Diversification is Key to a Medical Aesthetics Practice
How does diversification make a medical aesthetics practice more successful?
When we analyze a medical spa (or any type of healthcare practice), we look closely at its sources of revenue. Is one provider bringing in the majority of revenue? Does the practice depend on a single service to bring patients through the door? Are appointments concentrated between repeat patients rather than new ones? In the same way a financial advisor might tell an investor to diversify her portfolio, we advise medical spas to diversify their sources of revenue as a way to mitigate risk (and ultimately become more profitable.) To us (and often potential investors) diversification is the shorthand of a healthy medical aesthetics practice.
Think about it this way: if you rely on a single injector to bring in most of your patients, what happens if she leaves? If a single product or service is your bread and butter offering, what happens if it winds up in a controversial headline? A medical spa well-positioned to scale is one that does not rely on a single provider, service, or type of patient. In this article, we discuss best practices for diversifying a medical spa.
Focus on Provider Concentration and Retention:
An important KPI for a medical aesthetics practice to track is revenue by provider. Not only will it help you to understand each provider’s performance, but it will also bring awareness to whether or not your practice is too heavily reliant on a single person to grow.
It’s a common plateau most doctor-owners understand: building a business that’s entirely dependent on them to run. Or, perhaps it looks like having one provider who generates $5 million in revenue rather than five rockstar injectors bringing in $1 million each. Both are hindrances to growth, and both pin the success of the practice on the performance of a single person.
Lacking diversification in your provider base can happen at organizations of all sizes. A healthy practice has a wide provider base at different levels–esteticians, RNs, NPs, PAs, physicians. Depending on your service mix, providers of all levels have the potential to bring in strong margins.
Once you’ve built a strong base of excellent providers, it’s crucial to retain them. Turnover can be a challenge in medical aesthetics, so incentivize your team with competitive compensation, opportunities for ongoing training and education, and a strong culture as you grow.
Build Out a Diverse Service Mix:
There are many benefits to creating a more diverse service mix at a medical spa. Some treatments, like injectables, are an excellent way of bringing new and repeat patients through the door. Other treatments (energy based devices, body contouring) can generate higher margins. The key is to make sure you’re not relying on only one type of service to bring in revenue. When analyzing your own service mix, here are some considerations:
- Know which services generate the highest margins: We wrote about a profitable service mix here.
- Know how much time your providers are spending on each service: Are you spending too much time on low-ticket items and not enough on higher revenue-generating services? Are appointment times too long or too far apart? It’s important that you have the data to understand how to better optimize your schedule.
- Offer a range of high-demand services: To draw in a wider client base, you’ll need a range of high and low price point treatments. You might consider a membership plan for VIPs to keep them coming back–or build out treatment plans for patients. Of course your offerings will depend on understanding your key patient demographic, but whether you’re a volume-based or luxury practice, your patients will need a range of offerings that fit their needs.
- Set competitive prices: If you’re offering a premium experience, make sure to price your treatments accordingly.
Elevate Systems and Processes for Cross-Selling:
Once you’ve built out a diverse and profitable service mix, train your team to be able to sell it. Make sure everyone on the team is educated about the services you offer. Not only does this ensure that a patient is receiving the best possible treatment plan for her desired results, but also that your team has the potential to promote high-margin services, follow-up treatments, or other services.
Improve New Patient Acquisition and Patient Retention:
Finally, at a healthy medical aesthetics practice, there’s even diversification in the patient base. Successful practices are able to both retain existing patients and attract new ones on an ongoing basis. A med spa that is able to shepherd a new patient to become a lifetime patient is one with staying power.
You can start by making patient experience a priority. We share a process for new patient acquisition here. And once you’ve ushered new patients into your practice, a combination of building personal connections, intentional cross-selling of services, and a strong membership program can keep them coming back.
Diversification at Your Medical Spa
The central theme of diversifying a medical spa is risk mitigation. With a diverse provider base, patient base, and service mix, you’re reducing the impact of losing (even seasonally) a provider, a patient, or a service offering. Work with our consulting team to learn about more ways to increase your medical spa’s value and uncover opportunities for growth. Contact us to learn more.