The Truth About Med Spa Profits: What You’re Not Hearing Before You Open One (Ep. 91)

Thinking about opening a med spa? You’ve seen the rise: new med spas popping up on every corner, flashy marketing, and $500 treatments, but is the business really as profitable as it looks?

I'm your host Dr. Jason Hall and in this episode of The Trillium Show, I'm pulling back the curtain on the economics of the med spa industry. From startup costs and overhead to hidden expenses and private equity myths, he walks you through the real numbers, hard lessons, and what it actually takes to build a med spa that lasts.

You’ll learn:

• What the average med spa really earns (and what’s just hype)
• How long it typically takes to turn a profit—and why
• The biggest mistakes people make with devices, overhead, and debt
• Why controlling your costs and prioritizing patient care is non-negotiable
• What private equity is looking for, and whether it's worth chasing

If you’re a physician, injector, or entrepreneur eyeing the med spa world, this is your reality check, and your playbook.

Transcript

Dr. Jason Hall: 0:36

Are you tired of wasting money on skincare products and treatments that don't work? Or are you afraid of looking unnatural after having some non surgical treatments done? If you are then my new book, The Art Of Aging, is for you. In The Art Of Aging, I break down the aging process and talk about treatments that target specific parts of the aging process, what works and what doesn't. Also, I lay out a biology based skin care and non surgical treatment plan that will keep you looking great without looking fake. Check out your copy of The Art Of Aging on Amazon or in any of your local booksellers. Med spas are hot businesses these days. If you look around, you see one opening on almost every street corner. But are they really profitable? I think the answer might shock you. Today we'll talk about the whys and the hows. Welcome to The Trillium Show. I'm Dr Jason Hall, board certified plastic surgeon and author of the new book The Art Of Aging. You can check it out on Amazon and put a link in the show notes. One click and you're there. So med spas seem to be opening on every street corner in the country. Certainly in Knoxville, there's one everywhere, and there's new one opening up pretty much every day. If you look at the numbers, the numbers of med spas in the country keep just increasing. Every there's almost 11,000 I think over 11,000 in the United States as of last year. So they're insanely popular. But are they profitable for outside observers, for the med spa industry, you would think that these places are just printing money. You know, you go in and$300 treatment there, $500 treatment here, and you think these things are just making money, hand over fist. The economics behind a med spa, whether you're an injector, whether you're a physician who is looking to open a medical spa, may surprise you, and I think before going down that road, you really need to understand the business of a med spa and understand the kind of business basics to Make sure that you're not making a huge mistake in jumping into one of these things. Like I said, there's, there's 11, there are over 11,000 medical spas in the United States, and most of those are owned by pas nurse practitioners, non physicians. The other you know, I think 30% of them or so are owned by physicians. Most of those are what we call non core physicians. So core specialties, core esthetic specialties, being ENT, facial plastic surgery, plastic surgery itself, dermatology and oculoplastic surgery. So those are not the people opening the med spas. It's OBGYNs, it's emergency room doctors, family practitioners. Now that's not a bad thing, but they're, you know, I'm glad that there are other people getting into the esthetic space, but you have to know what you're getting into when you open one of these things. One of the things to note, and if you, if you go to the American Medical Spa Association's website, they've got all this information out there. The average med spa across the country does about 1,000,000 3 1,000,000 4 in revenue. That's 1,300,000 in revenue a year. And that sounds great, until you realize that that is top line revenue, that is what's coming in the door. That is not profit. And in business, if you're a business owner, you're in business to make profit. In my opinion, top line revenue, or revenue in general is a meaningless number. Profit in business is really what you need to be looking at. So how profitable are these med spas? We'll get to that in just a second. But I think first things first, you want to look at startup costs for these things. You know, what does it cost to start a spa from nothing and just on average, you can pretty much ballpark it'll cost you about a quarter of a million dollars to start a spa. That includes finding a space, renting a space, that includes hiring staff, that includes inventory, because you're going to be selling skincare and injectables that you've got to keep on the shelves, and that includes marketing. So all of those things together are going to be and then you add on things like computer systems and it and internet and water and all of that, you can pretty much ballpark that it's going to cost a quarter. Of a million dollars to just get a spa open. So the next question, you say, well, you make, you spend $250,000 you make 1,000,00 3 that's that's pretty easy. It's a quick thing to pay off. The average time it takes for a med spa to cross over from losing money to making money ranges anywhere between a year and two years. So think about that. It may be to build up a patient base to where you're an average spa bringing in over a million dollars a year, then it could take a couple of years. And so you've got to have a plan to be able to weather that year to two year span while you're ramping up your business. What goes into the time it takes for you to become profitable really depends on a couple of things. One and most obvious is patient flow. Do you have the volume to really support the monthly costs staff salaries and overhead that go into it? The other is staff retention. It's expensive. It costs mid five figures on average when you lose a staff member to hire somebody else, the lost revenue from not having that person in the office, and then being able to train them up to where they were at the level of the person that they're replacing. And that that brings me to, kind of the third part of this that I think is really important is a discussion on overhead, the overhead in med spas is enormous. The best run, and these are the top spas in the country, have an overhead that is about 80% so 80 cents of every dollar that comes in goes out the door and to pay your overhead, the average spas probably are closer to 85 90% overhead. So 90 cents of every dollar that comes in goes out the door. That means, if you're average, and you bring in 1,000,00 3 in revenue, you're bringing home $130,000 in profit at the end of that year. That is not an insignificant amount of money. But, you know, a lot of people who speak in terms of top line revenue say, Well, you know, we made 1,000,00 3 last year. Well, you really only made 130 grand, which is, you know, a far cry from over a million dollars a year in bigger markets where you're spending more on marketing and patient acquisition, that's going to drive your overhead even higher. Overstaffing is probably the biggest thing that drives overhead, and then people who make the unfortunate mistake of renting space that's way too big for their office, especially startups or going in over their head on every conceivable device trying to recruit patients can really get themselves into into a pickle and be negative year over year. Have an overhead that that exceeds your monthly revenue, and so that's something that you really want to watch out for, especially when you're starting out, is controlling your overhead, which kind of leads into the next part is about equipment. When you open a spa, you are going to be inundated with vendors, companies you've never heard of are going to come out of the woodwork trying to sell you every conceivable device that you could want to try and recruit patients. And the banks are probably going to be pretty forgiving in terms of letting you borrow money to buy these devices or finance these devices, it's really important when you open a new office, that you understand that the vendors are there to sell you're their customer. They don't care about your patients. You're their customer, that all they have to do is convince you that it's a deal so that you spend the money on the device. If that device doesn't bring in any revenue for you, that's kind of your loss. The equipment manufacturers already made their money. They don't care, and the rep that was bringing lunches is going to disappear. It I'm sorry if I'm offending any of the equipment reps out there. You know, my reps, we love you, but you're largely gone. There's an old joke, how do you make an equipment rep go away? You buy the device. And that really does hold true with a lot of these things, my advice and what I've done in my office over the last decade. I is i wait to purchase a device until I've got patients who start asking about the device, and I see an opportunity within my own practice to be able to use it. You know, the laser platform that we have, we've had for six years, and I wanted one the day that we opened. But fortunately, my wife, kind of, and business partner, who you've seen on social media, I'm sure, and who will have on a show here in the coming months, talked me out of making some obscene purchases early on, which really saved us and helped keep our overhead low while we were growing until it got my practice grew to a point where we could use them. And now, you know, the laser is something that I we use every day, multiple times a day, but early on, we we did go in on a device that we never used, and it was expensive, and we financed it, which is a terrible I don't, don't finance a device, because you end up paying double what the device is worth over the over the time that you had it. Fortunately, we realized our mistake early on. We sold it and didn't lose a whole lot of money in it, but be very careful with equipment purchases early on, and only buy the things you absolutely have to have until you have a patient base that's really going to support a new device. Because the device, contrary to what the equipment manufacturers will tell you, will not bring in new patients. You will not get new patients calling you for that. You may get one or two, but you will not have a patient volume that will support and pay off, much less make profitable a device. If you're just marketing the device, all you're doing is marketing for the company so that they can sell it, that same device, to the guy next door. One of the myths that you that you hear, you know, when people are talking around the water cooler and people are talking about opening spas, is that they're they're very easily profitable. And I hope that what we've done today is kind of gone through some of the numbers, gone through the overhead and that you you start to realize that med spas are not easy money. It is a it is a cutthroat world. There's one on every corner. There's lots of competition, and the overhead, just because of what it is, is very high. And so, you know, going into a med spa, if it's something that you want to do, absolutely do it. Be smart about it, and understand that it is going to be, there is going to be a long runway of not making money before you start to turn a profit. And the profits that you you get out of those are going to be fairly meager at first, until you get the patient base, until you control your overhead. It's not an easy business, but it's great business, and if it's something that you are interested in doing, please reach out to me. I'd love to share my experience or be talking about more of this on this show in coming months. And the last thing I really want to touch on is private equity because there has been a massive influx of private equity money into the med spa space. And we actually thought about this for a time, but private equity money, those guys are businessmen, which, you know, I'll speak for myself as a physician. I'm not. I was never I didn't take an accounting class. I didn't take a business I was totally focused on medicine all the way through what we've learned, we've learned in the school of hard knocks and a lot of late nights, a lot of conversations with business owners in this space that are well beyond where we are. So know that the private equity folks are only looking at the dollars and cents right now, the multiple so how much over what you bring in every year they're willing to pay for a spa. Those have started to come down, and in coming years are only going to get worse. And they really require you to have all of your numbers in order. You have to be a high performing spa. And it's it's hard to get to a point where you are a legitimate target for a private equity exit, and so if that is your goal, by all means, do it, but do it smartly. Now I know some of this podcast probably has come across as doom and gloom and very negative, but. Certainly don't intend it that way. It's more of a reality check, but you can build a spa that is profitable, and the way, the way to do that is control your debt, control your overhead, control your spending, and take good care of patients that that probably is the is, the biggest thing is, don't go into the med spa world trying to sell things. We're there to fix somebody's problem they don't like what they see in the mirror. Our job is to help them understand what they're seeing in the mirror and offer solutions to fix it, whether that's a device, whether that's an injection, whether that's a referral to surgery, but those that is what we're here for. The success and profitability comes as a byproduct of taking good care of patients. So if that's your motivation, by all means, I encourage you to take the leap. Being a business owner has been one of the most fun things I've ever done. It's also been one of the hardest things I've ever done. But I wouldn't trade the minute, even the late nights when you're lying in bed worrying about things for the freedom and the happiness of controlling your own destiny. I hope you found this entertaining. I hope you found this informative. If you've got any questions, shoot me a DM@drjasonhall, on Instagram. Shoot me an email info@drjasonhall.com and if you want to learn a little bit more about the non surgical patient care, diagnosis and treatment side, check out my new book, Art Of Aging on Amazon. Got a link in the show notes to that otherwise, I'll see you next time you.