SMME EP428 Why You’re Not a Million-Dollar Med Spa Owner – And How to Change That

7:22AM Apr 3, 2025

Speakers:

Daniela Woerner

Keywords:

Med Spa

recurring revenue model

memberships

pricing strategy

key metrics

high profit treatments

marketing funnels

sales funnels

strategic partnerships

client acquisition

profitability

client retention

business growth

spa CEO

growth factor framework.

Welcome to Spa Marketing Made Easy, a podcast for spa owners who want to step up their leadership and business skills and step into the role as spa CEO. I'm your host. Daniela Woerner, CEO of Addo Aesthetics and Founder of the Growth Factor Framework Program, where we teach, coach and guide spa owners in scaling their spas to the next level of growth and unlocking freedom in their life and their business. I'm so glad you're here now. Let's dive into the show. What if I told you that the only thing standing between you and a million dollar Med Spa is you? That's right. Most spa owners don't hit seven figures not because the industry is declining. We're actually seeing quite the opposite, with private equity just really flooding into our market. No, they're not hitting seven figures because they're making a few crucial mistakes, and today, on the spa marketing Made Easy podcast, we're going to talk about exactly what those mistakes are and how you can fix them, starting right now. So let's just first zoom out and take a look at the Medical Spa market, which, as of 2023 was a $15 billion market right here in the US, and that market is continually growing approximately 15 to 20% on an annual basis. Now, for those of you that love to do your own research, we grab these numbers from the amspa website. We'll be sure to link up their website at the in the show notes of this episode, if you're wanting to head over there and do some of your own research. Now also, according to am spa, the annual revenue per Med Spa was about 1.9 8 million in 2022 a single location. Med Spa sees roughly 283 patients per month, with an average spend of $536 per visit. So that adds up pretty quickly over a year. And the cool thing is, it's common for even small med spas to gross well into the seven figures. So there was actually an industry survey that showed that most med spas generate over 1 million annually. So why if we're seeing this average 1.98 and the majority of these med spas generating over 1 million Why are there so many that struggle to hit that consistently and profitably? We're seeing the examples of these spas that are doing it, but there's so many that are still struggling. Well, that's what I want to address today. If that is you, if you are a med spa, and you're like, gosh, I look around and every Med Spa I see is doing 1 million, $2 million in revenue, what am I not doing? Well, mistake number one is you don't have a recurring revenue model, aka, memberships. All right, so the spas that scale fast and sustainably, they are not starting back at zero every single month, they have recurring revenue. They have predictable cash flow that helps them to take bigger risks, that helps the spa CEOs to sleep better at night when they know that that money is coming in predictably and consistently. Okay, so spas that use membership models see 65 to 70% of revenue coming from repeat clients, you guys, that is huge. That decreases your client acquisition cost, that helps you have that predictable cash flow. Depending on where you live in the country. There's ebbs and flows. You know, there's certain parts of the country where people leave in the winter to go somewhere warm, and also vice versa. There's ebbs and flows in every kind of micro market, and when you have memberships, you're able to really stabilize those ups and downs. So memberships can be around maintenance treatments, whether it's a facial or a chemical peel or something along those lines, if you're doing medically assisted weight loss hormones, there's ways that you can do memberships around that. So lots of really great ways, but absolutely you want a recurring revenue model in your practice. All right. Mistake number two, you're not pricing your services correctly. Are you pricing for profit, or are you just covering cost? And so often, as spa CEOs, we have this insecurity in us, and we're worried about, you know, the 20 other med spas that are within 10 miles of us that you know, we've got to come. Heat, and so we just lower our prices and discount and do all of these things that really is such a downward spiral. When you're pricing your services, you've got to make sure that you are really analyzing the client experience, that you are covering your cost and you're also including profitability. When we teach this inside of our APA, we actually just did a master class on this around pricing your services for profit and experience, and the first thing that we do is start out by looking at the cost of treatment and profitability tracker. So we're actually, at a granular level, breaking down what are the consumables? And I'm talking like, if you're doing a dermaplane, you're like dividing out and knowing that that single dermaplane blade is going to cost you 39 cents. So we are breaking this down in such a granular level, we're adding in payroll cost. We're really looking at where do I need my margins to be to ensure that I am profitable? Okay, so having a poor pricing strategy or not knowing how to effectively price your services will keep you from hitting the seven figure mark. All right. Mistake number three, you're not tracking the key metrics. Okay, so let's just talk about this in terms of membership, right? So you maybe heard mistake number one and were like, Oh my gosh, 65 to 75% of revenue comes from repeat clients. That's such a huge thing. Long term. I want that predictability. I want to get off the emotional roller coaster. And so you go in, you start getting people signed up for your membership, but you're not tracking churn rate. Okay? Huge mistake. Do you remember Pretty Woman, those of you my, my fellow children of the 80s. Big mistake. Big, huge. That's what I think of here, not tracking key metrics. Okay, so when we're looking at membership, when we're looking at churn rate, we want to understand if we have a six month membership and then it goes month to month after that, what are we going to be doing to make sure that we consistently have touch points with our members, and specifically at points where they are dropping off? Okay, so churn rate is just one specifically connected to membership. You can look at retail to service. You can look at revenue per hour per room. You can look at client purchase percentage. You can track profitability. I mean, there's all different types of things that you can be tracking, but these numbers are helping you to truly understand the health of your business. We don't need any emotion brought into this. It's purely data to help us understand what our business is trying to tell us, okay? Mistake number three, not tracking key metrics. All right, so let's move into Mistake number four, you're not leveraging your high profit treatments so

this happens. And look, I'm an aesthetician. I get it. I haven't been practicing for a while, but when I was practicing, there's always the services that you love doing, right? And so I know your providers are like, ah, like, I loved Dermaplaning. I love the sound of it. I loved the like, scraping. I it was for me so detail oriented. I needed to get every single hair off of there. I wanted to Derma plane every single person that was on my table. But if I'm and Dermaplaning, I guess is maybe not the best example, because that does have a high profit, you can do it pretty quickly. But think about if you had somebody who really loved doing some of these specialty facials. And you know, all the love in the world for the specialty facials, there's a lot of them out there. They're an important piece of the puzzle. But I don't want to lead with something where my consumable cost is going to be so high if I have a consumable cost around 40 bucks, and I can only charge 150 200 maybe $250 for this service, then that's not going to help me grow as fast as possible. If I'm doing another service that has a very low consumable cost, high perceived value. Okay, so when we're looking at like, what are we going to lead with? And we've got a great resource called the spa capacity calculator, where you basically plug in four different treatments, and up at the top it says. Hey, how many rooms do you have? How many hours are you open? How many weeks are you open? What's the consumable cost of this? What's the payroll cost of this? You plug in these numbers, and then it basically pumps out specifically how much profit you would make if the only thing that you did was that service. So if I said, Hey, the only thing I'm going to focus on is Dermaplaning, I'm going to lead with that. I'm going to become the specialty spa for that. Then it would pump out. Here's how much profit you would make if, literally every appointment was DERM planning, and next to it, you could put specialty facial next to that. You could put micro needling next to that you could put like an energy based device, and it's going to show you very clearly, pretty drastic differences in profit. Now I know in the real world, we're never going to do just one service. We're all using a multi modality approach for skin rejuvenation to help our patients reach their skincare goals, but if we lead with the high profit services that we know are going to make a difference for our patients, we can increase our profitability on such a huge scale. So if you're not understanding that and leveraging that you are missing out. Okay, so let's move into Mistake number five, failing to invest in marketing and sales funnels. Okay, if you build it, they will come. Is this another like 80s movie reference you guys know? Kevin Costner, Field of Dreams. Field of Dreams. That one liner like has influenced my life in such a big way. If you build it, they will come. We see this in Spa where someone's like, if I buy this, you know, several $100,000 energy based device, all of a sudden I'm gonna be so profitable. No, no, ma'am, you are not you need to seed that and let your patients know how excited you are about it and what it does, and then you need to launch it, and then relaunch it and continue to talk about it, for it to actually yield an ROI for you. Okay, so we've got to make sure that we are focusing consistently on marketing new devices, marketing new services, marketing new providers, to make sure that we are attracting the right clients and patients for us. Now, how do we do that? Well, the next piece of the puzzle is sales funnels. So sales funnels, and I always you know this, this is feel like it takes people a minute to really understand sales funnels. And if I actually go back, my girlfriend Tara, one of my very best friends in the whole world. Love her love her family. We actually met at a networking group for female entrepreneurs. I had just moved to the DC area the first time that I moved here and didn't know anybody in the world. Didn't have anyone to put as my emergency contact. It was really like. I was like, Okay, I have got to put some effort into meeting some human beings that are actually like, within the same proximity to where I live. So I went to meetup.com I found some entrepreneurial groups. I was really uncomfortable doing that, but I went out there, I started meeting people. And after a couple of months, the main lady who was organizing these groups actually introduced me to Tara, because she had lived in Hawaii before, and she knew that I was from Maui, so there was this connection there. And you know, 10 years later, 11 years later, here we are happily ever after, and Tara has been someone who helped me to generate millions in my business. We grew our businesses together. We were pregnant at the same time, had our babies together. Really, really beautiful story of what can happen when you put yourself out there. Anyway, one of the things that she helped me with was when I was first starting to market. And keep in mind my background was always working in the spot in operations, and so I would be a provider, and they would see that I had talent in the business side of things, and they would pull me up, and I would go, like, from the front desk to the spa manager, or I would go from an esthetician to handling all the social and all the marketing, right, like, so you know what I mean, the the provider that gets pulled out and starts doing like, 10 different jobs, that was always me, and so I did the. Things. And a lot of the things I was doing, I didn't realize that they had a name for them. And sales funnels was one of those. And so I asked, Taro, is here? I was doing all this research around marketing, and when I kept hearing everybody talking about funnels and funnels and funnels, and I was like, What are they talking about? Like, I just could not get it. It took me probably four to six months before I really had a grasp on like the landing page to the thank you page, to the email sequence, to the offer, all the pieces that go in there. She was the one that helped me with that tremendously. And sales funnels, they are a tactical piece of how you get new clients, new patients, into your practice, okay? And a sales funnel doesn't have to be the landing page, the thank you page, all of that. A sales funnel can be something even as simple as saying, Hey, I'm a solo provider, and I actually have $0 to start out with marketing. And so I'm gonna use Groupon. Everybody like, ooh and ah, because I said Groupon. But like, if you're using Groupon as a client acquisition strategy, which a lot of people

do in the beginning, when they don't have marketing dollars. They are using that to get access of with a group of people that they're able to market to and bring into their business. So yeah, you're paying for it through Groupon fees, but you don't have to put your cash out there. Now, a sales funnel would be running a Groupon campaign, getting them in and then upselling them into adding add ons, adding all of these different pieces to recoup the fees that you paid to Groupon. Now, let me be clear, you will not build a profitable spa doing Groupon alone. However, I have met spa owners more than one who have scaled into the seven figures using Groupon as an acquisition strategy. So they're using them to get to initially get that client or patient into their practice, and then they're converting them into clients or patients of their practice through the different stages of this funnel, through building trust. All right, so important piece to remember there and Mistake number six, I want to spend a little bit more time on this one, so let me just recap these first five, because these first five are very tactical, okay, like input, output. It's very much like here is the step by step way that you are doing something. So recurring revenue model, they don't have a membership. Mistake number two, they're not pricing things correctly. Mistake number three, they're not tracking the key metrics. Mistake number four, they're not leveraging their high profit treatments. Mistake number five, they're failing to invest in marketing and sales funnels. Okay, those are all tactical mistakes. Mistake number six is failing to build your network and strategic partnerships. This is something that is the foundational secret sauce of any business owner. If you are zooming out, if you are looking at how did that spa get that door open to that partnership? I mean, look at me. How did I get a consulting job with the top physician dispensed brands without even trying, without even going for it. It was through relationships. It was through my network. Okay, so this is the foundational piece, and then we want to layer the tactical strategies on top of that, if you remember, I just told a story about my relationship with Tara. I built the relationship with Tara, then Tara taught me how to do ads. She was my go to person. She was there as a support. She was a part of my network that helped me build out these tactical pieces which are essential. You've got to know how to do these things, right? You've got to know about sales funnels, about ads, about pricing. But the real secret sauce comes in these relationships. And if you want to grow more than you know, 10% a year, 15% a year, the partnerships that you build with other companies will help you double and double and double. Okay? Now, Industry Research shows that strategic partnerships boost customer acquisition and awareness for wellness businesses referral marketing and word of mouth. That are very powerful in our industry. 74% 74% I'm going to link up the article that I pulled this from. 74% of consumers identify word of mouth as a key influence on purchasing decisions, which means having other local businesses that they have already established trust with when they recommend your spa that can directly drive bookings. And the same report is saying that formal referral programs have found that capitalize on this found that implementing these incentives can increase client acquisition by 15% so to go back to our metrics, one like, hey, if we're looking at how fast, how much is one patient worth, what is the Lifetime Customer Value? Meaning, what is my average patient spend in my practice. If I could take the number of patients and increase that by 15% and add that dollar, you know, figure out what that dollar amount is, it's huge. Okay, so I want you to know you can run a seven figure Med Spa. All right, you do these six things, you will get there, okay, start with the partnerships, start with your relationships, start with your network. Who can help you with the tactical? All right? Google Chat, all these things can teach you the tactical but having a person to talk to, having someone that can make you feel not alone, because let's be real. As entrepreneurs, we are all we're special. We are special people, and we can be on such a high high when we're making money and doing great, and this is you want to open 15 businesses and franchise and all the things, and then, you know, two weeks later, you get a negative review. Somebody on your team walks out, and you're just done. You just want to close your doors. You're over it, right? So we, we also have whiplash in our emotions around the entrepreneurial journey. So having that community, I know my community, my you know, five people that I spend the most time with are a huge support in me to stay level headed, to shift my perspectives around different things, and they are a huge support in helping me build a multi million dollar business. I want that for you too. So start with building strategic partnerships and layer the tactical on top of that. Okay, thank you guys so much for listening. I hope you found this valuable and happy business building.