ever acquire. And if you don't acquire it, you basically said, hey, I am now putting myself in a position to say I want to be a practice owner. I want to grow, but I don't want to invest in a digital piece of real estate that's going to produce patients. So for me, I look at that and I'm like, I don't even know how you put a cost on it. It's more expensive to not do, way more expensive to not do if you want people to

go somewhere else. Yeah, then then and this is where I come back to, like the why some practice owners struggle with the financials, because that should be looked at as an investment allocation. Right, once you acquire the domain, once you build the site, once you have it, traffic's coming in. You have a revolving door of traffic of patients that it can flowing in. Now you can take that digital asset and you could sell it. It's worth

it's worth cash. Right, I'm not saying that's what you do, but like if you package up your practice in the solid obviously you'd sell your website with it. So it's it's it's super important to know, like everything that you're doing here, you're you're actually building intellectual property, you're building assets, right, You're acquiring little physical assets for your practice. And I think that's the right lens to start looking through. So

super super important. So I'll give you a couple of tibets, like on how to improve your financial management. Okay, so set revenue and profit goals. Start aiming for a thirty percent profit margin. If you're below that use financial dashboard software like Sinodi, REPETMD, Cetic Record, Boulevard Growth ninety nine. Right, so hire a bookkeeper or CPA who understands MEDSPAT finances.

There is there's a lot of people out there, some great people who do a wonderful job, and they've worked with so many practice they know these numbers back and forth. Optimize pricing and services like high ticket services you know RF micronadling, body contouring versus low margin treatments. Okay, micro needling is has a great high margin, high ticket I was at a conference recently and I was talking with the device and and a practice owner happened to have

the device in this this machine. It was like one hundred and fifty grand. I don't want to drop the name. Great micronedling device. Low down time about one hundred and fifty thousand bucks. And when they sell it, they charge about eighteen hundred dollars per treatment and it cost them about one hundred bucks to run the machine. What a

and it takes about fifteen minutes. So it's like wow, you know, that's that's a great, great way to uh, you know, to look at your finances and optimize those based upon you know what works, okay, and then up selling like I think like after you are done doing the treatment, it's a great time. As they're going to the checkout area, don't just let them walk by the

retail product. The retail product should should complement the treatment and it should work and give a result, right like don't sell like thin air, like make it give them a result and then track ROI on marketing, spend and sure your leads convert to patients. And if you have if you're spending money on marketing, you need to be

spending and investing money on converting them. If you have leads coming in and you have people that are not taking the phone calls or are not following up with them through text emails, phone calls, everything, like whatever it is immediately like right away, you need to you need to invest in that. Okay, you need to make sure you have systems and processes in place because this will

reduce your patient acquisition costs, your cost per lead. You'll have to you'll spend less on marketing and produce more results. And the whole point, guys, like on the marketing side is reducing your seed on your customer acquisition cost. Okay, so takeaways here. Knowing your numbers is not optional, it's essential. It's essential for business sustainable practice growth. So here's your action plan. Set a revenue goal for the next six to twelve months. Analyze your cost per lead, per service,

and overall profit margins. Implement one financial improvement strategy this month. Increase prices, reducing costs, or offer membership something. Take action, and then call to action. If you guys found this valuable this particular episode, please share it with your colleagues. Everything I do here I do for you, and I want to help you guys grow in any way possible. I'll leave it at that until next time. Happy.

this episode with a fellow entrepreneur. Rate the show and don't forget to click the link in the show notes to access powerful tools and expert guidance at get dot growth ninety nine dot com, slash MM, and make sure to tune into the next episode of Medical Millionaire