Maintaining Profitability for Your Medspa During the Summer Months

Summer looms ahead, and for those acquainted with the ebbs and flows of the medical spa industry during this season, it’s evident that challenges lie ahead.

Historically, summer months bring a downturn in patient appointments and revenue, coupled with a surge in cancellations, forming the perfect storm for business slowdowns.

In 2023, the Federal Reserve Bank of New York reported a notable increase in vacationing households during the summer months, reaching a record high. This trend underscores the need for proactive measures to maintain profitability in the medical spa sector during this period.

For those pondering strategies to sustain profitability amidst summer’s dip, several approaches warrant consideration:

Rebooking Patients:
It’s imperative to adopt the best practice of rebooking patients during their current visit. This entails scheduling their next appointment before they leave, fostering revenue predictability and ensuring a full schedule year-round. Initiating this practice now, particularly in spring, can fortify appointment schedules during traditionally slower summer months. Additionally, coordinating treatments with patients’ summer plans enhances scheduling efficiency and minimizes future administrative burdens.

Strategic Marketing Investments:
Anticipating seasonal business fluctuations necessitates collaboration with the marketing team to identify optimal investment channels. Planning targeted promotions or events, such as open houses or summer block parties, can attract both existing and new patients. These initiatives, when coupled with prudent promotional strategies, have the potential to bolster revenue streams and offset seasonal declines.

Implementation of Cancellation Policies:
Establishing clear and communicated cancellation policies serves as a deterrent against last-minute appointment cancellations. While not infallible, such policies mitigate the impact of cancellations on appointment availability. Employing appointment reminders, such as text confirmations, aids in reducing no-shows and optimizing scheduling efficiency.

Strategic Employee Time Management:
Proactive planning for employee vacations and time off is crucial to mitigating revenue losses during slow business periods. By coordinating staff schedules to ensure coverage during peak patient traffic periods, practices can minimize the financial impact of employee absences. Effective communication and scheduling coordination among team members facilitate operational continuity and revenue stability.

In summation, strategic foresight and proactive measures are essential for medical spas to navigate seasonal fluctuations and sustain profitability during summer months. By implementing these approaches, businesses can mitigate the impact of seasonal challenges and maintain a thriving practice year-round.

Production, Collections, Profit – Understanding the Differences

Imagine an inverted pyramid with its widest layer at the top. At the top is Production, followed by Collections in the middle, and Profit at the bottom.

Production – Top of the Inverted Pyramid

Production represents the total fees for all services and products performed within a specific period, before any discounts or adjustments. This metric is crucial for tracking both the entire office and individual providers, allowing for an apples-to-apples comparison on a monthly basis.

Collections – Middle of the Inverted Pyramid

The next layer is Collections, which is the actual amount collected from clients each month after accounting for discounts, adjustments, and prepayments. The difference between collections and production is also reflected in the outstanding amounts clients owe for services already rendered and the end-of-month reconciliation process.

You might wonder, “Can collections exceed production?” Yes, collections can be higher than production in a given month due to prepayments for packages and memberships. This often results in higher production and lower collections in subsequent months as prepaid services are performed.

Profit – Bottom of the Inverted Pyramid

At the bottom of the pyramid is Net Profit (or Net Income), the amount displayed at the bottom of your Profit & Loss Statement (P&L). Depending on whether your accountant uses cash or accrual basis accounting, income on your P&L will either include total collections (cash basis) or production net of fees (accrual basis). By subtracting both fixed and variable expenses from your income, you determine your Net Profit. This metric is essential for assessing the profitability of your practice. It’s recommended to review your Net Profit monthly and annually to monitor how revenue and expenses fluctuate throughout the year.

At Fullcycle CFO, we assist our clients in tracking these figures to ensure they know exactly what money should be hitting the bank and that their discount and adjustment amounts are appropriate for their business.