The Yin and Yang of a Healthy Medical Spa Practice.

What Constitutes A Healthy Med Spa?

Data analysis and the practice of medicine are the yin-yang of quality care. After all, a provider must analyze hard data, such as a patient’s vital signs and medical history, before moving forward with treatment. This is typically known as the good faith exam. This data is then coupled with professional judgment or opinion, which is usually based in education and experience, as well as feedback from the patient through thorough questioning and focused listening. Those who have become the best in their field are the best at incorporating quantitative and qualitative data into their decision-making process and utilizing their well-developed skills to treat their patients.

This system of analysis is regarded as the minimum standard for the treatment of patients. It is also one that, if incorporated into the day-to-day operations of the practice, can make for a very healthy business. Just as there are vital signs that can serve as indicators of good patient health, there are vital signs that can indicate the same for a practice. Many refer to these vital signs as Key Performance Indicators or KPIs, which serve as the most important quantifiable measures of progress toward your intended outcome.

While many practice owners do a great job analyzing data for their patients, many do a less than adequate job of using data to determine the health of their practice. For some, the letters KPI can bring feelings of anxiety followed by nausea. This may be due to the overwhelming amounts of data available, the fact that many providers are creative types and are typically turned off by financial data, or it could be they just don’t have the time necessary to effectively manage the numbers. No matter the reason, those who have the financially healthiest medical spas are those who have figured out how to track and communicate the vital signs of their business.

While business data tracking can appear to be daunting and analyzing financial reports can be as exciting as having a root canal, it doesn’t need to be that way. There are a few key data points that can communicate the vital signs of the practice and serve as early indicators of health and wellness. If the correct KPIs are chosen and managed appropriately they can also have a trickledown effect into other key areas of the business.

For example, a person that decides to engage in a healthier lifestyle may begin by simply monitoring their weight (KPI). This practice will typically have a trickledown effect into other aspects of their life. Monitoring weight may lead them to monitor caloric intake, watch the type of food they consume, increase their water intake, and engage in more physical activity. One key data point can have far-reaching impact. That’s the value of a good KPI.

While there are many data points to consider when determining the health of a business, there are a few that rise to the top, and when managed closely, can have a similar trickledown effect on the entire business. Every business may have different KPIs depending upon the type and strategic outcome desired. However, most medical spas will have the same or similar key performance indicators. Like a great provider, the healthiest medical spas are those where the KPIs are viewed as an integral part of their regular operating practice.

So how do you choose? First, start with what matters most. For example, if patient retention is viewed as vitally important to the health of the practice (which it is), then maybe you look at key data points that would indicate the practice’s ability to effectively retain patients. Some data points that might be considered are rebooking percentage, net promoter score (NPS), Google Reviews, appointment cancelations, patient referrals, tips, etc. Why these? If patients are not rebooking, referring, offering positive reviews, or tipping when appropriate, they are likely going to be less loyal than those that do.

The goal here is to identify 4 or 5 KPIs that will move the needle and have a trickledown effect. In the example above, if rebooking percent becomes the vital sign for patient retention and it becomes a focal point for everyone in the practice, it should have a positive impact to the overall care and service provided. If the team knows that rebooking is important, they will tend to behave in a manner that ensures the percentage is maintained at a level necessary to experience success. To clarify, when we say rebooking, we mean scheduling a future appointment and keeping it.

As such, the natural trickledown effect from the team will be higher quality treatments, better service, and friendlier engagement. The trickledown from the patient will be more referrals, more positive reviews, tips, etc. Why? Because if the patient is rebooking and keeping their appointment they must be satisfied. Satisfied patients love to celebrate and take care of their beloved medical spa.

Below are some KPIs you may wish to consider. Please understand that by simply choosing a handful of KPIs you will not experience success. You must engage them, talk about them, dissect them, and seek to have the team understand their importance. It’s about creating a culture around data analysis and executing on what the data says and not on feeling alone, which is what many practices do. We want our team to know the data because when the data is known desired behaviors tend to follow.

Below are a few Key Performance indicators to consider plus some of the possible trickledown effects that may be experienced by each.

• Rebooking Percentage

  • Google Reviews

  • Net Promoter Score

  • Referrals

  • Tips

  • Cancelations

  • Client Retention Rate

• Total Revenue

  • Retail Revenue as a Percentage of Total Revenue (provider and spa)

  • Service Revenue as a Percentage of Total Revenue (provider and spa)

  • Revenue Per Hour Per Provider

  • Revenue Per Hour Per Room

  • Revenue Per Patient

• Labor as a Percentage of Revenue

  • Schedule Utilization (provider and spa)

  • Room Turnover (provider and spa)

• Total New Clients

  • Lead Conversion Percentage

  • Cost Per Lead/Acquisition

  • Lead Campaign Effectiveness

  • Referrals

• Cost of Goods Sold as a Percentage of Revenue

As you develop your own KPIs keep in mind the outcome you desire. It is important that each KPI links to a strategic goal. You must also know what each of the benchmark data points need to be to achieve the goal and ultimately have a healthy medical spa. For example, you may want net profit to be 25%. To achieve this goal, you will need to back into all your fixed and variable expenses, as well as your revenue drivers. From an expense standpoint this could mean that labor needs to be at 25%, COGS at 30%, Marketing at 7%, rent at 5%, etc.

By understanding your KPIs you’ll better understand how your business is performing. You’ll know if it is vibrant and healthy or hanging on by life support, which is typically funding from your pocket.

Randy Stepp is a principal with Renaissance Leadership Group. RLG is a full-service business development company driven by Purpose, Passion, and Strategy and the goal of helping entrepreneurs realize their vision for their business.

Visit Renaissance Leadership Group at www.renaissanceleadershipgroup.com to learn more.