Most medical spas have grown out of an existing physician practice. The idea of having technicians producing revenue, low additional overhead, increased patient flow, and feel that “I could do that” is attractive to a large number of doctors who are tired of grind of medicine. (We’ve been approached by a surprising diversity of physicians looking to enter this market including; anesthesiologists, cardio-thoracic surgeons, and even podiatrists.)

Multiple Locations: After some initial success, many physicians and MedSpa owners attempt to open additional locations. (For some reason, these second-clinic startups are often opened by a relative, usually a wife or daughter.) These second locations never achieve success of first clinic for a very simple reason; their a completely different animal. If you’re thinking of opening multiple locations you’re work load just tripled. Multiple location sites are outside abilities of most physicians and involve a much greater financial risk. Staffing and human resources, legal issues, medical oversight… most fail within first year.

Successful multi-location practices are built around systems. If your first clinic doesn’t run without you there, you’re not ready for a second. Expanding to fast is a sure why to overextend your resources. Then you’re in big trouble. If you’ve closed a second clinic, lenders are going to be very wary of lending you money.

The Turn Key Solution: Franchises and consultants love to drop this phrase. The idea is an attractive one. Experts will guide your steps to financial glory. Marketing, financing, training, everything will be delivered in a nice little box with a bow on top. But, knowing a number of franchise owners and problems they’ve encountered, I would give this advice; beware.

The current crop of franchises have a lot of problems. (One of them in California was shut down for selling medical practices to non-physicians. They’ve since reopened and are among most aggressive advertisers.) Franchises are attractive because they claim to have all answers. If you’ll just write checks all of your troubles will be over. Not so fast. What you’ll really get are some manuals, pre-written scripts for sales, and bad ad-slicks. You’ll also get: locked into specific technologies that might be second-tier (the franchise gets kick-backs), spend money you could use elsewhere, and pay royalties on all of your income. (The franchises that offer a flat fee are an even worse idea. They have absolutely no motivation to help you.)

Big dogs eat little dogs. The next five years will see dramatic and disruptive changes in this marketplace. Large, well-financed medical businesses with smart physicians and high-quality care are going to open up next door to you. (You’re corner store, they’re Wal-Mart) These businesses will be category killers and if you’re not well established with a broad market presence and multiple revenue streams, you’ll be gone.

The $80,000 towel dryers. Choosing right technology is one of things that will let you move ahead a step, or put you in cement boots where you stand. I always think of way one physician described pair of IPLs [Intense Pulsed Light devices] that he’d bought; as $80,000 towel dryers. Before you decide on which system to buy you’re going to need to crunch numbers. How many shots will IPL heads last for until they need to be rebuilt? How much support is included? What kind of training is provided? Does device work better than its competitors? Before you sign your next few house payments away, make sure of your technology decisions.

Buy or lease. Leasing is best way to go if you want to pay for your equipment as you use it while preserving your capital. Many of technology companies have delayed payment plans as long as six months. Buying used equipment is often best way to save money if cash flow is not an issue. (We purchase used medical lasers and IPLs online from a broker we trust and sometimes negotiate with our buying power for other physicians.) You can often save up to 40% off price of a new machine if you have cash on hand.

Don’t guild lily: Cash flow is a problem many start-up medical spas face. Revenues and growth projections are commonly exaggerated in excitement of a new business. Before you invest in embroidered leather treatment tables, make sure you can pay your bills. One medical spa startup spent $350,000 on build out and didn’t have any money left to attract patients. They were out of business in four months.

A few simple finance rules: • The Golden Rule is actually translated as: He with gold makes rules. • You will end up being personally responsible for money: Physicians sometimes think that they can use equity in their medical practice or future earnings as security. Nope. • Be frugal: Take only amount of money you need. It’s tempting to take as much money as you can get. Don’t. All money you take will come with strings attached. • Take enough money: Lenders hate it when you need additional money. They worry something’s going wrong in original plan. • Sometimes you can’t get there from here: Competition is fierce. If your market is already “owned” by a competitor, think carefully before going into debt to compete in a market you can’t win.

Tighten your belt: Financing is like anything else. In order to really find best solutions you’re going to need to do some research. Find a mentor, someone who’s done it before and knows what to avoid. And remember, most common reason that businesses fail is not lack of capital, its poor decision making.

Resource links for all of businesses and information discussed in this article are available online at www.surface-med.com

Find someone smarter than you: The most important step is good management. Without that, people can, and have, lost everything. If you don't have good management skills, hire someone from outside medicine who does.

Franchises: “Turn key solutions”. That’s how almost everything is marketed to physicians. Buy this technology, hire this personnel, run these ad slicks, and everything will fall into place. Sorry. It doesn’t work that way. Most of these franchises are sold as a sort of “we’ve already worked out kinks” sort of deal. It’s a lie. Franchises focus on treatments that everybody else will be able to replicate with ease. It’s more a case of, “ In kingdom of blind, one-eyed man is king”. You don’t need a franchise.

All technology is not created equal: Despite what company reps will tell you, choosing right technology will mean big differences at end of year. Efficacy, cost per treatment, initial costs, usage, and a long list of other considerations should go into technology decisions. Many physicians jump first and then end up with $80,000 towel dryers that they still have to make payments on every month. Used medical devices are readily available from constant stream of bankruptcies and failed medical practices. Choose your technology carefully.

Understand marketplace: Medical spas are a luxury business. And for most physicians it comes as an unwelcome surprise that their new patients are more demanding. Long waits, aloof staff members, poor communication, and ambivalent staff, are all in past. You’re touting yourself as a luxury service, act like one. Hire top-notch people that are service-oriented, friendly and courteous. Protocols can be taught easier than attitude.

Rein in your ego: This is business. It’s not personal. If you feel you must charge twice as much as your competitors because you “deserve it” or you’re board certified, get used to empty appointment book. One of my personal pet peeves is condescending attitude of many physicians.

Do not use “advanced” or “laser” in your name: The number of “advanced” laser clinics is staggering. Don’t do it. It’s inane, overused, and bland. I actually had a physician ask me if changing his name from Advanced Laser Centers to Advanced Laser Group would get him more business.

Network with successful medical spas: Successful business owners are only to happy to help newcomers to industry. We have constant dialogue with physicians and investors who are investigating marketplace and have advised clinics on four continents. Successful medical spas will be happy to build bridges with smart businesses.

Don’t look to day spas to solve your problems: Physicians hear “spa” and immediately think that day spas have answers they’re looking for. Wrong. The average net margins for day spas are around 8%-10%. The average physicians is 60%. This is a different market.

Don’t base your pay on commission: Commissions sound like a great solution. You save overhead and motivate your staff to grow business. Wrong. Commissions are used in spas to keep overhead low, but guess what. Staff members working for commission aren’t working for you. Commissions lead to overly aggressive staff that don’t do anything for your reputation.

Don’t gild Lily: You may have heard that you have to “build out” your clinic at cost of $80-$120 per square foot. Nope. You don’t have to start with treatment tables that have your clinics name embossed on them. Spend all your money before you open and you won’t be able to spend it where you’ll really need it… getting butts in seats.

Stay lean: Physicians practice medicine based on science. You don’t need to offer massage and you don’t know anything about it anyway. Stick to basics.

More information is available online at www.surface-med.com