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Med Spa Success Strategies
The Financial Shift Every Med Spa Owner Needs to Make - Interview w/ Shannon Simmons
00:39:17
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- [00:03]
A
Hey there, I'm your host Ricky Shockley with MedSpa Magic Marketing and this is the MedSpa Success Strategies podcast where MedSpa and Aesthetics practice owners come to discover strategies and tactics that help them better market and manage their practices so they can grow, improve profitability and have greater impact for their teams, their patients and their communities. Today's guest is Shannon Simmons, the founder of Fit for profit. Since 2008, Shannon has been helping business owners build financially sound, sustainably profitable companies. She's been a certified profit first professional at the mastery level since 2014, and since 2016, her firm has focused exclusively on serving fitness and wellness businesses. Through Fit for Profit, Shannon and her team provide financial coaching and consulting that helps owners improve cash flow, increase profitability, reduce stress, and most importantly, create more freedom in both their businesses and their lives. If those are the reasons you went into business in the first place, you're going to get a ton of value out of this conversation today. Shannon Today's episode is sponsored by CallRail. When a single call could mean thousands of dollars in revenue, you can't afford to be in the dark on your marketing attribution. Stop guessing and start optimizing with CallRail, the lead generation platform that helps you transform calls into consults. With CallRail, you'll know the exact keywords and campaigns that are driving your highest value clients. Answer and qualify calls24.7 use AI to analyze client intent and to automate follow up so your high value leads don't slip away. Most importantly, CallRail's platform supports HIPAA compliance to ensure your client information remains safe and secure. It's time to stop the guesswork and start using real insights to inform your marketing strategy. Optimize ad spend and drive significant growth in your Med Spa. Try CallRail by starting a 14 day free trial at CallRail.com Medspasuccess that's CallRail.com/medspa success. We've been using CallRail for over a decade in our agency. I think it's the best call reporting and attribution platform on the market. Shannon, thanks so much for coming on the podcast. We're excited to have you.
- [01:59]
B
I'm super excited to be here Ricky. Thanks for having me.
- [02:02]
A
We're talking all things money and profitability today. You got the Profit first book anchored behind you. We talked about that a little bit pre interview. I started reading the book. It's very long but for anybody listening, I think that's a good read in addition to Shannon's book. But but we'll Jump right in and we'll start talking about the book here a little bit. I scanned through it and we have some questions from the book. I think that'll be a good guide for our conversation. And one of the first things you mention in the book is what does it mean to be fiscally fit in your business? You mentioned there are three core elements to being fiscally fit in your business. It's your clients are thriving, your team is thriving and you feel successful as an owner. Could you talk a little bit about that framework and those three items?
- [02:40]
B
Yeah, I feel like as business owners it's our responsibility kind of to back balance that three legged stool. Right. Of all of our stakeholders, if you will. The clients like they have to be getting the result that they're coming to you for. That in turn creates like raving fans and they should be out telling other people about you, which helps you to become a successful business owner. Maybe a little different, less marketing. If you have referrals coming in, your team is an important stakeholder. They're the ones that are serving your clients in the most part. So you have to keep them happy and doing what they're doing. I view my job as a business owner to take care of my team because the team then is taking care of the clients. Right. And then the other leg of that stool is you as the business owner, thriving, being happy, enjoying what you're doing, being rewarded for what you're doing. Let's face it, your team is only going to do so much if they're not being rewarded for it. And so are you as a business owner. If you're not being compensated well for the work, you're going to burn out. And then nobody is receiving your benefits. The team and your clients. If you're not there to do the.
- [03:52]
A
Work, yeah, that can be demoralizing for sure. And I know we talked about there are a lot of people in the space that like, hey, the business is thriving, their team's getting paid, but as owners they're not necessarily profitable. And we'll get to this relationship with money question in a few minutes here. But yeah, that's going to create stress and you're not going to get the best out of yourself. And the good thing about all this stuff though is all of those things work in tandem. Right. If, if our teams are happy, our clients are happy and we're doing well, it's like all of those things feed the other things. So on that note, you mentioned, I think, scaling staff systems and things. So since a high quality team is so critical to the business. What is the single most important role repeatable process to ensure that that's happening?
- [04:34]
B
For me, it's all about having a hiring process and knowing how you find the best people for your business, the best team members. And then can you repeat that every single time you need a new team member? So I'm all about hiring off of values and personality. Right. Like I get it in med spas, there are some skills that some basic skills people have to have.
- [04:59]
A
But.
- [04:59]
B
But if they're not going to fit in with your culture, it doesn't matter what skills they bring to the table. If they're not going to fit into your client culture, it doesn't matter what skills. And so really figuring out what are those hiring metrics that you need to be basing your hiring decisions off of that way, it's a repeatable process every single time.
- [05:19]
A
What are some of the keys to? I know as a business owner, for us, that is a challenge too, is a good hiring funnel. I know that can be complex. Everybody's got their own system, their own way. What are some key bullet points for you in terms of how you think about creating a successful repeatable hiring funnel and to filter for the right people and to get them to not spend as the owner, like your entire week or multiple weeks doing this stuff like manually necessarily. I don't know if there's any tricks or tips there.
- [05:43]
B
Yeah. I think one thing that I've learned recently in my own business is always be hiring. So here, always be selling, always be marketing. Right. Always be hiring. Always be looking for those people who just stand out to you as that's a personality that I would love to work with. Right. Where are. Again, where do you find those people? So I found some. I know where my people are hanging out. Right. And I. I go to those places. I literally have a job post that I post every two to three months whether we're hiring or not. And I have a virtual bench. It's a people that I have identified as like, you're the next person I want to bring on. And we stay in regular communication that way when something happens. Right. Because we would love to think we're in control of everything in our business, but hiring is, I feel like the one thing that we have the least control over. Not hiring so much. But team members, right. They just up and leave all of a sudden. And you can feel really behind the eight ball. If you have somebody that you've already identified and you have that relationship building that whole time, you're building a relationship, you're trying to figure out and confirm this is the person I want to work with. Right. And so are they. So. So just making it a longer hiring process has been successful for us too.
- [06:55]
A
Yeah, I'm in a college football mood lately. So it's like recruiting, it's like a long term process. You always want to have your next guys lined up.
- [07:01]
B
Right.
- [07:01]
A
You don't want to wait until the person's leaving to go desperately try to find the next person. And I know that as a business owner, like early on, I think everybody makes that mistake. You have people, it's all going well and then you need more help or somebody leaves and now you're just frantically and desperately searching for the next person instead of constantly building a bench. So you have a handful of people that you have some sort of relationship with that that might be willing and excited to jump to the next opportunity and you've kind of screened that. So you're excited about those people. They're a good cultural fit. And I totally agree, like hiring for the soft skills, like even for us, there's all sorts of technical marketing skills. But I think the things that matter most are like alignment with core values, work ethic, attention to detail, attitude, energy. Like those things matter so much more than the technical things because you can teach people the technical things. Those other things, by the time you're a full grown adult, either kind of have them or you don't.
- [07:51]
B
Yeah, yep, exactly. Cool.
- [07:54]
A
Okay, so shifting gears to this, this relationship with money. So the wealth relationship shift you talk about, if you had to describe your relationship with money, would you describe it as like frustrating and stressful or would it be something that energizes you? Like if money were a person, what, what does that relationship look like? Can you talk about the mindset shift that you think is necessary for people to just have a better overall relationship with the money in their business and profitability in general?
- [08:21]
B
Yeah, let's face it, we all have a money story from our past, our history, usually from growing up. Right. It was formed very, very early and we are still living with that. And I find so few people in general, not just business owners, but people in general are aware of their thought processes, their relationship with, with money, and like how they interact with money. The limiting belie that they're holding around money is really what it comes down to, so they're just not even aware of it. And they are doing so much practical work right there. They're learning how to read balance sheets and profit and loss Statements and financial statements. And they're trying to get their books in order and they're trying to do all these things that they're told they should know how to do and they should be doing. And yet these things are in the back of their heads saying, you're not good at numbers, you're not good with money. Money doesn't grow on trees. All these things that we hear and it doesn't really matter how good we get at the practical things with money, if those voices are still in our head, we're, we're self sabotaging that process of learning. And eventually this is, we've been doing this work for 15 years now. And for the last, for the first 10, we really only focused on the practical pieces of it. And I was getting frustrated because we would have success, our clients and getting them really profitable, and then all of a sudden there'd be this massive backslide. And I was like, what the hell just happened? I don't get it. And finally I was like, they have these thoughts that are running through their head, these patterns, their systems in their head that they don't even realize that's just holding them back, that self sabotaging that they, they get so far and then they're like, I can't get any further. They put that ceiling on their head. And so we just started getting clients to become aware of what those things, thoughts are. As soon as you're aware of it, you're like, oh, I don't really believe that. That's pretty easy to shift. But the awareness is the key to what is creating those backslides.
- [10:26]
A
I know he's a controversial person in the money circles, but I know Dave Ramsey, like their whole thing, they talk about this too. It's like money, money management is 20% math, 80% like behavior. And so same thing I think is true in business. Are there any of those, like, so the limiting beliefs, the things that people are doing that are, you know, attitude, mentality based, that are sabotaging the way that their businesses operate, their profitability. Are there any common themes there?
- [10:49]
B
I think really the biggest one is people saying, I'm not good at numbers or math or accounting or whatever. And I'm like, who the hell cares? You don't have to be like, numbers are nothing more than letters with different shapes on paper, right? It's, it's like if you're good with things on paper, you can read a financial statement. You just have to learn how. And none of us are taught how to do these things until we get ourselves into business. Right. And then all of a sudden, we're supposed to just know how to do it. And it creates a lot of shame because people feel like they should know how to do it already. And the reality is nobody knows. And so it's like, just go learn. And. And again, like, we don't need to tell ourselves we're not good at something. You can learn. You've learned a lot of things to become a successful business owner or to get where you've gotten in business. You've learned a lot of things. You can learn math and accounting, too.
- [11:41]
A
Yeah. Is there anything like, beyond just their. Their ability and willingness to, like, take ownership and responsibility over it that you find behaviorally is like, people are just sabotaging their profitability in their business with. With just, like, certain behaviors, certain decisions they make?
- [12:00]
B
Yeah, absolutely. I mean, we could also talk about. Pricing is a big one that we see people just like, I don't know how to price. They don't do the math to figure out pricing. They just say, okay, well, this is what the person down the street or the person across town or my mentor told me I should price, and so I'm gonna price it that way. And it does. Like, every single business is different. You can look at what they're pricing, but you have no idea what their costs are. You have no idea what their rent is, how well they negotiated rent. I mean, yes, you can look at marketplace drivers for rent, but you still don't know how they negotiated it. Right. So there's so much behind the scenes that you don't know that you. You just can't make a really good comparison. You don't even know how profitable they are. Do you really want to copy what they're doing? But again, that comes back to that whole mindset and that limiting belief of, I'm not good with numbers, so I'm just going to copy what somebody else is doing because it must be working for them. We don't know that. Yeah.
- [12:55]
A
So most people, even if they're. Whether they're profitable or not, they basically just kind of like stumbling along, guessing along the way. Some people end up in a place that's profitable, some people don't. But being more intentional with those decisions and understanding your numbers, your financials, your cost of goods, what you need to reasonably charge. And yes, of course, there's a competitive landscape. You have to consider. Like, all those things have to work in tandem, but just getting clear with, like, getting clear and confident in your numbers so that you know the profitability is kind of locked and loaded. MedSpa owners if you're tired of your marketing feeling like an expense, it's time to truly see it as an investment. At MedSpa Magic, we specialize in driving predictable massive growth for med spas. We've helped practices jump from 30k a month to 120k a month in a year and a half. And we've helped multi location med SPAs add over $2 million in new patient revenue in just 18 months. Directly attributed to ads. These aren't outliers. This is our expectation. We're HIPAA certified by Compliancy Group, rated a perfect five stars on Google. We provide a true consulting and strategic layer, not just button pushing. So if your med spa is ready to consistently invest $6,000 or more in proven marketing solutions, you want a transformative look at the exact frameworks, ads and offers that we use for our clients. Schedule a complimentary one hour consultation with me at MedSpa MagicMarketing.com that's MedSpa Magic Marketing. I know this isn't like specifically mentioned in the book necessarily. Well I guess it is referenced but like the profit first mentality, we've talked about this a little bit in other episodes. What are some of the things that you recommend people doing going off topic here a little bit logistically to really ensure that their businesses are profitable at a satisfactory rate. And then I guess the follow up to that is are there different stages in the business where profitability ebbs and flows because of reinvestment? So like hey, early on or at certain stages when we're trying to jump to the next level, we understand profitability dips. But as a general rule, how do you recommend people think about locking in profitability with like the profit first framework?
- [14:54]
B
Yeah, yeah, it absolutely ebbs and flows as you're reinvesting in the business. I would say general rule is like we love the profit first system for setting up cash management in your business. Right. That pay yourself first mentality, making sure that your business is profitable again. Like we have targets that we're going to create for every single business as far as how profitable you are and we baby step it. Like I'm all about sustainable financial habits. You're not going to go from break even to 30% profitability in a year. Probably like it's going to take you time to get there, but we can sustainably get there with small tweaks in your business. The first one is setting up those bank accounts to get you in the habit of paying yourself and creating that profitability. The first time you have a profit account, you're probably only going to be allocating 1% to that profit account. That's how small we start. We're going to start bigger with other areas, like paying yourself. The target would be to get that anywhere from 5 to 15%. And then if you're all of a sudden like, I want a second location or a third location, and I'm already at 15% profitability, we may back that back down to 5%. So profitable. Right. We're not going to go to 0% profit, but we're going to back that down maybe to 5% so that you can use that 10% to reinvest in that next location and then rebalance.
- [16:18]
A
For those of you who aren't, for those of you who aren't doing some version of this with your banking, like, we've done it. It's so much easier than just feeling like, okay, I've got this big pile of money. And, like, mentally, I kind of understand that it covers this, this and this and this. If you're actually using those systems to make sure that those things are locked and loaded, like, hey, we've, we got conferences coming up or additional training, maybe that's going in like some sort of a sinking fund. And this is our operating expense account that funds payroll and all this, all the purchases we have to make in the business. But then part of that earmark is at the beginning or end, whatever the cadence is. End of the week, Beginning of the week. Do you have a cadence? You recommend people do this and check on this.
- [16:53]
B
We, we usually work with each client to determine what the best cadence is going to be. A lot of people already have things like payroll cadence set up in their business, and that's pretty hard to change. And so we usually work with that cadence. So if payroll is twice a month, then doing your allocations twice a month, if it's every other week, doing it every other weekly, too, would work.
- [17:14]
A
Yeah, yeah. And it's like the Parkinson's law concept. And I think so many businesses that, like, on the surface, they look successful, they've got good revenue numbers, but maybe they're stressed with money behind the scenes and owners aren't taking home a paycheck. It's because you haven't locked this. If you lock your profitability, or at least like you said, Shannon, your pay as the owner, pay yourself your owner salary, at least first and foremost, and then whatever's left over is now the money that you have to run the business. If you treat every dollar coming in like this is the money I have to run the business and you come last, then by nature, you're going to continue to come last. And that's going to be a perpetual cycle that's hard to break. And I think just switching the order forces you to control cost, right? That's like the essential thing is we're force, force functioning the cost control.
- [17:54]
B
Yeah. I like to tell people, I know you can run your business off of less money this, this month. You know how? Because last month or a year ago, you were doing that, you had less revenue. Most businesses are constantly growing at some level, even if it's only a 1% growth, right. That means you had a little bit less last month and you made it work. And exactly like you said, Ricky, profit or Parkinson's law says that every time you increase revenue, your expenses will increase if you're not paying attention to it. And so that's exactly what we do. We just take that money right off the top and kind of force you to run your business off of the revenue you had six months ago instead of what you have today.
- [18:34]
A
Do you find that people that are kind of going down that slippery slope of, like, expenses are getting away from them? Are there a couple big categories where it's sort of out of whack, or is it death by a thousand cuts? Like, they spent a little too much here, they had a subscription, they added a soft. What is it that generally look like?
- [18:48]
B
Yeah, that's a good question. It kind of does depend on the business owner. I would say usually there's a couple big categories that we look at first. Payroll and marketing tend to be the two. Like, people just think, if I put more into marketing, I will get more results. And I am not saying don't market. You absolutely need to be marketing, but you also need to be getting a return on the investment of marketing. And if you're not measuring that return on investment, stop marketing until you figure that out. Right? It's like 100.
- [19:18]
A
Agree.
- [19:18]
B
Gotta figure that out. So those are the two big ones. But then, yeah, I mean, we see people all the time who have subscriptions for the. The same basic, you know, services, right? And I'm like, why are you paying for two calendar services, for example? One's better than the other. Okay, well then, like, let's get rid of the other one, you know, and just. Just things like that that just creep up, right? Like shiny object syndrome. I think we're all guilty of it. Something comes across your screen, it looks really Good. You know, the 97 or the 297 dollar course that you purchase. And then you don't ever take advantage of it. It's like, okay, either take advantage of it and get what it's worth or stop paying for it. Those types of things are the death by a thousand.
- [20:05]
A
I've sort of noticed too, like you, you tend to adjust to new norms. So like, early on in your business, the idea of like spending 500 or a thousand dollars on something, you're like, oh my gosh, I can't spend $500,000. But as you grow and become more successful, you start to become a little bit more numb to these expenditures and you tend to be a little bit more casual with like, whatever, that's a couple thousand, there's 500, there's, there's another couple thousand there. And so is it a good exercise? I think this is something we've been trying to do. So I'm thinking about it. It's like going through your bank account and just looking at where are we actually spending money and catching like, oh crud, there's a software we pay for we don't actually use anymore, or a duplicate version of that, or wow, we're still signed up for this. We're not really taking advantage and just systematically going back and reviewing. Like, hey, and I know as business owners and in your personal account, some of us are just averse to this. We just don't want to look. It's just out of sight, out of mind. As long as the big number's good. We don't want to go into the nitty gritty. But you're probably losing some, you know, advantages profitability wise by not going through and doing that sort of cleanup, I assume.
- [21:03]
B
Yeah, again, like, Even if it's that 1% that you could add to your profit. Right. It doesn't have to be a lot. But I'm also going to go back to that mindset and the relationship that we have with money because this is one of the things we see. People are so afraid or so full of shame around it that it's easier to just bury your head in the sand and not look at it. So you just don't pay attention to the expenses. One of the exercises we do with our clients every three months is pull up your last three months bank statements and just go through them. And do you know what every single expense on there is? Because so invariably somebody will come to me and they'll be like, I don't know what I paid ABC Company for. And I'm like, that's a problem. Go figure it out. Because if you don't know, you're probably not using it. And sometimes they are. Sometimes, you know, ABC company is actually 1, 2, 3, company. And they're like, oh yeah, I do know what that is now that I know who it is. But most of the time they're just not using it. And so. And it happens on the regular. So it really is something we recommend you do every three months. Just quick glance through your bank statements. Do you know who everybody is?
- [22:07]
A
Yeah. Quarterly recurring calendar event. So you don't go to the end of the year with your bookkeeper and feel sick to your stomach that you found out you're paying for nine things you didn't know you're paying for.
- [22:14]
B
Exactly.
- [22:16]
A
In the book, you also talk about why profit matters. And it's not, it's not just a greed mechanism. Right. We're not just trying to be profitable so we can collect a bunch of money, but it does things that make our business sustainable. Could you just talk about a little bit why profit matters, like why we should care about being profitable. Yeah.
- [22:31]
B
It goes back to that three legged stool that we talked about at the beginning. Right. If you're not profitable, you can't pay your team well. They won't take care of your clients. Well, even, even bigger picture than that, if you're not profitable, how long can you literally be in business and running at a deficit? Eventually you're just not going to even be able to cash flow the debt payments if that's the case. And then you go out of business and then you can't even serve your clients. So yeah, I have people say out of me, say to me all the time, well, profit isn't like, profit can't be first. I want to serve my clients first. And I'm like, you can't serve your clients forever if you're not profitable. I want you to be able to serve your clients as long as you want to be in business. And that means you have to be profitable in order to do it. Yeah.
- [23:16]
A
And you've got wiggle room. You're not going to be stressed. You can, like you said, like you hit a road bump. You still have money to invest in your team, to invest in training, to make the office experience nicer, to add additional services. Like all of that is reliant on profit. So like if you have some sort of grandiose vision that you're running like a nonprofit charity in your med spa, you're probably doing a disservice to not only yourself, but your team and your patients. Because like, like we talked about, profitability is something that is really beneficial for everybody involved. It makes the patient experience better, gives your team more opportunities, and you get rewarded for the risk you take as an owner. The key number two you have in the book is maximizing profit and cash flow. I think you have five strategies in there, five high impact strategies. Could you, I guess, give us some key points on strategies to maximize profit and cash flow in the business?
- [24:04]
B
Yeah, I mean, I think first of all, like, pricing is, I think that's where we see people just, they, they get scared, right, that profit or that if they're going to price themselves out of the market, right. And they're not going to be able to serve the people that they want to serve. And so, so that's, that's one of the big ones that we see a lot of times. And then like we talked about just not looking at their expenses on a regular basis. That's a big one that we see not. And not having a system for managing their money. Right. Like we've talked about profit first. So that's another one that we talk about frequently with our clients. And really just like having an alignment between your values and your money. We've talked about, you know, a little bit of values when we were talking about hiring and things like that. I mean, that's another one that we really talk a lot about with our clients. Just because when your values, when your money is aligned with your values, you want to talk about running a not for profit in your business. When your money is aligned with your values, you can do things like make donations to charities, like give away some services in your business. If you have, you know, if you have a heart for giving to people who maybe can't afford your services, you can do that when your money is aligned with your service or your values. And you have built in that profitability. Right? And so that is, that's a huge one that we talk about a lot with our people is like, what are your values? And how is your money supporting your values? And that just brings a huge amount of peace to people as well, when they know that everything is aligned and everything's flowing in the right direction towards those goals that they've set for themselves and their business.
- [25:57]
A
Hey there. Wanted to briefly interrupt the episode to make a quick ask. If you're a podcast listener, it would mean the world to us if you'd leave a review for the podcast, whether that's on the itunes Or Spotify. It's something I hadn't really remembered or thought of asking for, but it does help us show up more frequently so that we can reach more people with the information that we're providing. So it mean the world to us. If you'd leave a review on itunes or Spotify, if you're listening on audio, if you're watching on YouTube, make sure to hit the subscribe button so you're in the loop for future videos and you don't miss any of the content that we're putting out. Rewinding a little bit. I know we didn't go over the term, but we went over the concept. The idea of an embodied CFO versus a bookkeeper, I guess. Can we talk a little bit about that concept and who should wear that hat? Is it. Is it the owner that wears that hat or who in the business wears that hat? And does that change based on stage?
- [26:46]
B
Yeah, I mean, who in the business wears that hat is a question that's different for an answer. That's different for every single business because it absolutely changes based on stage. A bookkeeper is somebody who is recording what has happened already in your business. That's it. They're just looking historically at what is happening in your business. Somebody needs to be making sure that all of the decisions are aligned with where the business is going and looking forward at what is going to happen in the future with money in your business. That is a CFO role. I believe that just like every other, every business owner wears multiple hats. The CFO role is one that every owner will need to embody at some point in their business. If you don't have money to hire as a CFO or fractional cfo, somebody needs to be doing it. It's going to be the business owner. Even if you hire a fractional cfo, I want you to have the knowledge that you can have an informed conversation with your cfo. That means you have to be more than the bookkeeper of your business. You have to have be able to embody that role. You. You don't have to do it, you know, 20 hours a week or 10 hours a week. Even just that one hour a week when you're meeting with your fractional CFO to have an informed conversation. That's to me what an embodied CFO is. Somebody who can embody that. Not that they do on a regular basis.
- [28:11]
A
Yeah, I love that. I always say the same thing with marketing is like, do not just keep this out of sight, out of mind and just trust somebody and hand it off. You have to be educated enough, at least at a high level, so that you can have an educated conversation, ask the right questions and gain an understanding of the things that you need to know as the owner of the business, regardless of whether you're actually doing the task or not. Yeah, yeah, I love that. One of the last things here was, and this comes up a lot is med spas have some of these, like they've got product costs, they've got labor costs, a lot of these recurring costs that are regular in their businesses. But a lot of people also deal with these big expenses. Right. I'm bringing on a new service, I'm buying a new laser, I'm bringing on debt. So I guess a couple of questions on this one. You say you talked a little bit about the decision making process that people should go through when they're making these big decisions. Because we talk a little bit about that. What is that decision making process? What should people be keeping in mind when they make these big financial decisions in their businesses?
- [29:03]
B
Yeah. Again, one of the accounts that we recommend anybody with big expensive equipment investment purchases is to have a separate expense account or accept a separate equipment account for that expense. So you're constantly saving for that. Right. Even if it's just 1 or 2%, even if that means all you can do is put the down payment down and you have to finance the rest of it. Great, fine. That's part of the decision making process. Can you cash flow the debt payments then? Right. But if you're able to put something on as a down payment, that's just going to decrease the amount that you have to finance. So first and foremost, I would say every med spa needs that equipment expense account. Just make it a habit to, to be investing in that, to be saving for that. Right. And then being able to project like, how much is this going to increase my revenue? How much will I have profit off of that that I can put aside 1% for my profit and put the rest towards the debt payment on that equipment. Right. Can I cash flow it? How much do I have to generate setting all of those goals, those metrics, and knowing that you're going to be able to cash flow that and it's not gonna, it's not gonna take away the profit from the other services you already have existing in your business?
- [30:24]
A
Yeah. Two follow up questions to that. One would be, in these accounts, are these just standard checking accounts and are, are these places where there's like, are they like high yield savings? Is there some sort of other vehicle or Are these generally just going to be like your checking savings accounts for your business, where the cash sits? So if you're waiting for like a big equipment purchase and you're saving up for, I don't know, 12 to 24 months, is it okay to just have that sitting in cash or do you recommend some other vehicle?
- [30:48]
B
I mean, I'm going to tell you, find a high yield savings account for it. Right. Because you might as well be getting interest on it if you're saving for that long. Those accounts. So there's three accounts. Your profit, your tax and like, equipment accounts. There could be others. And this is where it kind of depends. But yeah, those three for sure. You're not going to be taking money out of them on a regular basis. So, yeah, let's get them out of. Out of. In a savings account, we also say out of sight, out of mind. So, you know, if your main bank accounts are, let's just add a big bank. We won't name the big bank, but at a big bank, let's put those at a different bank so that we're not tempted when payroll is feeling a little tight or operating expenses are feeling a little tight to be like, oh, look at all this money I have sitting over here. And my profit tax.
- [31:33]
A
The problem. Don't go Band Aid it with money from somewhere else.
- [31:35]
B
Exactly. And you're forced to do that a little bit more when they're out of sight, out of mind. So that's another reason for having them in a savings account somewhere. But for the most part, you know, your income, your owner's pay, your operating expenses. Another account we sometimes recommend is an annual expense account. So, Ricky, you were talking about, you know, if you have a conference that you go to every year and you know you're going to spend $5,000. Well, let's put $600 in every single month because that's a lot easier to feel 600 every month than it is 2500 when you register and 2500 when you go and, and have the hotel and all of that. Yeah, so that's another one that may be high yield, but usually you're going to be dipping into that one a little bit more frequently. And so a checking account is good for that.
- [32:18]
A
Yeah. Putting the things in separate accounts kind of reminds me of like a James Clear Atomic Habits type thing. Like, you're just, you're built. You're making it harder for yourself to not do the thing that you want to do.
- [32:28]
B
Yep, that's exactly what it is. It's all about behavior.
- [32:32]
A
Yeah, exactly. Okay, good question. To wrap on I think now is the concept of debt. So I know there are plenty of people that manage debt responsibly and they've got this pretty dialed in and they've got like maybe ratios that they, hey, we're only going to take on a certain amount of debt in our business and we're pretty confident that debt we're taking on, we're able to cash flow and it's giving us a benefit on the other side. But I've also seen a lot of practice owners even that are pretty successful on the outside that are over leveraging debt, at least in my opinion. This is not my area of expertise but just in conversations, right, They've got like a huge build out loan, they've got loans on equipment, they're taking like SBA loans and just credit line like everything they can possibly do to give themselves more cash now and they end up digging themselves in a massive hole. So I've talked to businesses that again at surface level they look very successful. They maybe have two locations. The locations are pretty busy but they're so over leveraged in debt that the revenue coming in doesn't pay for it and they just haven't. They've just done whatever they feel like they need to do today without any sort of long term vision. So how do you think about responsibly managing debt and a med spa or business in general? Any guidelines on that?
- [33:34]
B
I think it's really where it does come down to individual business owners and, and a lot of it comes down to that relationship you have with money. Right. And like what did you grow up with? Did you and what do you, do you have an abundance mentality or do you have a scarcity mentality? And it does not matter how you grew up, those can manifest into the same or different personalities. Now I would say key to how leveraging debt or maintaining those ratios, maintaining a healthy debt position, getting an accountability partner, getting somebody that you have to run those decisions through. Because I get it like we get emotional when it's our business, it's our baby, we want to do what's best for it. And sometimes we can't see the long term vision, we can't keep that in front of us when that shiny object is there. That's saying this will bring in so much more revenue. This is going to double your business. And you're like, yeah, it's going to solve all my problems, right? If you have an accountability partner, somebody who you have to step back and say Explain the whole dang thing to. So many times when you say it out loud, you all of a sudden come to your own answer. You don't really need somebody else to tell you that it's right or wrong to take on this next debt. You just need to have that out, verbal processing that outward, listening to yourself and having somebody that you can do that with who's a neutral party. So don't let it be a business owner. Don't let it be a life partner or anything like that. Have it be somebody, another business owner, right. Who really is not your friend that.
- [35:10]
A
Has a spending problem either.
- [35:11]
B
Right, exactly. So getting that accountability partner, I mean, that's a lot of what we do for our clients, right? It's just give them that space to process what they already know. They just haven't given themselves space to really think through it. And sometimes, obviously we can put a little bit of our own spin on it, but most of the time.
- [35:33]
A
Is there any general rule, this might be a totally dumb question. Is there any general rule for like debt ratios? Like, hey, how much debt do you actually have in your business relative to revenue? Like is there any sort of guideline on that or is it just so dependent on the business and what the reasons for the debt are? Because I do feel like just anecdotally I see so many people that just, it's an SBA loan, it's a credit line, it's just everywhere they could possibly get money now to band aid the problem instead of fixing their business so they have a profitable business. They're just band aiding it with debt in a lot of different directions. It feels like.
- [36:02]
B
Yeah, I would say. I mean it kind of does depend on like your long term growth plans. And like, would you rather owe money to the bank or would you rather owe money to yourself as far as like investments, right. Do you want to take on another owner? Like you need cash in order to make those investments, especially if you haven't saved it. My general rule of thumb is no more than, no more debt than you have equity in your business. Right? And so like that's really, really safe and conservative. Some people will say you could double the, the equity with debt. So have a two to one ratio. That's a little, that's a little much for me. So again, it does kind of depend on your risk tolerance. It also kind of depends on how much equity you have in your business. If you're just starting out, you don't have any equity, you have to take on debt, then it just becomes a How fast can we get that paid off so that we can start building equity so that the next time we need financing, we can make the decision, are we going to invest more? Are we going to take on another investor or are we going to go to the bank and take on more debt?
- [37:06]
A
Yeah, I guess. To wrap. What if you had a tip for, let's say. Let's say it's an established med spa that's just looking to really dial in their finances and their profitability. It probably is going to be one of the things we already talked about. But if you had to pick the one biggest thing to make that shift and to feel more confident in the way you're managing your money and your profitability in your business, what is that? One thing.
- [37:27]
B
One thing. Start one new bank account and take 1 to 1% of every deposit that you get into your business and put it into that profit bank account. Super small habit. Yep. It starts to gain traction, you start to get results and then you're like, oh, if I can do that, I can probably do more. And it builds from there.
- [37:46]
A
Well, Shannon, thank you so much for coming on. It was a great episode. Where can people learn more about you? What do you do for your clients? I guess, first of all, what are the options people have if they want to work with you? And we'll make sure everything's included in the show notes in terms of they want to work with you or the additional resources you have available.
- [37:59]
B
Awesome. Thanks, Ricky. It was great to be here. So the name of the company is Fit for Profit. We did put together a special link just for your listeners. So@fitforprofit.com Med Spa Success, there's a success kit there. There's an assessment, a guide and a training so you can get all three of those at that one link. We offer fractional CFO work. We offer profit first implementation. So sometimes those are the same, sometimes they're different. And then we also offer bookkeeping. So you don't have to bring your bookkeeping to us if you already love your bookkeeper. But bookkeeping is essential to the fractional CFO and profit first work. So if you don't have a great bookkeeper, we can do that as well. And so all three of those. And then like I said, fitforprofit.com and we're on all the socials at Fit for Profit as well.
- [38:45]
A
Yeah, awesome. And again, we'll make sure all those are in the show. Note links, whether you're watching on YouTube or any of the podcast platforms. Shannon, thanks so much for coming on. We'll see you on the next one. Thanks everyone for tuning in. This podcast is a production of medspa Magic Marketing. If your med spa or aesthetic practice is in need of digital marketing services, help with advertising on Facebook, Instagram, Google lead generation and booking more appointments, please visit Medspamagicmarketing.com.