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Med Spa Success Strategies
Wednesday Thoughts: This Mindset Mistake Is Killing Your Med Spa's Growth & Profitability
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Hey MedSpa owners, here's something that might be a little bit counterintuitive, but many of you are not spending enough on your advertising to make your marketing investment profitable. I did a video recently on body sculpting advertising and how body sculpting advertising has a high customer acquisition cost associated with it. But if you look at the total picture can be very profitable. One of the other disconnects that I see talking to med spa owners is this disconnect that happens. It's one of the biggest challenges we face as a digital marketing agency, especially as an agency that's very data heavy is the disconnect between marketing as an expense versus an investment that produces positive roi. So I wanted to talk about how spending more on your marketing, if the numbers align, is actually the catalyst to helping you grow and improve short term profitability in your med spa. But I also want to talk about how delicate that balance can be. So I talked to somebody last week that was in South Florida and they were struggling with their ads performance. So they were spending $3,000 a month on agency retainer and fees and they were really struggling to see results. They were actually just running some ads that I think just set them up for failure. They just had a low chance of success anyways the types of ads that they're running. So they didn't have the data but they started to feel this, this sense that like I don't know if this is a good investment and they pulled back and they, and they dropped their ad spend all the way to $600 a month simultaneously. I think that this med spa had also just recently started what was going to be their most effective ad. And I want to show the danger of not spending enough money on your marketing and advertising investment and how this can actually destroy your profitability and growth prospects. So in, in her case she was positioned to see under $100 acquisition cost for injectables, which by all available evidence is going to be a great number. If her initial Visit revenues are $400 and she's spending $80 in customer acquisition cost, not only is this like creating a good return on ad spend out the gate month one, it's also long term really, really going to be, if she's spending enough money, going to be super profitable campaign in terms of long term ROI over 6, 12, 24 months and beyond. The challenge is at this low of a spend threshold, she's not offsetting her retainer and fees and she's spending so little that it's actually destroying her Financial investment. So at this investment rate, even with a successful campaign, she was positioned to go into the hole in terms of negative cash flow implications month after month after month after month, all the way to. She would have had to run this ad for 11 straight months or nine straight months, going in the opposite direction in terms of overall cash flow impact. So she's $3,000 in the hole. Ish. After two months, she's $6,000 in the hole after four months. And now she's almost $9,000 in the hole after nine months. And because of the low ad spend, even though she has a good cost of customer acquisition number, she's not offsetting her other expenses like cost of goods, retainer and fees, enough to make this a profitable campaign. And you look at this campaign, it takes till month 10, even with phenomenal cost of customer acquisition cost for this to be profitable. And this is one of the disconnects that I see. And I said, well, if these numbers are actually true, the thing that you should be excited about is you're right, like, like this is not going to be successful. But it's not because this new strategy is not successful. It's because you're not spending enough money to offset your expenses to create profitability and real growth. So if she would have continued on this path, really seeing marketing as an expense and trying to trim that back, she would have only grown her business. And this is, I'm giving you the example of, of the same ad campaign that is getting a customer acquisition cost of $80. So for every $80 she's spending, she's getting a new, let's call it a Botox client through the door. It was different, injectable. But for example, sake, for every $80 she gets a new Botox client, it would have taken 24 months just to add $11,000 in monthly revenue growth to the practice. And it would have taken 10 months for this to even turn back in the opposite direction where it started to cash flow. It wouldn't have become, all in all, net cash flow positive until 19 months into the strategy. What a disaster. Seeing your marketing as an expense and not an investment would make, in this case, let's say all these other things were equal. But now she decides to be aggressive and she's going to spend $5,000 a month on her ad spend. She sees the same customer acquisition cost of around $80 or so. And so we've kind of got that dialed in. She's still seeing $80 customer acquisition cost, but now she's spending $5,000. This campaign generates 60 clients a month and creates immediate net positive cash flow for the business and dramatic growth. So now she's it took her 24 months in example A to grow by $11,000 monthly revenue. She's now growing by $25,000 in an instant. She's at $50,000 in monthly revenue growth for her business before a year in and at 24 months she's almost at a hundred thousand dollars improvement in her monthly revenue growth. This campaign has now generated 1.4 million in 24 months and over $600,000 in net positive cash flow. After cost of goods and the fixed marketing expense of an agency 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? That'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 the 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 other 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 so this is the potential disaster you face when you see marketing as an expense and not an investment. I see this happen way too often where people think I'm uncomfortable with seeing the money go out, so I'm going to trim it back. And in reality, you're killing your short term prospects at profitability. You're killing your potential for revenue growth and success in your business. So I wanted to illustrate that as an extreme example. Instead of going nine months positive cash flow. And there's all sorts of variations of this. Some of you have a fixed marketing budget where you're spending two or three thousand dollars a month on ads. We had a conversation with a client on this recently. They're spending $2,000 a month on ads. And we really have a new patient disport campaign super dialed in. Their cost of customer acquisition is under. It's like $50 right now. So really crazy. Great result. So let's just plug that number in and kind of see what that looks like. So right now, at $2,000 a month, they're creating immediate net positive cash flow after retainer and fees after product cost. And over the course of 12 months, they're positioned to grow the business by $35,000 a month. So if they're doing $100,000 a month now, they're doing $135,000 a month a year in just from this ad campaign alone. Over 24 months, this campaign's brought in $900,000 almost in revenue, $400,000 in net profit. Now the question becomes, if you know your numbers and this is creating immediate net positive cash flow and accelerated growth growth for your business, by not investing more money, you are essentially saying you don't want to, you don't want the free money that's on the table. If you have a money printing machine on your business that for every dollar you put in it prints you 3, 4, or $5 and you decide not to put the dollar in there, you're giving, you're giving up free money. It just is. It's an illogical decision, but I understand the emotional decision that people make when they see marketing as an expense and they only have a certain comfort level with a certain amount of money going out the door. If you know your numbers and your campaigns are setting you up for success and profitability, the only thing that's hindering your ability to grow your business faster and to see more profitability faster is your unwillingness to invest in an effective marketing strategy when it's working. So I hope that makes sense. If your marketing is an expense, you shouldn't be doing it in the first place. If you see it as an expense in the short term, my challenge would be, do you have data to back that? And if not, you need a comprehensive perspective of what your marketing investment is doing for you. Is it producing an ROI or is it an expense? And if it's producing an roi, you want to be as aggressive as you can be within the growth constraints of your business. Let me explain one other consideration though, which is short term cash flow impacts versus long term growth. I talked to a client this month that wants to spend a lot of money. They want to be very aggressive with their ad spend and they had a question about Our, our service agreement as our agency service agreement in terms of when you should expect to see ROI from your marketing campaigns. And let me illustrate how fragile this balance can be. So even spending $30,000 a month, aggressiveness doesn't solve alone the short term cash flow impacts of your marketing investment. Now, it will solve your revenue problem, even if the numbers aren't great. But let me explain what is actually happening here. If there's not enough of a gap between your cost of customer acquisition upfront and your initial visit revenue after cost of goods. So in this case, I'm illustrating a client that would be spending $30,000 a month on ad spend, but they have a $270 customer acquisition cost. Let's say their offer is not super attractive, it's not marketed well. There's, there's just, they're not converting at a high rate. So they're paying $30 a lead, they're closing 11%. We've got a $272 customer acquisition cost and an initial visit revenue of only $400. Well after cost of goods. This is creating negative short term cash flow. Although these people will be very profitable after 12, 24, 36 months, in the short term, you're losing money on the first visit. So there's a delicate balance here between customer acquisition cost and initial visit revenue that can still position you to be profitable long term, essentially be a loss leader in the short term. So in this example that I have on my screen, for those of you watching on YouTube, even at spending $30,000 a month, generating 110 new patients per month, that's going to, that's going to create immediate revenue boost of $45,000. The first month you do this, you boosted your business by $45,000 in revenue, but it took you $30,000 in ad spend, ad expense plus cost of goods to do that. So in my example, you're losing 10 or $11,000. You're in the whole 10 or $11,000 three months in. And it takes until month five or month six for this to overall turn into a cash flow positive investment. So what do I mean by cash flow positive? It means after all costs are considered, if you had $100,000 in your bank account, you now have, you have $95,000 after three months, or, sorry, $90,000 after three months, $93,000 after four months, $98,000 after five months. And it takes to month six to now you have $106,000. It's created net positive cash flow. All things considered, again, Long term, looking at this strategy, you're going to be in great shape. Even with what I would call less than optimal customer acquisition cost, you still created $2.5 million in revenue and $700,000 in net profit, all costs considered after 24 months. So a very successful profitable campaign over a 24 month duration. But in the short term, if the numbers in terms of customer acquisition cost relative to initial visit revenue are not dialed into or that's, that's not at least at break even or better, you will still have short term negative cash flow implications with your marketing strategy. So I want to illustrate that point. I think when you're marketing, the goal should be how do we not lose money, at least break even or make money after cost of acquisition and cost of goods on our initial visits so that we can set ourselves up for for growth and success, while also ensuring that we do have minimal impacts or at least maybe even a positive impact on short term cash flow considerations as well. So lots of math today, but bottom line is, if your marketing is working and you know your numbers, your marketing is an investment that's helping you make more money and improve your profitability. If you're seeing it as an expense, you're doing it at the detriment of the profitability and growth and success of your business.