Hi Dangerously in Love with Finance,
I’m a proud owner of a beautiful medical spa that’s been my baby for the last five years. My clients love the treatments, my staff is talented, and business seems to be thriving. But the numbers—revenue, expenses, profits, losses, you name it!—have been crushing me as of late.
I hear words like “KPIs” all the time, and I know they’re meant to inform my business analysis. I’m too busy with day-to-day operations and ensuring the medical spa has an aromatic eucalyptus scent to figure it all out. Starting is the hardest part. Assist me! If anything, how can I make sense of this?
Sincerely,
Overwhelmed Spa Owner
Hey Overwhelmed Med Spa Owner…
First off, breathe. No, really, deep breath in… deep breath out. Ahhh, that’s better. Now let’s get into it.
I get it, you didn’t start your medical spa because you were in love with spreadsheets and balance sheets. You wanted to help people feel fabulous in their own skin, create a space of beauty and calm—and let’s face it—rule the world of aesthetics. But here’s the thing: even the most successful spa will collapse under its own weight if the numbers aren’t adding up.
That’s where KPIs, or Key Performance Indicators, come in. Think of them as your business’s vital signs. Just like a doctor checks your pulse and blood pressure, you need to check your KPIs to ensure your spa’s health.
There are five financial KPIs that every medical spa owner should know—and by “know,” I mean have memorized like your favorite skincare product’s ingredient list. I’m talking about:
Don’t worry, I’ll break it all down, and, yes, I’ll explain how a fractional CFO can be your business BFF through all of this. Ready? Let’s dive in!
Revenue Per Treatment: Your Golden Ticket
This is the bread and butter of your medical spa. Revenue per treatment is how much dough you’re making every time a client gets Botox, a facial, or whatever magic you’re working on them. To calculate it, just take your total revenue from treatments and divide it by the number of treatments you’ve provided. Simple, right?
But here’s the catch: If your Revenue Per Treatment is low, it could mean you’re offering too many discounted services, or (and I hate to say it) you’re not charging enough for the value you provide. Imagine giving someone a luxury facial for the price of a drugstore moisturizer. Girl, no!
A fractional CFO can help you understand where the leaks are happening and how to plug them up. They can analyze your pricing strategy and advise you on when it’s time to bump up those prices (because you’re worth it!) without scaring your clients away.
Average Customer Spend: Treat Yo’ Self—And Your Medical Spa
The Average Customer Spend tells you how much each client is dropping per visit. Here’s how to calculate it: Take your total revenue and divide it by the number of clients. Voilà! Now you know whether your customers are opting for the $100 facial or the $300 all-inclusive anti-aging package.
Why is this important? Because if your average spend is lower than you expect, it might mean you’re leaving money on the table. Could you be offering add-ons like a collagen boost or a quick massage? Or maybe a membership program that encourages repeat visits? Yes, honey, there’s always a way to increase the total bill (and satisfaction).
A fractional CFO can help identify opportunities to boost your average spend. They’ll help you design profitable packages, memberships, and add-ons that not only make your clients happy but also fatten up your revenue. Bonus: They’ll even tell you which treatments are most profitable so you can gently steer clients in that direction.
The Average Customer Spend tells you how much each client is dropping per visit. Here’s how to calculate it: Take your total revenue and divide it by the number of clients. Voilà! Now you know whether your customers are opting for the $100 facial or the $300 all-inclusive anti-aging package.
Why is this important? Because if your average spend is lower than you expect, it might mean you’re leaving money on the table. Could you be offering add-ons like a collagen boost or a quick massage? Or maybe a membership program that encourages repeat visits? Yes, honey, there’s always a way to increase the total bill (and satisfaction).
A fractional CFO can help identify opportunities to boost your average spend. They’ll help you design profitable packages, memberships, and add-ons that not only make your clients happy but also fatten up your revenue. Bonus: They’ll even tell you which treatments are most profitable so you can gently steer clients in that direction.
Customer Retention Rate: The Return of the Loyal Client
Repeat customers are the lifeblood of any medical spa. The Customer Retention Rate tells you how many clients are coming back for more. If your spa is a revolving door of one-time clients, it’s time to rethink your retention strategy. You calculate this by taking the number of returning clients and dividing it by the total number of clients in a given period.
Low retention? It could mean clients aren’t happy, or maybe they’re simply forgetting about you (noooo!). This is where your spa’s customer experience matters. A fractional CFO can help you build loyalty programs or subscription models that make clients want to come back for more. And because they’re a financial pro, they’ll make sure these programs actually make sense for your bottom line, not just for your Instagram feed.
Gross Profit Margin: The Money You Keep (and Love)
Here’s where it gets real. Your Gross Profit Margin is the percentage of revenue you keep after deducting the costs of providing services. Essentially, it’s what’s left over to pay your bills, invest in new equipment, and, oh yeah, pay yourself.
To calculate it, subtract the cost of goods sold (COGS) from your total revenue, then divide that by the total revenue. A higher gross profit margin means you’re keeping more of the money you make, and that’s what we all want, right?
A fractional CFO can analyze your cost structure and help you reduce expenses without sacrificing quality. Maybe you’re paying too much for supplies, or maybe some treatments are more expensive to perform than they’re worth. With their expertise, you’ll know where to cut costs and where to invest more, so you’re always operating efficiently—and profitably.
Staff Utilization Rate: Your Superpower (or Achilles Heel)
Staff utilization is the KPI that tells you how much time your team is spending on billable treatments versus how much time they’re just standing around looking pretty. To calculate it, divide the number of hours your staff spends on actual treatments by the total hours they’re available to work. If your staff utilization rate is low, it’s time to reevaluate.
Are there gaps in the schedule? Is someone always available but rarely booked? A fractional CFO can help you optimize your staffing levels to make sure you’re not overstaffed (wasting money) or understaffed (missing out on potential revenue). It’s all about balance, and a good CFO will help you walk that tightrope gracefully.
So, let go of that number-crunching stress, hire a fractional CFO, and get back to what you do best: making people look and feel fabulous!
Sincerely,
Dangerous in Love with Finance
Mindful Financial Tips
These five KPIs—Revenue Per Treatment, Average Customer Spend, Customer Retention Rate, Gross Profit Margin, and Staff Utilization Rate—are the heartbeat of your medical spa. Understanding them is the key to running a profitable, sustainable business. And, trust me, a fractional CFO can be your secret weapon in mastering these numbers, ensuring your spa is as financially healthy as it is aesthetically pleasing.
Contact Healthy Bodies of Finance today and take the first step towards falling dangerously in love with finances.
This article is designed to provide information only and should not be considered legal or tax advice. Because of the complexity of the law and the variables in your own personal tax and accounting situation, you can’t rely on our advice specifically related to your unique circumstances. In order to get the best tax savings and legal advice available to you, you should consult with your own accountant, attorney or advisor regarding your particular facts and circumstances. Healthy Bodies of Finance is an accounting firm that specializes in working with health and wellness providers. We provide monthly accounting & bookkeeping services and financial education. For more information on our specialized services for health and wellness providers please contact us at [email protected]