SMME EP421: 3 Ways to Increase Your Spa’s Profit Margins

10:23AM Feb 16, 2025

Speakers:

Daniela Woerner

Keywords:

profitability increase

smart automation

strategic pricing

revenue leaks

appointment scheduling

AI tools

content creation

social media

blog posts

SOPs

pricing strategy

consumable cost

value adds

memberships

financial freedom

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. As a spa owner, increasing profitability doesn't have to mean working longer hours or squeezing in more clients than you can handle. The key to scaling lies in efficiency, smart automation and strategic pricing. In today's episode, right here on the spa marketing Made Easy podcast, we'll cover three ways that you can increase your profit margins without adding more hours to your schedule. Before we jump into ways to increase your profit margin. I actually want to zoom out, and I want to take a look at why profit is so important in the first place. And after more than a decade in the coaching and consulting space here in the esthetic industry, I've seen behind the scenes of hundreds of spa owners looking at their financials. Almost all of them are tracking revenue, but when you start asking them what their marketing budget is or what percent of profit they're aiming for this year, they look at you like a deer in headlights. But when you ask any entrepreneur why they started their business, financial freedom will almost always be one of the reasons financial freedom does not happen without profit, period, and right now, in 2025 we are dealing with inflation as a country, which means our employees are asking for higher and higher wages just so they can make ends meet. We're dealing with an overall increased cost of doing business with all of our vendors, increasing prices. We're in a balanced economy, where we would just simply increase prices by three to 5% year over year, today's market would demand such a massive price increase just to maintain the same profit margin as before, it would be such a huge increase that it plain and simple, just wouldn't be realistic, and many people would go out of business. So before we start focusing on more sophisticated metrics like lifetime customer value, we need to first get comfortable with profit, and we need to look at what we're going to do in today's market to increase those margins as much as possible. In the most simple of terms, profit is the money left over after you take out all of the expenses. This is also the way that spa CEOs pay themselves. Now, depending on the structure of your business, you may be a w2 employee. That's not where the serious pay is coming from. And if you are paying yourself most of your salary through your w2 please don't we talk with your CPA. They'll give you guidance of what a reasonable salary should be, and the rest of that should come out of profit in the form of an owner distribution. Now you are putting so much time and so much money into building this business, and you deserve to be compensated for that. Without paying attention to profit, you could be missing out on 1000s of dollars every single year, and if you're not paying attention to profit in today's market, it could put you out of business. It's that important. So let's go ahead and jump in. First step is timing. Now, one of the biggest hidden revenue leaks that I see in spas is inefficient appointment scheduling, especially in locations that do not have a front desk team. So if you are leaving 30 minute gaps between appointments to check out clients, to rebook them, to handle payments, you could be losing 10s of 1000s of dollars in potential revenue every single year. Now think about it this way, if your average service generates $100 and you see five clients a day that's $500 in revenue. But if you could fit just one more appointment in your day by streamlining checkout and shortening that 30 minute buffer down to a 10 minute one, that's an extra $100 per day, or $26,000 per year based on a five day work week now, 26,000 more a year working these same exact amount of hours. And I know guys, I used easy math here, right? I wanted something that would easily make sense as you're listing as you're on your commute, as you're getting ready, as you're exercise. Raising $100 an hour. Truth is, most of you are charging well over $100 an hour for your service, and you're selling retail. So those things are going to make the amount of potential revenue just keep going up, just by squeezing one more appointment in. And for the spa CEO, who is also in the treatment room, who you're attempting to squeeze your CEO tasks on the same day as you're seeing your patients. You know in between you've got the 30 minute gap and you're trying to prepare your social media or get a team meeting scheduled, or whatever it is that you're trying to do in between seeing your patients, that's just hard, guys, that's just hard. My brain does not work that way. I need a day dedicated to CEO tasks, and I need a day dedicated to coaching. So when I give myself that gift, I am way more efficient, and I'm showing up in so much more of a flow state, which also allows me to serve my company or my clients in a better way. If you're still in the room, great, just schedule yourself as a provider on those days and fulfill the role that a provider would do if you're in CEO mode. Give yourself the gift of only wearing that hat on that day, and if that type of time blocking is not possible at this point in your career, at least break the day in half. So half is provider and half is CEO. By tightening up your schedule, you'll be able to see more clients generate more revenue and work the same amount of hours. Okay, so let's keep moving here. I'm going to jump into AI, and AI has been talked about a lot in the past year, and now we are at a place where I'm seeing spot owners actually use it in their business at a much higher level before, in fact, we actually have an entire episode dedicated to how we're using AI in our business in 2025 that's coming out in next month, as well as some other content. So stay tuned for that. But I want to talk about a few places that we can use AI to give us back more hours to give us more time. Think about AI as being an assistant to you. Okay, and I was on a call the other day, and I asked everybody, where were they spending the most amount of time in their business? Social media, blog post, captions, creating content that was a huge time suck for CEOs. And listen, guys, I, you know, I was talking to my husband the other day about AI and the the changes that we're seeing in today's world. And I was equating it to, you know, when I was in high school, I had a beeper, and right now we're in the time of having the beeper, and we're moving into the time of having cell phones. And the the big change that happened there, and I talked to my husband about it, and he's like, no, it's actually like being in the, you know, early 1900s when people had to use snail mail or have like horses carrying letters, and then moving into the time of having personal computers in your house, it's that big of a jump. It's that drastic of a change that we are right in the middle of right now, and we are going to continue to see those changes over the next three to five years. So the way that we're doing business even this month is going to be different than how we're doing business at the end of the year. So if you have not jumped on the AI train, it's time, my friend, it's time to get on the band again. It's time to understand how you can incorporate this into your business, because you will get left in the dust, okay? And the way that we're wanting to use it is on those tasks that can be automated, on those tasks that can be streamlined so that you can actually be out there in your community, building relationships and connecting with real people. So spas can dramatically improve efficiency by incorporating AI powered tools into your daily operations. So let me just give you a couple ideas of how you can save time and money. So social media and blog post, I'm a big fan of chat GPT. I know there's a lot of other

tools out there that you can use, but I, over the past probably six months, have been playing quite a bit with chat GPT, and the thing that I do is. Is upload all of my own content. So I will upload the book that we wrote. I have it scan my social media. I have it if I create a training, I create PDFs and have it upload my slides. So I'm constantly feeding information of my voice, of things that I have created, and then I will say, so, for example, if I created a training, I'll upload that specific training the slides and say, create, use this PDF to create 10 social media captions to promote this specific training. Okay, so if in Spa, if we're looking at a particular treatment, maybe you have a signature treatment that you've put together, you want to list out all the benefits. You want to list out what it does for the patient or the client you want to talk about how it's positioned, give chat all of that information, help it to learn your voice, upload your brand style guide. There's lots of things that you can do. And also make sure that you're asking it to either only use that information or provide sources from where it's gathering its information. Okay, that's an important piece. The biggest hesitation I've always had with chat is copyright infringement, which is a big deal, and we want to know where we're sourcing information. There's a lot of things on the internet that you know maybe you wouldn't be the best source. I want to make sure that I'm, if I am getting something from a source, that it is a valid one. Okay, so your social media, your blog post, these can all be things that can be that maybe you've been spending hours on this. This can take you an hour to do the entire month. So it's something with the help and support of chat GPT, chat can now also create images. So Canva even has its own AI kind of incorporated within there. So there's a lot that we can do to develop this content in a much faster way. You can also, if you do have a brand style guide, or if you've created a mission or vision statement, if you have an ideal client avatar, you can feed all of that in and say, Can you tighten up my messaging to really speak directly to this person. You also can use chat for SOPs. A lot of people that come into our world, they are, you know, dead set to say, I'm ready to run a systems based business. I want to, they'll, they'll usually say, I want to spend all of q2 getting all of my systems done, and then we have to have a conversation and say, you know, this is not something that is done in one quarter. It is a ongoing lifetime process. But you can get started and chat can make it really, really easy for you. So with softwares like loom, or even softwares like otter.ai you get the transcription. And so all you have to do is film the loom, and which I think is the easiest way you take that transcription, feed it into chat GPT and say, turn this into step by step instructions, and so you can get all of those loom videos that you filmed. Instead of having a virtual assistant do it, you can have chat do it. There's so many more things you know inside of APA, we recently had a chat GPT prompt, and we actually just created a new channel in there for different prompts that spas are using to help them. So that's a really cool thing, but we posted a prompt in there to scan your website and social for to make sure that it's in alignment with metas new advertising policies, which there were some really big changes, and we got this from our dear friend Tara Zirker, over at Successful Ads Club, but there were some big changes with the meta advertising policies, specifically in the spa space, And so we use the prompt to scan the website, to scan our social media to make sure that we were in alignment with all of the updates and changes. Okay, so by leveraging AI, you can cut down on manual tasks, you can reduce staffing costs, and you can free up. More time to focus on the high impact areas of your business. All right, now, let's move on to revisiting your pricing strategy to maximize profitability. So many spot owners are going to hesitate to raise prices, fearing they'll lose clients. And you know, as I talked about in the beginning of this episode, I really don't feel that this is the moment to increase prices right now. But pricing isn't just about charging more. It's about structuring your services for maximum profitability. So we can look at consumable cost, we can look at value adds, we can look at enhancements. So how can we offer small add ons? How can we offer upgrades so scalp massage, led therapy? These can be little upgrades that will increase our revenue per hour per room that will increase the profitability, especially with things like LED or even scalp massage. You're just using your hands right, and maybe an oil. But these are things that are not having a high consumable cost, but are increasing the amount of revenue that's coming into that room again in the same amount of time, you can bundle treatments together, so you can create tiered packages where maybe clients get a small discount for booking multiple sessions up front. That's going to increase commitment and revenue stability. So that can be a good thing. You can re evaluate your service cost, and by that, looking at, you know, always going back, those of you that have been in our courses and programs, you know about the cost of treatment and profitability tracker, where can you save on those? Where can you tighten things up? Can you use private label products? Does everything need to be automatically included in there? Or can you lower the cost? I know we had some accounts that were big hydro facial accounts, and they were automatically putting the like the derma builder or the peptides, the different ones in there. Well, those have a significant range of pricing depending on if you're doing a peptide or if you're doing a growth factor. So simply removing those in the base price and charging them as an add on could be an option, right? So we're looking at different ways that you can do things to lower the consumable cost and increase the profit, so you're not raising prices, you're just charging extra for specific enhancements. And you, of course, can look at memberships, you know, incorporating different services into memberships where they get some sort of discount by joining the membership, but it's giving you that predictable cash flow. Okay, so we're always looking at consumable cost, we're looking at upgrades. We're looking at package bundles, and we're looking at memberships, all right, so we want consistency of visit. I know in economic times like this, we might see people coming in on a quarterly basis who used to come in on a monthly basis. Can we get them to come in monthly through something like a membership, where maybe we're giving them a discounted price, but again, we're keeping them coming in. We're keeping the relationship. That is the really, really important piece there. So it's really important how you're structuring your services, how you're showing up to serve your clients where they're at and to maximize that revenue while maintaining your client satisfaction.

Now, the most successful spa owners aren't working more hours. They're working smarter. Okay, that doesn't mean that you don't have to work. You've got to be out there, you've got to be fully present, but you just want to make sure that you are not just hustling so hard that when you're showing up to CEO, you're overworked and overwhelmed. That is not where we want to be. We want to be in a rested, confident, clear headed space so that we can optimize appointment scheduling, we can integrate your AI tools. We can refine your pricing strategy. We can review the consumables. These are the ways in today's market that you can significantly boost your profit margins without that burnout. Now look, you're putting so much of your time and energy into. Building your business. I want you to pay yourself, and I want you to pay yourself well, and I know you might feel like you're not a numbers person, or you don't have the luxury of working on your business right now, because you're working in the business. If you keep yourself with that attitude, you will burn out. Okay, profit is where it's at, profit over revenue all day, every day. Don't get stuck. Don't let your ego take control and saying, I've got to have that million dollar spa, even if it costs me my profit margin, not. Okay. All right, we want to focus on profit over revenue all day, and it's usually going to be a combination of several small actions in different areas of your business that are going to help to make that huge impact on your profit margin and ultimately your life. And listen, if you're serious about operating a profitable business, this year, we've got a master class coming up on March 10, at noon, Eastern Time. It's called The Art of Pricing your Services for Maximum Profit and Experience. If you're an APA member, you can find all of your discounted registration information in the members area or the community hub. If you're not an APA member, you can attend live for 197 just go to the virtual events tab on the Addo esthetics website to learn more. I hope to see you there, and I hope to see you next week for a new episode of Spa marketing made easy. You.