Start with the Numbers, Not Feelings
- Avoid emotional decisions about services; rely on data and analytics to guide your strategy.
Our Laser Hair Removal Lesson- Laser machines seemed profitable but actually cost us thousands in losses annually.
- Key issues:
- High rental costs for machines.
- Dedicated staff (MAs) tied to one task all day.
- Lost revenue potential from the occupied treatment room.
Break Down Service Profitability- Analyze each service's revenue against:
- Cost of goods (supplies, equipment, etc.).
- Labor (hourly staff costs and time per service).
- Marketing expenses (ads, promotions to attract clients).
- Calculate gross profit for every service by subtracting costs from revenue.
Spot the Loss Leaders- Identify services that lose money or barely break even.
- Understand when a loss leader (e.g., discount Botox) serves as a gateway to higher-ticket services (e.g., fillers).
- Eliminate services that consistently underperform without upsell potential.
Invest in What Works- Reallocate resources—time, money, marketing—toward services with higher profitability.
- Example: Shift focus from low-income services to high-demand, high-revenue offerings.
Partner with a CPA or Use Data Tools- A CPA can help you:
- Analyze service performance.
- Identify unnecessary expenses.
- Optimize profit margins.
- Tools like EHR or POS systems are invaluable for tracking revenue and expenses by service.
Think Like an Outsider- Pretend you’re an outside investor reviewing the numbers. Would you keep the service if it’s losing money?
The Formula for Success- Revenue – (Cost of Goods + Labor + Marketing) = Gross Profit.
- Focus on services with the highest gross profit to scale your business.
Why It Matters- Consistently offering unprofitable services can sink your business.
- A data-driven approach ensures long-term growth and sustainability.
Final Tips- Hire a CPA early, even if it’s just a few hundred dollars.
- Avoid the “everyone else is doing it” trap; focus on what works for your business.
- Always evaluate new services before adding them to your offerings.
