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Med Spa Success Strategies
The Ultimate 5-Step Financial Framework for Med Spa Owners - Interview w/ Shannon Weinstein
00:43:47
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- [00:02]
Ricky Shockley
Hey there. I'm your host, Ricky Shockley, and this is the Med Spa success strategies podcast where med spa 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 and their patients. I'm excited today to be joined by Shannon Weinstein. Shannon is a fractional CFO for medspas and host of the Keep what you earn podcast. She became a CPA after losing a bet with her dad, who was taught her about money early on and was running a McDonald's by age 16. After 15 years in Big Four accounting and Fortune 50 finance, she now helps small business owners understand their numbers and grow profitability. Her mission, translate the language of finance and prove that accountants can have personality. Shannon, we're excited to have you. I know I come to this from the marketing side, but weirdly, I think this might be the most fun part of the conversation is when we talk about financials. Ultimately, these people are running businesses, right? The people that are listening to this podcast are running businesses. And you can do a bajillion things, right? If you don't nail your financial management, I think everything tends to go off the rails. So I always enjoy these conversations. In our preliminary talks, we talked about kind of your framework and your order of operations here for troubleshooting and what stats you look at. I would like to start there if that's okay. Can you give us that background on the five step process? The framework, do you have a name for it?
- [01:19]
Shannon Weinstein
The.
- [01:20]
Ricky Shockley
I don't think I asked that.
- [01:20]
Shannon Weinstein
I do. I call it the profitable scaling. Profitable scaling playbook. I know, super clever. But. But Ricky, you hit the nail on the head. That's why we have a brand called keep what you earn. Right? It's the. You can be earning all the things in the world, but if you don't know how to keep it, then it's not going to help you too much. You'd be hustling a lot and not taking a lot home. So we have a, basically a five step framework that we implement with our clients that we teach. Because what we realized was a lot of practice owners are really overwhelmed when it comes to the financial focus in their business. They're like, I have all these metrics, you know, Zenoti Boulevard, Vagaro, these next tech. They're all giving me data, but I don't know what to do with it or how to read it or know if I'm doing good or not. I don't know what success looks like. So we kind of came up with a, hey, let's focus on these things one at a time and let's get these metrics ironed out and we can figure out where the constraint is in your business. We got to figure out where to zoom in and go fix something that's log that's clogging the pipeline. So when we figure that out, it usually results in the biggest impact because you can cut costs all day, try to make more money with marketing, but if ultimately you have cashflow issues cause of timing or a bad refund policy or there's leaking over here because of your rent or because whatever or got the equipment loans. Don't get me started. Like all the stuff you're spending.
- [02:35]
Ricky Shockley
Yes. You have to be on the podcast.
- [02:37]
Shannon Weinstein
Exactly. People don't realize how much goes into this and they don't plan all of that out and realize how it's actually impacting them. So our five steps are really offer profit. Fundamentally, are you selling your treatments for more than they cost you to deliver? Very simple. Are you making money on a per treatment basis? If you're not, stop, do not pass go, do not collect $200. Focus on that. Your pricing might need a revamp or you need to be looking at what costs you have and your compensation plans with your providers. Because if you're not making money on a per service, per hour basis, then you're just speeding up how fast you're losing money. So we got to work on that first. And if you've covered that, we look at operating profit. Is your business profitable? So are you running a functional, profitable business? You know, we talk about front desk, we talk about rent, we talk about the utilities, the supplies, the. And making sure that you've got everything aligned so that you have all the right support. Your administrative, your legal, your accounting, the stuff it takes to run a business. That includes marketing too. So. So when you start looking at we're running a business, are we actually turning a profit at the. As a result of operating a business? And if you do, fantastic. A lot of people get here, okay. A lot of people have a profitable business. Yay. I have a tax bill, I have a profit. Now we get into cash flow. Cash flow is number three. That is actually like the metabolism of money in your business. It involves the speed that it comes in and the speed that it goes out and the timing of all these things. So managing. When are you paying your credit cards, when are you paying for your laser equipment, when are those loan payments coming due and when Are you collecting from customers? Are you taking deposits? Are you swiping the credit card for cancels and no shows, so plotting when deposits come in and payments go out and making sure that you're never in a position where the bank account is suffering and making sure you're hiring according to that plan, that you're not overextending yourself and overspending in the wrong timing. And then fourth customer value, huge. We could nerd out on this all day. Ricky is LTV cac. It's making sure you're making on a per customer basis, a maximum lifetime value. It's making sure you're upselling, reselling, reoccurring revenue or recurring revenue through membership. Making sure you have a good model on how you make your money so you're not hustling, selling every person who comes in the door, even if they're profitable. You don't have to market for every single Botox treatment to a new customer. And then finally, the fifth one is enterprise value, which means you are running a profitable cash flowing business with high customer value, meaning it's an asset. Now the business is turning into an asset that you can scale, turn into a cash machine for yourself or sell. And the cool thing is that you want to be building it as though you're going to sell it because the most attractive business to a buyer is the one that you want, is the one that you want to actually keep because it's making you money. People want to buy them a golden goose that works, right? Like they want to make sure the eggs are coming out. So we got to make sure that we have a cash flowing, strong business. So you have that choice. Private equity sweeping through the industry. We want to make sure you have that choice if you choose to sell or you choose to scale it. Either way you're well positioned. So that's really what we focus on.
- [05:58]
Ricky Shockley
Yeah, amazing. We just talked about that with Ben Hernandez too, Is like even if you don't want to sell your business, building it to the point where you could means that you have the business that you want. So we should all be doing these things and having the smart financial, making smart financial decisions to maximize that enterprise value. Because that means you get to sleep at night easier, you've got more wiggle room, you've got more margin, you have less day to day involvement in the business. All those things are kind of critical, I think, to that enterprise value. Some questions going back, I know there's like you said, Shannon, you could do like a seminar on each one of these Things, and obviously we don't have that much time today, but I want to make sure that we're delivering value and digging on some of this. So when you talk about offer profit, this is obviously relevant to a med spot just starting or a med spot that's doing five to $10 million a year. Everybody still needs to know that. Offer profit. So gross margin. I like that you have these terms that are like, just a little bit more of a layman's version of it, which is your offer profit. How much does it cost you to deliver the service versus how much you make on the service? And we want that to be profitable. Step one, like, that's obviously the baseline.
- [06:58]
Shannon Weinstein
Yeah.
- [06:59]
Ricky Shockley
What's the ratio on that? Do you have, like a guideline? Is. Is there a specific ratio? Does it depend on the service?
- [07:04]
Shannon Weinstein
It depends on the treatment on the service, depends on the pricing, because different geographies can command different price points. So it's very dependent. But you obviously want to be keeping the majority of your revenue after you spend it. So I tend to look at 30 to 40% cost on a blended basis means. It could mean you're doing pretty good. You also have to look at the blend of your services. So you want to be evaluating this on a service or treatment basis. So you should be looking at, well, what is my margin on injectables? What are my. What is my margin on laser treatments? What is my margin on aesthetics? And making sure that it. We work backwards, actually, from the operating profit to make sure that it traces all the way back up to. We have plenty of money left over after these costs to support the overhead of the business. So it's a bit of a holistic look to see what does good look like for you. But in general, the vast majority of your revenue should stay with you after those costs come out.
- [08:02]
Ricky Shockley
Cool. So, like, the blended number cost to deliver all of these things. 30 to 40% of what you're actually collecting. So if you're collecting $10, it should cost you three or four to fulfill it. As a general rule, just to get somebody. If people have successful businesses, I know they're. Yeah, yeah.
- [08:17]
Shannon Weinstein
Ballpark. And obviously you're gonna. You're gonna gain efficiency as you scale. Right. So you'll be able to make better margin by, you know, offering higher price points, more expertise, more experienced people. So it will really vary, but that's a great place to start. Yeah.
- [08:33]
Ricky Shockley
Can I sidetrack that part of the conversation a little bit or maybe go down a rabbit hole on that?
- [08:37]
Shannon Weinstein
Yeah.
- [08:38]
Ricky Shockley
So one of the things I think can be dangerous. But I'd be interested in your opinion. This is just my, my two cents for my surface level knowledge of it is some people have services that like, if they're just looking at offer profit, that gross margin number, things look good, but it might be something that's like not in demand. There's not, there's not a lot of people actually searching for it. It's hard to sell. So there's not enough volume even though the margins are good. So I think sometimes in my experience, probably deal with this as the marketing person. My margins are really good on this one thing, so I want to do more of it, but people don't want it. And then you end up having to advertise so aggressively that now you've squeezed your margin completely out of it. Yeah. Is that a real concern?
- [09:17]
Shannon Weinstein
Yes. So there's two things that go into your price, which is your margin and the market. I say margin and market equal price. So you have to look at what your margins are, but you also have to look at market tolerance of the price and of the service. So if it's something, let's just say it's a service or a treatment that people only need once or twice a year. That's hard to argue why you dedicate a whole room or a piece of equipment to that treatment if you're not getting the flow of those people coming in. So to your point, Ricky. Yes. If there isn't a huge demand for this type of service, it could actually be weighing you down because you're using providers that could be doing other things that are more lucrative. So it's not just the margins, but it's the blend of how does this treatment, this service, contribute to your overall profit? Because you could have your highest margin thing is 5% of your sales if you eliminated this and you lost 5% of your sales, but you then gained back a whole bunch of labor costs that you were spending. It's a win, you know, you have to make sure it's worthwhile. I think it's an excellent point.
- [10:19]
Ricky Shockley
So. So even for the practices that you work with that are like bigger established successful practices, I'm assuming for them this order of operations, this is like your, your five step framework is basically troubleshooting. So the first thing we want to look at is, is our gross margin, our offer margin. Because nothing else past that is going to work if that doesn't work.
- [10:36]
Shannon Weinstein
Exactly. It's our onboarding, onboarding model too. So we come in and we say, what do we want to work on with you guys. What's the best use of our time as a cfo? This is how we do it. Yeah.
- [10:46]
Ricky Shockley
When it comes to operating profit, do you have a benchmark there? Like what is it? What is, what is a healthy med spa these days? I feel like people hear so many different numbers. Like some people maybe have an unrealistic expectation. Some people are like barely, barely getting by. What do you think a healthy med spa looks like in 2025 in of that actual end of day operating margin?
- [11:04]
Shannon Weinstein
Yeah. And it's like saying, what does healthy skin look like? That's another thing where I'm like, okay, it depends. Yeah, the whole bunch of it depends. But for the sake of being helpful, I'm seeing a lot of med spas that are between 8 to 10% margin that are doing just fine. That's probably industry norm. Okay. Is like sub 10% profitable. Is profitable, which is good. It will also depend on your entity structure, like how you're structured from a tax standpoint, because maybe there's an owner's salary in there that technically you're taking home that you add back to the profit to figure out what it's really producing. So the first thing is getting a really good accurate idea of what is the operating profit. And operating profit is net margin. But we add back things that are tax, strategized cash flows, the payment to the owner if you're an S corp or if there's no other role that you're fulfilling. Right. So we look at certain things of what is the business actually producing before we make it look nice for the irs and then.
- [12:03]
Ricky Shockley
Yeah, got it.
- [12:05]
Shannon Weinstein
Yeah. Not by the way, I'm not manipulating PNLs. I'm doing, you know, the tax, the tax accounting. But the, the, the, but going back to the operating profit, I also have a sort of weird view on this where if you're making over, I'd say 20 to 25% margin, you are under investing in your business. I actually think that when you have a really high margin and I actually had a client where this was the case where they have such a high margin, I go, you should, you are probably doing a lot as the founder that you should be hiring up. You probably are under investing in the right people, the right tools, the right marketing, the right, you know, insert here to actually grow the business because you have plenty of margin. It's a machine, it's working. We have to double down on, you know, investing in the right people. So I, believe it or not, have had your Margins too high, problems.
- [12:57]
Ricky Shockley
Yeah, that makes sense. Especially like if you're in growth mode. Like you're basically, if you're taking it all home, there's not the money to go back in it to help you get to the next level.
- [13:05]
Shannon Weinstein
Right.
- [13:06]
Ricky Shockley
This episode is brought to you by Med Spa Magic Marketing, my agency. We help Med spas and aesthetics practices grow with more effective marketing strategies. And I know that's a vague phrase, right? It's a vague claim. So I have an offer for you. I offer this to any new prospects if you're interested in exploring any of them. Another marketing option, a new agency, or just getting into Facebook, Instagram, Google Ads for the first time. I'd love to show you why we're different, what we're doing for clients. And we can do that via a one and a half hour planning session where I'll outline a specific marketing plan and I'll give you all of the blueprints that we would implement if we were to do business together. Now you can take that, use that on your own, hire someone else to help you execute it or work with us. We really don't hold anything back on that strategy call. And I think you'll have a lot of confidence in how you manage your marketing investment moving forward, understanding some of the nuances that can help you implement more effective marketing strategies for your business. So if you want to do that, you can go to MedSpa magic marketing.com the cash flow. So getting to the next phase here and you talked about that like so many practices are profitable but have cash flow issues.
- [14:10]
Shannon Weinstein
Yeah.
- [14:12]
Ricky Shockley
What does that typically look like? Like is it is. So is a cash flow issue a byproduct of not having like enough reserves in there? Like can you, can you be profitable? Have what look like cash flow issues? Because there are these ebbs and flows, but it's, it sort of sustains. Where do you see people run into problems where they actually have profitability, but.
- [14:29]
Shannon Weinstein
Cash flow issues like every Med spot. So okay, so basically if you feel this way, you're not alone. But let me just break down profit versus cash flow because I think they get conflated as the same thing thing, which is actually if you take nothing away from this but this, this will enlighten hopefully somebody out there who thinks that this is the same thing. So if you make money from the operating of your business, so like you sell your treatments and services and you make enough money after paying all your bills and things that on your P and L, on your profit and loss statement, it Says that you made a profit. Great. However, there's a lot of stuff that doesn't show up there. Lot of ways that your, your money is exiting your bank account that do not cross the profit and loss statement. So the profit and loss statement is kind of lying to you and not telling you the whole story. Okay, so we've got the equipment loans, we talked about this. If you're paying for your lasers and they're frickin expensive, so you're financing the lasers, maybe you have, you know, you're paying your own distributions, you're paying, taking draws out. You know, you're paying the credit cards at a certain time of the month, even though all the expenses show up in the P and L, you may have a big credit card, bulk credit card payment to make. And maybe all those things all hit on the 15th and your life just kind of sucks that week because your bank account gets drained in that one week of the month and then rebuilds when all the membership dues hit. So you have to be paying attention to the timing of all these things where the P and L shows you holistically over time, all of this regulates. And it's like you make this much money in the month, spent this much money, I go, yeah, but when did we get those deposits? When did we have to pay the payroll? When did we have to pay the credit card bill? And what cash flow does is it integrates time into the ins and outs of the bank account where you have to actually manage that flow. So if you are paying at the first of the month, all of these bills, but then you don't collect your membership payments, or you don't do a campaign to bring people in or whatever it is, or the books are filled with later in the month, then it's like we're kind of chancing it every single month, where we're basically shelling out all this money ahead of time, paying payroll and then getting our money back, which is a place you don't want to be.
- [16:45]
Ricky Shockley
Yeah. So you got a rush of money coming in, but then all of a sudden it starts to drain and goes out. And the timing of that is what are. I know this is probably a way more complicated conversation, but you have one or two things. If people are feeling like they're in that situation, like they're successful, they're profitable, but they do feel like they're getting in a cash flow pinch. What are maybe the easy one or two things at the top here that they could implement?
- [17:05]
Shannon Weinstein
So one is, if you feel like you Are, well what I mean, there's so many levers to pull here depending on the inflow or the outflow side. I love to, you know, tell people, don't pay your credit cards early. I know, weird, but you don't. You want to basically speed up the rate that you're bringing in money and slow down the rate you're paying out money. If you can just follow those two cardinal rules, slow down the outflows as late as you can possibly do without incurring interest, fees, penalties, and getting in trouble. Like slow it down. It's also why I don't necessarily agree with paying tax estimates as a cpa because I actually don't like tying up that cash to the IRS and an interest free loan. That's my personal opinion. So there are certain things that I say. I, I would rather you keep that cash in the bank and invest it in a new hire than to pay these certain things and hang onto it as long as possible. On the inflow side, you could also accelerate payment, take deposits, make sure you get a credit card on file to swipe for the cancel no show fee so you're not out those dollars that you should be collecting and that you can pay your staff, you know, collecting membership upfront for a month of services, having some type of recurring revenue, building that in so that you have more predictable inflow that comes in the same time every month that you can bank on because then you can start planning around that. So those are just some examples of ways that we try to install better cash flow practices when we work with a client.
- [18:34]
Ricky Shockley
Yeah. That's awesome. And I know like they're in so many other industries. I get like manufacturing where they're like terms, right? Yeah, like an, yeah, like net 90 on like paying like so you're trying to figure out strategically as a med spa, don't use this as an excuse to stiff your vendors, by the way.
- [18:47]
Shannon Weinstein
No.
- [18:48]
Ricky Shockley
How do you slow down, how do you slow down the. Not the things that you don't necessarily have to pay at that moment in time and make sure that you're stretching those out and then speed up the rate of which is coming in. So you're basically trying to pull at both ends to create the gap. And that's one of the essentially, I guess the simple version of how you're solving the cash flow problem. Cool. Love that customer value. So when you get to this phase, I'm assuming at this point for a business we've got, we're pretty good on our gross margin operating stuff looks Good cash flow. But there are businesses that can have, is this, is this true that there are businesses that you feel like can have all of those three boxes checked but are still not quite hitting benchmarks on customer value?
- [19:23]
Shannon Weinstein
Correct. So this would be an example, would be where you have a med spot that never upsells product, never rebooks. When the person exits the building, they have to hustle and call and market and run ads to get people in the door. So the idea is at this stage that they have a machine that prints money but nothing to put in the machine. So you've got a printer with no paper. So what you're doing is you're hustling to go find paper to put in the machines. You need to go find customers to go make profit off of. And that's why we made this the fourth stage, because we said you have a machine that works. We need inputs, we need people to come through the machine and pay you. Because you do keep what you earn. You gotta go earn it. No, you gotta make sure you're earning it on a regular basis and that you're not spending all of your time selling it is exhausting. If you are just marketing and marketing then and everyone who comes in the door is a result of an ad or the result of. And not from our referral, which is zero cac, you know, and not from rebookings, you know, packages, multi visit cards. Whatever way you do it, find a way to accelerate that cash flow. Number one just talked about that. And find a way to create ongoing higher lifetime value of a customer by having every customer, customer spend a little bit more with you and bring other people in so that you're basically earning more without having to spend more in acquisition cost. That's the whole goal.
- [20:53]
Ricky Shockley
Yeah, yeah. And speaking from the marketing side, I think so many practices they come thinking that marketing is going to be like their one size fits all. If I could just, if I could just get more people and everything will be okay. But if you don't have this part of the equation fixed, that's not true. And like you said, you're putting a band aid on a bullet hole. And those successful practices have this part dialed in so they can comfortably spend money on marketing because they know that they're going to be able to make up for it on the back end. If you're always chasing the next dollar, it's probably a pretty good sign that you've let some stuff slip in terms of patient experience, your ability to consult and retain clients, something about your rebooking process. Probably a lot of things going wrong there that are way more important than, like, going to just spend the next ad dollar. So that's all about the stuff, I'm assuming, Shannon, that you're doing in house in terms of operations consulting, having the right people in the right seats, retention, rebooking strategies. Those are the things that have to be dialed in to make that work. Is that right?
- [21:46]
Shannon Weinstein
Yeah. So when we work with a client now we're CFOs, but we also look at revenue per employee per hour, and we look at their sales dollars. Like if they're upselling and if they are rebooking, what's their rebooking rate for these different treatments? So we know kind of who's stepping up and getting us no CAC or leads and who's getting us new lifetime value and who isn't. So even though it is a little bit operational, everything ties back to the numbers. We want to see the data to see who's kind of stepping up, allow our practice owners to set goals for those things. Like, we want a rebooking rate of X percent and we want to see that grow to Y percent over time for this provider. And you can give them really good metrics to track for themselves and to hold them accountable to some type of scorekeeping. Because I think the rebooking rate is one of the best indicators because it shows loyalty, it shows the customer experience, and it shows stickiness of that client. So you can start using that to predict cash flow and say, well, that's a, you know, after four visits, they're a lifer. You know, they stay for two years. If you actually see a disparate data where it's like a lot of people are coming for one visit, a lot of people are coming for two visits, and then the next thing is everybody who basically has over five visits has been a client for two years. So it's like, oh, yep, maybe there's a trigger point there where if they come to us for five visits or five months or whatever the timeline is, that's when they really become loyal, you know, customers. So knowing where that point is is key because you want to get them there as quickly as possible, even if it means discounted services for the first five months. Right. Because now they're going to be a lifer because they've adopted the habit of coming to see you. So to your point, Ricky, it's a lot of customer experience, but strategizing around, hey, at what point do they become a lifelong client and how do I get them There as quickly as I can.
- [23:32]
Ricky Shockley
Amazing. Yeah. There's an example that aligns with that that I use all the time. I don't know if the show still exists. It's called Bar. It was called Bar Rescue with this guy, John Taffy.
- [23:40]
Shannon Weinstein
That's where I saw it too. Yeah, the restaurant.
- [23:42]
Ricky Shockley
Oh yeah. I love that strategy though. And he talks about like the restaurant giving somebody like a buy one, get one free entree to get them in the door. And then he said there's some data point like you said. And a restaurant is typically three visits. If you're three visits, you become a regular if you can get them three times. So the first time you have an incentive, I'm going to put a red napkin on there. I'm going to make sure they get the VIP experience and then I'm going to give them an invite for a second visit. And I say, oh, you had this today. You got to come back for this reason. Give them a second.
- [24:07]
Shannon Weinstein
My cheesecake. Amazing. And then it was free rib dinner. And then it was that.
- [24:12]
Ricky Shockley
Yeah, yeah, I love that. I think that's just true. Like that is how consumer psychology works. If you have a, you have a catch point where if people do things enough, it becomes a habit. Like I might go join like a men's basketball league and play like a game and if I don't like it, I'm not going to stay. But if you get me to three games, I'm probably going to do it as a regular thing. And year in and year out. So many things I think map to that. I have a few follow up questions on this. One of the biggest pushbacks I hear in the space, there's a massive debate around it. We talk about it all the time is the concept of discounting. And what a lot of people say is that discounting is basically like as a blanket rule, it cheapens your brand that attracts the wrong type of clients. What we've seen in our data when we run these things is you do have to sift through some dirt to get to the gold. So your retention rate on those clients that are brought in from a discount is not going to be the same as a word of mouth referral, but it lowers your customer acquisition cost. So where it might cost you a hundred dollars to acquire a client, you spend a thousand dollars to get 10 clients with that strategy, if only five of them are left over, it's still better than the strategy that cost you 200 or 300 in customer acquisition costs. So you only spent or you only got Three people for that same thousand dollars in the first place. So my philosophy and our philosophy and this is what we see in our data is that on average this tends to be a more effective strategy because we lower customer acquisition costs. And if we think we're the best provider, this actually gives us the opportunity to prove it and to create perception through experience. How do you think about the numbers like on the marketing side and the trade offs there? And I agree there are trade offs.
- [25:42]
Shannon Weinstein
Yeah, there's total trade offs. And that's a conscious trade off is the key. And knowing the data, to be able to make that trade off consciously and say, hey, is this going to make me more than I paid the math. Maths. It makes sense, right? The data speaks for itself. But the trick is knowing the data. And I think that, I think discount, I think there is an argument to be made about diluting the brand and all those things. Yes. When you just hard discount. But I look at it more as what do I want to incentivize? Right. What is my goal to incentivize? What is the behavior I desire out of my customer? And if you want them to purchase multiple services because you know that will help a different objective that you have, then by all means make it more enticing to do that. But what I don't, what I'm not a fan of is the communication of the discount in the form of we'll just give you 20% off or like it's all about positioning it where the person, they're giving it to them for a reason as a reward of a behavior, as a thank you for purchasing a bundle of items like a package as an incentive for, for being a loyal customer or hey, here's a freebie to go with that. Or hey, I'm recommending you some retail products because you booked your next session already. I'll just, you know, here's some free samples or here's a discount on the product that we used on your face today. You have to make it meaningful for them and make them feel special in the process if you're going to do something like that. I think it goes back to the customer experience ultimately where if you're simply saying come on in half off laser treatments, I'm like, okay, why, like are they closing? What's going on? You have to look at customer perception of why you're discounting and, and the incentive that you're trying to cause with that. From a margin perspective, I think you're absolutely right. You it's worth a. If you get out of a customer that an on average will be a customer of yours for two years, right? Let's just say that they're typically come to you for two years wherever they live and that's how long they'll come to you, maybe monthly. So now you've got 24 visits, right? And if you discount a few of them on the front end or even offer one for free, it's worth it because you've got that revenue, that lifetime gross profit that's going to be coming in. It's well worth it. But that's where you have to know when a person comes in the door, what are they worth to me? What are they worth to me? After they get to a certain stage of my customer journey where now they are worth this much money, it is worth me taking a bit of a hit. The other example I'll give, that I thought was phenomenal. I used to teach Zumba part time and I had a studio that I was working with. I was actually helping them with their finances. And they said, well, we have this policy called second class free. I was like, second class free? Why, why not first class free? I said, well, we do first class free. Everyone comes for a first class and gets the hell out. Because they take their free class and they're not interested. They said, well, second class free means you gotta come for one, pay your way, enjoy it. But now you've taken a class, you've seen the choreography, maybe you messed up a few times, had some unexpected solos, we call them and now we. Well, I have to come back because now I can do the second one for free. Because they realize that when you come back for a second class, they say, hey, if that person comes back, do the same choreography. And now they're mastering it because they're like, I remember this song. I remember now it's left, then right. Ah. And now they feel like they're winning and they're successful. Then they have a. They leave with a good feeling and then they're more likely to come for a third class. And what that studio knew was after the third class, they're coming, they're a regular.
- [29:23]
Ricky Shockley
Yeah.
- [29:24]
Shannon Weinstein
So that's what I mean is you have to get really creative with the discounting and with the incentives.
- [29:29]
Ricky Shockley
Yeah, I agree. And even if it's like for us, like one of the things is, hey, we want the at bat, we want the. We want people to give us a chance. They have a lot of options. We think if people come in and have a great experience, it's our opportunity to prove the value. So I do. I am generally a proponent of like the first visit in this space if we can give them an incentive. But I love this idea of because again, you don't have to, but it lowers customer acquisition costs. I think that's the part that's inarguable. It's choosing your pain. There's always a trade off with this. If you try to come out of the gate and you're just going to win on reputation, first of all, you better have the goods to even do it. And second of all, if you do, there's less of a carrot that you're dangling and you're going to pay more in customer acquisition costs. So you have to make sure the differential is worth it and all of these things like move together. And I love the idea though, that being creative about how do we figure out how to get someone into this med spa three times in the next 120 days? Because now they're probably going to be a regular. Like, what does that look like for us? And what is, what is that catch point in terms of our data? I love that. 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 leave a review for the podcast, whether that's on 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. So tracking all this stuff's really important. Like you mentioned, like revenue per employee per hour. Do you see that certain EMRs as a default have better data than others? This is a question I get all the time and I have no idea where to direct people. Only, like, do you have a favorite or is there a software that people should be using that they aren't using that helps track some of this? Or is it more of a manual exercise at this point?
- [31:13]
Shannon Weinstein
Well, none of them pay me to say it.
- [31:17]
Ricky Shockley
This is true. So none of them pay me.
- [31:20]
Shannon Weinstein
I know. And I'm like, I'm about to help, hopefully help somebody get rich off of this. But. So I work with A couple. I work with a couple favorites in terms of, well, here's the thing. The emr, the type of practice manager slash POS system that is going to serve you the best, is the one you can understand. Okay. I personally love. I love Boulevard. Okay. Boulevard's probably my close number one. I also work with clients on Zenoti. I enjoy Zenoti. It is insanely powerful, but so difficult if you don't know what you're looking for in the data. It's so powerful with how much data it collects. And I feel like I'm swimming in a sea of reports I can run. And my accountant side is joyous and enthralled and I'm like, how the hell do med spa owners even decipher half of this? Yeah, it is a very business and operational system centric application. I love it. It is an accountant and operator's dream. But the practice owner, though, if you are consuming the information out of some of these tools, it could be challenging. So I think it's a function of, do you have somebody on your team that can decipher it and turn it into valuable insights for you and how well you're willing to invest to understand the data and know what metrics you want to track. I think it just gives you such an abundance of different metrics and all these different dimensions of your business that if you're not clear on what your goals are and what your specific KPIs are, you're going to swim in a sea of data and not get anywhere because you won't know what good looks like and you won't know what to track because you're trying to track everything.
- [32:55]
Ricky Shockley
Yeah, I love that. What good. You have to know what good looks like to even understand what you're shooting for. We talk about that a lot too.
- [33:00]
Shannon Weinstein
Yeah.
- [33:01]
Ricky Shockley
Going back to one thing you mentioned earlier, like, when it comes to debt, we talked about, like the machines and how those can be real detriment at times to a practice. How do you think about as fractional cfo? Like, how do you think about debt management? When is. When is debt responsible? And how do you see people using debt responsibly versus people that are using it as a lifeline with no plan how to dig out of the hole?
- [33:24]
Shannon Weinstein
Well, like when you said, when is debt responsible? I'm like, it's not when. It's who.
- [33:29]
Ricky Shockley
It's not even a question of when.
- [33:31]
Shannon Weinstein
It's who. It's. Yeah, it's. Well, it's how well do you understand the purpose of the debt. So a lot of people use debt to cover up cash flow problems. And that's basically a bucket on the Titanic shelling the water out. You know, it's like you're not fixing the problem. You are, I don't know, just trying to stay alive a little longer. But you're not changing anything about your situation. So you have to understand what purpose you're using it for and if it is really going to serve you in your growth. I like to associate debt. Let's just say it's like a line of credit you get from the bank and I like to associate that with that is money. So I can go hire my next one to two team members and I can start having cash flow there. They will then bring in a certain amount of cash flow. If we can fill their books and get their capacity up within the next three, four months, let's say, well, then that's when I'm really going to go hard on paying this back because that was the purpose it served. And then I will renew the purpose somehow. I will dub and knight the money. Let's say like I dub the for hiring. And when you give that a purpose, it makes it easier to manage other than convincing yourself it's just more of your own money. I learned very young. My dad got me a credit card and he was like, that's not your money. It's somebody else's money that you're borrowing to go do that. And I would be like, oh my God. Like, and then he's like, you have to pay it back every single month or like they're gonna come for you. I literally went well into my 30s thinking that was gonna happen. Like operated with that type of mentality.
- [35:04]
Ricky Shockley
Yeah.
- [35:04]
Shannon Weinstein
So you have to have a little bit of this. Hey, debt is not a solution. Debt is a tool to get to the solution and to adopt healthier habits. It's a little bit of a cheat head start, but that doesn't. It's not a replacement for good financial management. You can't just solve your problems by increasing your debt capital. It also looks very bad when you go to scale or sell your business. If you are fully debt financed and your balance sheet, which is where you would see this looks imbalanced, where you have say 50 grand in the, in the cash account. But you know, a line of credit is 45 of that and it's like, wait, you're over leveraged. Like most of your money is from the bank. You're not actually keeping any of your money. So what story is it telling and what purpose is it serving? Is the first thing I try to articulate.
- [35:51]
Ricky Shockley
Yeah. Awesome.
- [35:52]
Shannon Weinstein
Yeah.
- [35:53]
Ricky Shockley
A couple questions to wrap. So the businesses that are maybe successful, let's say, like, I've talked to practices that are in this situation. They've got a pretty big office, They've got a bunch of team members from the outside. Like, you would think this business is humming along. They're really successful, they're profitable. Then you get in there and you realize, holy crud, they're really struggling. Like, they're making money, but they're consistently spending more than they're making. Everybody I know probably has a different perspective on this. If you had to identify the common two or three things that you see that are at the top of the list for a practice that fits that description, what would those be?
- [36:29]
Shannon Weinstein
I go back to cash flow management and saying that you're not forecasting your cash flow. And I will give you a very, very practical tip. It's so simple. And I can help you guys with this if you need to. I can even. You know what? I'm gonna. I'll give you guys a template to follow. Ricky will share a template with you guys that we can use. But it's a thank you. Yeah, absolutely. For those who enjoy spreadsheets. But fundamentally, this is all you have to do. I don't care if it's crayon on a napkin, do this exercise. Okay, you take the bank account balance on Monday, on the start of Monday. I usually do this on Sunday night. I do this my own business, by the way, as a cfo, I do this every single week still. And it's been. The trajectory of growth has been great because I do this, take my bank account balance on Monday and I map out the week. Like I go through. Every column is one week. So I go through the next, like eight weeks or so. And I say, okay, when am I paying the credit card? When's the statement balance due? We have the statement balance by now. We can see out one month and see how much we're going to have to pay. How much is my payroll? How much is my loan payment? How much am I paying back? When those lines of credit, like, they have payback schedules. You can see when the payments are due. And then you can also go into your pipeline and say, I have membership dues that are coming in throughout the month of about this much per week. You can look at this actually in your bank statement. You can look at the history and go, huh? Every month around the same time this payment comes in or roughly the first week of the month, so and so is a little bit more booked. Interesting. We put in a little bit of okay, we expect to bring in this much money per week. So we take in the inflows, we subtract the outflows, and you end up with the guess at what your cash will be at the end of the week. As you do this more and more, you'll get better at being a psychic and predicting it. I'm almost within $10 every single week because I can predict my cash flow pretty well. I have all monthly recurring revenue, so that is easy for me to do. But when you don't, this is especially powerful. You can then map out and say, well, if I hire a new provider, a new injector, and I want to pay them this much money, can I afford that? Questions like that are answered really simply by adding a line here, plugging that person in and saying, do I like how I feel looking at this? Yeah, like the outcome that I see by adding that person in. How much more sales would I have to do to make sure that that was covered? Now you have answers to those questions and real goals to focus on. If you want to hire a new injector and you say, I need to bring in X dollars more per month to support that, guess what? Now you're on a laser focused mission to go do that. So the key is having a good map of your cash flow, not just your P. L. Not just looking in the rear view mirror, but looking at the forecast and saying, hey, this is what's coming up in the next eight weeks. I got to be ready for it.
- [39:08]
Ricky Shockley
If, if the problem is not cash flow, like they say, let's say they go in and they, they kind of figure that out, they're dialing it in and they actually figure out how to time this stuff out. But at the end of the day, it's just like the numbers still aren't as good as I want them to be in terms of the money going in, going out. Are there certain themes like in terms of like they're overstaffed, they're over leveraged in debt, they're not selling enough of a. Certain things that they have in the office, they've got too many treatment rooms, they're overpaying providers.
- [39:33]
Shannon Weinstein
All of the above.
- [39:34]
Ricky Shockley
If it is a profitability issue.
- [39:35]
Shannon Weinstein
Yeah, yeah, all of the above.
- [39:37]
Ricky Shockley
Okay, good.
- [39:37]
Shannon Weinstein
Yeah, like, yeah, you listed it. I would say it's mostly utilization. I think it's mostly a lack of awareness that your, your providers are not Being utilized effectively in either the right treatments. You're not efficiently using your space in terms of your treatment rooms. The flow is not working. It's a complicated problem, but I think that once you master it, it's game on.
- [40:02]
Ricky Shockley
Yeah. Amazing. Last question. What do med spa owners who are really successful med spa owners that are doing four or five million dollars a year at a single location, or maybe they've scaled to multiple locations and they're really profitable. What money habit do they have that struggling med spas don't?
- [40:21]
Shannon Weinstein
Oh, that's a good one. I would.
- [40:23]
Ricky Shockley
I know. That's. I knew, I knew that was going to be like a weird one. Like, if you have to think of it just observationally, like, when I talk to these people, they always have it really dialed in. And then the people that struggle miss that habit.
- [40:34]
Shannon Weinstein
Yeah. I really, I think it comes down to, like, and I don't want to be the boring one that answers this so productively, but it's because they pay attention to the numbers and they're actually consuming data on a regular basis. Like, they're actually focused on, like, they leave nothing to happenstance. They don't just kind of close their eyes, cross their fingers on a marketing campaign. They know what works. They look at the data. They a B test ads. They. They do the work to find out what works, and then they do more of what works. And they don't waste. This is a big one. They don't waste time and money on stuff that's just fun. I'll give you an example. So, like, I've had a med spa. They wanted to do like a community event where they had like, products and vendors and they wanted to do this like, community type thing to. Not just a grand opening. I love those. But they just wanted to do a special thing. But, but I was like. But like, how much is this costing and what are you expecting to actually get? All of their existing patients just came because they put it on their own social media. And I was like, okay, like, what result do you really want out of this? And did you just do this so you could have a party? Like.
- [41:41]
Ricky Shockley
Yeah, exactly. So the bottom line, though, is the people that know their numbers, like, the people that are paying attention.
- [41:46]
Shannon Weinstein
Yeah.
- [41:47]
Ricky Shockley
Instead of being blind to it and just hoping things work out, actually pay attention to your numbers, consume the data, know where you're going and what it takes to succeed.
- [41:56]
Shannon Weinstein
Bingo. Exactly. You have to be aware of the data and like, to your point before, know what good looks like. Because objectively, there's no like, one profit metric that matters. Like, it's about, what do you want to take home, how do you want to live? How do you want this med spa, this business, this practice to fuel your life? And in what way? How much money do you want to travel? Do you want to do xyz? Like, nothing's off the table, but you have to be aware of that and know what that takes and then work backward from that to make sure you're building your practice so that it serves you in that way and not just reacting to whatever must happen.
- [42:31]
Ricky Shockley
Yeah. Amazing. Well, Shannon, thank you so much. Where can people learn more about you if they want to work with you? We'll make sure all these things are included in the show notes as well.
- [42:38]
Shannon Weinstein
Absolutely. So you can find me as a podcast listener. I have my own show called keep what you earn. I absolutely love podcasting. I love what we've been doing over there. So come and take a listen to our show, keep what you earn. And we're also@keepwhat you earn.com, where you can find out more about our CFO services and about us as a team.
- [42:56]
Ricky Shockley
Yeah. Amazing. And, well, like I said, I'll make sure I get all the links from Shannon. So if you all are interested in the podcast, working with Shannon, this. This template, maybe that she has for us, I'll make sure all those things are in the show notes. So if you're listening on Spotify or itunes, they'll be in the show notes and YouTube as well. Shannon, any last words? Anything I missed?
- [43:14]
Shannon Weinstein
I just want to say thank you for listening and taking the first step toward knowing your numbers a little bit better.
- [43:20]
Ricky Shockley
Yeah. Well, thank you, Shannon. We hope to do it again.
- [43:22]
Shannon Weinstein
Thank you.
- [43:24]
Ricky Shockley
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.