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Looking Back

Remember where we were last year at this time? The presidential elections were over, and we were reacting to economic craziness. Now, a year later, what I hear is that we're starting to stabilize. Congratulations, we've weathered the slide of a year ago, and even a congressman's chest thumping who advised everyone not to buy gift certificates because we were all going out of business. 

We may not be quite where we were, but we're stronger for the experience. Although it wasn't always pleasant, there were lessons we needed to learn. Now, a year later, we're hanging in. Yes, there have been casualties, but the economy created an evolving event that made us focus on the management of our businesses and practices. We started asking why, and we felt vulnerable. Suddenly, where we were financially was important. So we addressed it. We should have been doing this all along shouldn't we? Oh well, better late than never. We're paying attention now. Not only to the numbers, but to those issues that make us operate better and grow. 

Labor & Compensation. This past month, my clients have been re-evaluating all their costs. We can't have a conversation without addressing staff compensation. A medical spa client took a strong look at what she was paying a subcontractor RN who does injectibles and derma fillers. Her compensation was about 25% of the revenue she was earning. Sounded okay on the surface, right? How many of us would love to have a 25% direct labor cost? We looked a little deeper. Percentages don't tell the whole story. The compensation model she was using was $50 per hour plus 35% of the gross margin (sales minus product costs) of the injectibles and fillers. When I realized that this RN was working fifty hours per month, we calculated that our subcontractor was making $107 per hour. When we dug deeper, we realized that we could employ a full time RN for what we were paying this subcontractor for 25 hours per week. Her argument that "this is the market rate" didn't work. When we presented this to her, we were able to re-work this compensation plan to a reasonable hourly rate. The same is true for non-medical personnel. Percentages only present a portion of the picture. Look at your compensation plan both in terms of what you are paying as a percentage of services plus retail and what your employees are in turn earning on an hourly basis. I think you'll be surprised. 

Don't forget that this season of hefty gift certificate sales creates a huge opportunity. Consider adding a little extra to the value of the gift certificate if the person who receives the certificate brings a buddy (first time spa visitor) with them when they redeem it in January. Heck, you're spending this much in advertising anyway. This way, you have a new client for a percentage of the value of a gift certificate. 

We can't just be fixated on the numbers either. We are obligated to provide a sanctuary and private escape for our clients. In our hectic world, "stepping out of the race" is a necessary indulgence. We provide these places and services. Providing this in a unique, personal and professional environment is our mission. We provide health, preventive care and the services to help our clients feel great about themselves. Aside from the health, wellness, spa and beauty industries, who else has this ability? 

Have a great holiday season. As always, if you want to talk, just call.

~ Monte & Mark