Understand how your service sales are trending. Look at this in terms of average price per service and number of guests compared to last year. Measure and plan your productivity and treatment or exam room utilization.
Know the job cost of your top 20% most popular services. Are you making money on these services? How much? The cost of providing our services has increased across the board Post-Covid. The Direct Costs of labor, professional product, back-bar, and consumables have increased. We have added the added cost of PPE. Payroll taxes are increasing for items such as long-term disability and paid family leave. In some situations, we are forced to buy more inventory to offset potential shipping delays and stock outages. The impact of this is that our Gross Profit Margin (Sales minus Direct Costs) is less than it was pre-Covid. Our Direct Cost are increasing five points in most Day Spas and Medical Spas. Whereas Gross Profit Margin was 45% in Medical Spas and 35% in Day Spas, it is now 60% and 30% respectively. We need to know what our Gross Profit Margin is on our most popular services.
Take full advantage of available loans and tax credits. Don’t miss your deadlines for claiming credits or applications for loan forgiveness. Use as little of the loans as possible. You can always pay it back if you don’t use it. These options are available for spas, health & wellness businesses, and medical practices; the type of business does not restrict your ability to qualify.
Understand your monthly Overhead Expenses. This number has not really changed post-Covid. It still costs the same for utilities, marketing, repairs, insurance, rent, telephone, dues, etc. The cost of your Overhead was under 25% for Medical Spas and under 35% for Day Spas. You can anticipate that business and health insurance will be increasing. The issue with Overhead Expenses is that you now have less Gross Profit Margin to pay them with.
Calculate your breakeven in terms of how many services you need to do every day to be profitable. Know how many services you provide on a weekly basis and plan your profitability accordingly.
Have your books set up and organized to that you can see this information in a format that is understandable and usable. This information should be given to you on a regular and timely basis. At a glance, you should be able to see what is profitable and what is not in your spa, wellness, or medical business.
Your financial team should set this up and manage it for you. It is not your responsibility to be the bookkeeper or know how to assemble your books.
Does your financial advice team help you determine whether you should buy that new device? How about if you should hire a new practitioner and what you can pay them? Do you discuss strategies for growth with them? How about a profit plan? If they don’t, they should.
If your business is to succeed, you must do what you know and what you are passionate about. It is important to “stay in your lane” and do what you do well.
To be honest, to get your books “right” for your small business, you may not know where to start, or what questions to ask.
That’s okay, I don’t do facials.
We’re here to help, and the first consultation is always free. Make the call, and let’s chat and see how working with a virtual CFO, financial advisor and/or virtual bookkeeper can help you navigate your Day Spa, Medical Spa or Health Business.