Managing Medical Spa Cash Flow - How To Be Proactive

In this interview, Ramin Monfared offers tips on managing medical spa cash flow. Ramin is the co-owner of 2 med spa locations in Houston, Texas. Ramin's background is in business and banking. He'll give advice on increasing revenue, cutting down costs, and putting more money in the bank.

This episode will cover:

  • Tips for increasing your revenue
  • The best way to cut costs
  • What you can do today to improve your cash flow

Would you rather listen to the "Managing Medical Spa Cashflow"?  Us the audio player below.
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Why Med Spas Are Great Cash Generators -- Or the Quickest Way to the Poorhouse

A lot of physicians see the move to aesthetic medicine as a way to generate extra revenue, as the business is largely cash-based as opposed to insurance-based. But like any business, if you don't know what you are doing, owning your own business can be the quickest route to the poorhouse. Med spas can be capital intensive, requiring a lot of investment in marketing and equipment when you are starting up. Making poor choices with your initial capital can create a disaster, leading many med spas start to struggle with debt. Some end up taking out high-interest loans to bridge the gap and start to struggle with monthly expenses.

It's often that struggle with debt that's holding them back from growing their business. Instead of reinvesting their cash flow into their business, it's going to pay off high-interest loans. So how can you decrease your costs, increase your revenue, and boost your cash flow? Ramin offers some tips...

Tips on Managing Medical Spa Cash Flow

  • Create a "rainy day" fund. Start putting away 10-15% of the cash generated in any month. This rainy day fund will allow you to avoid taking out high-interest loans. Those loans are like throwing money down the drain. 
  • If you can't put cash aside, focus on doing what you can. Many businesses are living paycheck to paycheck just like many people do. If you don't have any cash to put aside, start making decisions that will help you get to that point. That means increasing revenue and cutting costs wherever you can. 
  • Get strict with your cashflow. Be religious about setting money aside and finding ways to increase revenue and cut costs. The stricter you are, the better your cash flow will become. 

Keep in mind that cash flow will matter if you ever want to sell your med spa business, too. It's one of the things that a potential buyer or investor will look at. They'll want to see how much cash the business is generating each month. Even if the business is struggling, if it's generating cash, it can be a good investment. 

How to Increase Your Profitability 

Profitability isn't rocket science. It's about increasing sales and cost control. It's not one or the other, it's about doing both. Most business owners are constantly looking at increasing their sales but aren't keeping an eye on costs. That's where the breakdown happens. 

Increase Your Client Retention & Repeat Visits

Aside from staff, one of the biggest med spa costs are services with high disposable costs. Services such as injectables are popular but they aren't sustainable. That's because you'll have to constantly be bringing in new clients. Injectables clients will wait up to six months between visits. If they are coming in for two treatments a year, that's worth maybe $500 to your business (and you are likely missing out on cross-selling opportunities, too).

Instead, consider clients who are coming in for something like a hydrafacial once a month. Each visit generates about $150 (depending where you're located).  But as you know, hydrafacials are usually a monthly service. So that means they're coming back 12 times that year.

The hydrafacial client is worth far more to your business than someone who comes in for an injectable treatment. That's because of the number of return visits and lower disposables cost. It's these sorts of treatments that are going to make your med spa business money.

Avoid offering services that don't allow for repeat visits.

Ramin suggests that a good measure of customer retention is a service that brings clients back six or more times. These clients should account for 8-12% of your business. If they aren't, then look at your business plan and determine what needs to change so you can meet those numbers.

Ask yourself:

  • What will help my business retain patients lost after one visit? 
  • What repeat services do we need to provide? 
  • How should we change our communication with clients? 
  • Are we doing enough in the initial consultation to bring them back? 
  • What can we change about the post-treatment consultation to encourage repeat visits?

Introduce Subscription Services To Improve Med Spa Cash Flow 

More services in cosmetic medicine are becoming commoditized. It doesn't make sense to charge clients each time for these services when they come in. Instead, it makes more sense to put them on a subscription plan. Laser hair removal is an example. This treatment isn't a one-time deal, as the hair is going to continue to grow back for most people. That means they'll be coming in for a treatment five or six times a year, making a subscription plan a logical option for both them and your business.

Subscriptions can help with your cash flow, too. They give you a cemented amount of money that is going to be coming in every month at the same time. That can help you make better financial decisions when you have a fairly constant revenue stream to work with. 

Pay to Play & Stay Competitive

You can stay competitive in a saturated med spa market if you understand how to find clients. They are on Google, Facebook, and Instagram, and advertising to them online is going to require a capital investment. It's not about gaining followers, either.

You might have 100,000 followers on Instagram, but if they aren't all within a one-mile radius of your business it won't actually do much for your profits. It's emotionally satisfying to get a lot of likes, but there won't be any financial satisfaction. You need to pay to advertise on these platforms so you can target the right people in the right areas.

Ramin's med spa focused its online marketing on bringing in people for PRP hair restoration, using Google ads and Facebook campaigns. They spent $10,000 and saw a return of $40,000, gaining at least one new client a day for this service. Those are measurable results far above what you'd experience with a scattershot email blast or direct mail campaign.

The Best Way to Cut Costs in Your Med Spa

Don't chase the next bright and shiny device on the market. Med spa owners want to get clients in, get them treated, and get them back out. Device manufacturers prey on this by promising new equipment that will offer quick treatment times and pay for themselves with just two clients a month.

Med spa owners often fail to take in other cost factors such as the long-term depreciation and financing costs. They end up committing to hundreds of thousands of dollars worth of new equipment only to discover it's going to take a lot more than two patients a month to break even.

The attraction is understandable, but think long and hard before you invest in a new device. Think about what it will take to attract new clients who want to use the device as well as what the disposable costs will be. Both factors will cut into your potential profit margins.

Be sure you are maxing out use on the equipment that you already have, too. Get your payback on that equipment before you invest in something new.

What You Can Do Today to Improve Your Cash Flow

  • Identify what makes you the most money. Ramin suggests sitting down with a sheet of paper and writing out all your services. Next to them, list their costs and price points. Then identify your most profitable services. This is where you should start focusing your marketing. What earns your business the most money is often not your highest ticket item, either. But when you focus your marketing on your most profitable services, you can get ahead of the game.

  • Admit what you don't know. Don't be afraid to go out there and look at what other med spas are doing and learn from them. Reach out to experts in the areas where you struggle and ask them for help. Compete on service, but collaborate on technology. It may surprise you that many business owners are willing to help by sharing their expertise.

  • Get off of Groupon. Your business shouldn't be about the price. It should be about outcomes and ethics. Offering discounted services won't result in repeat business and it can actually hurt the reputation of your business. 


 Get off of Groupon! Your #MedSpa shouldn't be about the price! It should be about outcomes & ethics. Discounting services won't result in repeat business . And it can actually hurt the reputation of your business!   #Interview #MedSpaMarketing @@aprilinthezone

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Want More Advice on MedSpa Cash Flow Management? 

Ramin's medspa went from a $500,000 turnover to a $1.4 million turnover in a year and a half. He's clearly doing something right. If you'd like to learn more about Ramin's business you can visit his website or connect with him through email. You'll find more medical spa resources on our website, too, to help you build your business and improve your cash flow management.

Are you ready to finally stop wearing all the hats and feeling like an employee in your own medical spa?  If so, it's time you step into your true role as CEO!  Join us at the 2020 Med Spa Growth & Profitability Summit!

Guest Expert on Managing Cash Flow in Your Medical Spa - Learn more about Ramin Monfared:
Profile Picture of Ramin Monfared before he is interviewed about Med Spa Cash Flow

Ramin Monfared

Ramin has over 17 years experience in Finance and Business.

Founder Alliance Solutions LLC (US) A buy side and Investment Consultancy firm. Founding Partner of Cloud 9 Skin Solutions in the UK. Cloud 9 develops and sells a multi award wining range of skin care products for problem skin conditions including Acne, Eczema, Psoriasis, Varicose Veins, Cellulite, Scaring and Dark Spots.

Co-founder of Praefinium Group a regulated Private Equity fund manager with $100m AUM. Helped close deals totaling US$10m in the US healthcare market.  Founder  Alliance Solutions LLC (Dubai) VC incubator  corporate advisory firm. Helped establish & fund 30 companies raising seed investments totaling US$10million.
8 years in Ireland with Irish Life & Permanent plc as a senior executive.  Studied BSc in Biochemistry King’s College, London

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