These days, many physicians are interested in pursuing aesthetics as a side gig or a main gig. The allure is seemingly obvious, as this is a cash pay service that many patients are looking for, so services are ostensibly in demand. However, before venturing down the route of owning a med spa, it’s important to know the pros and cons, what challenges you can expect, competition in this space, and how profitable it can be. Below, we’ll cover these topics and more.
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Introduction to Med Spa Ownership
On the surface, for many doctors, the notion of owning or investing in a medical spa or similar non-invasive aesthetic service center seems like a no brainer if you have the skills and motivation to run one. Many picture a situation where healthy patients come in for elective cosmetic services that are entirely cash-based, with the med spa providing ancillary services and generating income from everything from massages to skincare products to botox and fillers and lasers. Physicians can use the help of aestheticians and other practitioners who are appropriately trained in these procedures to help scale their businesses. Emergencies are exceedingly rare, and the spa hours can be adjusted to your schedule. If profitable, you can open more than one and capitalize on efficiencies with size. Statistics from the American Society of Plastic Surgeons demonstrate an increasing trend for younger patients seeking non-surgical cosmetic procedures, so ostensibly, you’d have growing demand. So what’s not to love?
As with all business ventures, it turns out it’s not that simple. That doesn’t mean it’s not a good idea, but before you dive into owning a med spa, there are many considerations you should take into account, including the necessary training, competition and profit margins, overhead, market forces, and the time and energy needed for advertising.
We spend a little more time on these cautionary aspects in this article since the pros are more self-explanatory, but we want to make sure you don’t think it’s because med spa ownership is a bad idea. For the right person who goes in with eyes wide open, it can be an excellent opportunity!
Pros of Med Spa Ownership
We’ve alluded to some of the potential advantages of med spa ownership already, including the cash pay nature of the services offered and the demand for services, as well as the ability to build passive income streams and scale a business. Much of the daily work in an aesthetic med spa can be performed by injectors or aestheticians, and therefore, the physician / medical director can usually decide how much or how little of the hands on patient care they are directly involved in. Note, however, that the level of involvement necessary will depend on the complexity of and skills needed for each offering. For example, some physicians in our physician communities feel more comfortable with others handling IV hydration and aesthetician based services such as microneedling or facials, but want to be more involved with procedures such as PRP or lasers. It will also depend on the level of experience of those working in the med spa.
Additionally, for those very entrepreneurial physicians, as revenue grows and a brand presence is established, expansion to multiple offices is possible to grow the geographic catchment. This can then also be leveraged for eventual sale or investment by outside investors. Private equity groups are very interested in this space, and we have several examples of physicians who have made a lot of money through buyouts or investments from PE groups.
What Should You Be Aware of Before Pursuing Starting and Owning a Med Spa as a Side Gig or Main Gig?
The Right Background and Clinical Training to Start A Med Spa
Perhaps the singular most important aspect is ensuring you have the right skill set to provide medical aesthetics services. Are you comfortable injecting neuromodulators (for example, Botox) and hylaronic acid fillers and dealing with the complications of these injectables? Do you have the experience to know which lasers should be used for tattoo removal and how Fitzpatrick skin type factors into your selection of the device? Are you aware of the contraindications for laser hair removal? Although most of the daily services can be provided by aestheticians and advanced care providers, you should be comfortable managing these patients and their potential complications. While weekend courses can provide a starter on injectables and the relevant anatomy, they likely won’t provide sufficient breadth and depth to be proficient in managing complications from the various aesthetic services that can be offered.
Injectables such as fillers and neuromodulators have become the bread and butter of med spas given the low barrier to entry. However, as a physician, it’s important to remember that very real complications can occur, and you need to be comfortable managing these complications. Often, this can only come with experience. If you are not trained in these procedures through your residency and fellowship training, it’s important to make the effort to learn about them. Webinars and training sessions run through the injectable manufacturers, in addition to hands-on practice with expert injectors employed by the manufacturers, can be useful adjuncts to round out your background.
Competition and Market Forces in the Med Spa and Aesthetics Space
Competition in the med spa space has increased dramatically over the past decade, as more and more non-physicians have entered the space and as private equity investment in the space has increased. It can now seem like there are aesthetics practices on every other corner.
With the increase in competition, prices have significantly decreased and margins have become much lower, hovering currently in the range of 25% - 35%. These margins are usually not related to professional fees but rather just margin on product, so as aesthetics practitioners look to gain a competitive edge, many have slashed prices, and it is felt by many in our communities that this will only continue. This has raised a real question for physicians as to whether the lemon is worth the squeeze.
The other thing to note here in terms of threats to the business model is that cosmetic procedures are very sensitive to market forces. As we’ve had a decade of very strong economic growth, those physicians who have entered the workforce during this time may not have a recent memory of how dips in demand can happen during times of recession. When performing your market research, this makes it all the more important to ensure that you factor in a potential loss of demand when thinking about the long term viability of your business model.
Market Analysis for Your Med Spa Business
If you have the appropriate skill set and are okay with the market forces discussed above, the next task is to assess the market. This can not be overemphasized given the degree of competition in this space.
Choosing a Location for Your Med Spa
Deciding on a location is critical. What’s the local competition? Is there an adequate patient base from which you could draw your cosmetic pool? Patients typically will be less willing to travel for smaller cosmetic services such as injectables or hair removal; therefore, the location would ideally be convenient for a younger population with some disposable income. One potential approach is to begin first by incorporating medical aesthetics into your existing practice prior to having a new brick and mortar location. This way you can establish experience, a reputation, and grow patients without the requirements of large amounts of capital.
Learn more about choosing a location for your private practice.
Deciding What Services You Offer in Your Med Spa
As you assess the local geography and market conditions, decide which services you would want to start offering. There will likely be at least several private equity backed competitors already in the market, so you will want to see if you can start by carving out a separate niche, but you don’t want to do too much too fast either.
Most med spas will offer neuromodulators such as Botox and hylarunic acid fillers. The good news is that these are much less expensive to purchase. Get to know your local reps for the various injectable products and determine what your pricing structure will look like. You can then use this as your starting point when deciding how to price your injectables. Keep in mind larger purchases will lead to steeper discounts on pricing.
After this, it becomes more complicated. It’s tempting to offer everything all at once, however, instruments such as lasers and radiofrequency skin tightening devices require six figure capital outlays and have associated maintenance costs, so you want to be careful about jumping all in before understanding your demand for these services and whether you can recoup these costs. Also, unlike for traditional insurance based private practices, lenders are more skittish about giving you commercial loans to start an aesthetics practice given what we discussed above, so you’ll likely be bankrolling much of the initial expense. A slow rollout of services as brand awareness and popularity build is likely much more prudent.
For each high end device you incorporate into your med spa, be sure to run a pro forma on patient flow. This should take into account the cost of the device plus its insurance, maintenance, and consumables and factor in the number of patients needed to treat to recover your costs. For many practices, prior to purchasing new equipment, they generate a waitlist of interested patients who are contacted once the device is purchased. This way, you can hit the ground running on paying for the instrument.
There are several options that don’t require you making outright purchases of new equipment at list price. One is to investigate a lease with the manufacturer. Also keep in mind your local device rep will likely have year end deals on devices as well. If a new device seems too risky an investment, look into the purchase of an existing device from a retiring dermatologist or plastic surgeon. These will frequently be in good working condition and offered at a substantial discount compared to a new device purchase.
Marketing Your Med Spa Business
Marketing the med spa is another necessary essential aspect for growth and patient volume.
In addition to website design, expect to invest in search engine optimization (SEO) for brand awareness and potentially have ads in local magazines. Focus also on developing high quality Google reviews early.
Budgeting will need to accommodate capital outlays for influencers to promote the med spa via social media, ad buys across the social media platforms, and a “grand opening” with giveaways to generate buzz.
Many in our communities say to expect ongoing maintenance costs for marketing and website to be approximately $500 to $1500 per month, but note that in certain markets, it could be much more depending on the competition. Also, keep in mind that these costs aren’t just monetary - they’re also the opportunity cost of your time in creating constant content to continue to bring in new customers. While some people have fun with content creation and find this an enjoyable part of the process, marketing the med spa is unquestionably costly.
Learn more about marketing your private practice.
Learn more about creating a website.
Learn more about creating a brand.
Staffing Your Med Spa Business
As with all businesses, this is likely one of the most difficult and important aspects. Are you planning on being a medical director and hiring nurse injectors and aestheticians? If so, keep in mind that labor costs are among the highest portion of overhead in this situation.
Aestheticians are a valuable asset to a med spa business. By adding aesthetician services, you can add microdermabrasion, chemical peels, facials, and expand your laser services. Additionally, the aesthetician can increase product sales.
The addition of another physician or advanced care practitioner allows for the development of a more stable and more passive revenue stream where the injector has a steady flow of patients returning quarterly for their maintenance treatment. While this will likely be your highest source of labor costs, a skilled physician, NP, or PA can operate semi-independently and grow the practice.
Note that if your med spa is in a state where advanced care practitioners must practice under the supervision of a physician, then the liability of their treatments falls upon the supervising physician. You will need to spend a lot of time finding the right people with appropriate credentials and experience, and who will work with you in a way that you feel comfortable with. While employing a NP or PA will be cheaper than employing a physician, you will have to weigh the pros and cons carefully.
One thing to think about carefully during the contracting process for physicians and non-physician practitioners is the noncompete clause. While we definitely globally think there are problematic aspects to noncompete clauses, most med spa owners will incorporate them into contracts, as this is a space where the practitioners will generate a recurring patient base who will stay loyal to them, and if they were to leave and set up shop across the street after using your overhead and upfront risk to build their brand and reputation, it could be financially devastating to your business.
A Side Note About Being the Medical Director for a Med Spa
As a side note, sometimes doctors are asked to be the medical director for a med spa that is owned by a PA or NP. This is a commonly asked question in our communities, as our physicians routinely are approached by non-physician providers who ask them to be their supervising physicians in states where they are not allowed to practice independently. It elicits a strong response from most of our community who feel very strongly about the risks of assuming liability for someone else who is essentially renting their license. Ultimately, anything that goes wrong in this situation will fall on the supervising physician, and there are many examples now of lawsuits where the NP or PA performing the procedures were released from liability while the physician (most often not even on site) was held liable. We caution all physicians to think very carefully about whether the (often very low) compensation for serving as a supervising physician is worth the liability and the potential risks for patient care when allowing others to practice under their licenses.
Conclusion
While aesthetics services and med spas can certainly be profitable and scalable, any suggestion that this is easy money in today’s landscape is easily debunked by several in the field in our physician communities. If you have an interest in this space, make sure you do your due diligence about the market and the profit margins. Ensure that you have the motivation and financial rewards necessary to make the med spa thrive, as well as a passion for the space and the appropriate skills to do this safely. Opening a med spa requires a large investment of money, time, and energy, so it’s important to understand the challenges before embarking on this pathway.
As the pros are seemingly obvious, we spent a little more time with the cons and cautions in this article, but it’s not because we think med spas are a bad idea! For the right person, med spa ownership can be a great opportunity. If you’ve decided to pursue it, we wish you the best of luck!
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