By Skytale Group

When Skytale analyzes a medical spa (or any type of health care practice), it looks 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 their portfolio, Skytale advises medical spas to diversify their sources of revenue as a way to mitigate risk and, ultimately, become more profitable. To Skytale—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 they leave? 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. This post will discuss best practices for diversifying a medical spa.

Focus on provider concentration and retention

Revenue by provider is an important KPI for a medical aesthetics practice to track. 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 rock-star 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—estheticians, RNs, NPs, PAs and 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 excellent ways of bringing new and repeat patients through the door. Other treatments—including energy-based devices and 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: Skytale 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 their 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 can both retain existing patients and attract new ones on an ongoing basis. A medical spa that can shepherd a new patient to become a lifetime patient is one with staying power.

You can start by making patient experience a priority. Here is a process for new patient acquisition. 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 Skytale Group’s consulting team to learn about more ways to increase your medical spa’s value and uncover opportunities for growth. Contact Skytale to learn more.

Skytale Group is a full-service strategic, financial, and M&A advisory firm. Through management strategy and financial analysis, Skytale helps start, grow, and sell organizations within the aesthetics space.