In order to establish and build a profitable Medical Aesthetic / Cosmetic company today, business owners must have a wealth of skills and knowledge in many areas: branding, marketing, social media, customer service, astute financial skills, fundamental business skills and of course exceptional clinical skills. What a tall order!
Many business owners believe that the key to increasing profits is just to increase the sales. However, if you really want grow a profitable and sustainable business, the most important skill to master is the ability to understand, keep track of and manage your financials. The most successful business owners do not leave everything to their accountant. They don’t set goals at the beginning of each financial year and then check to see whether they are on track (or not) at the end of each quarter or worse, at the end of the financial year. Successful and profitable business owners don’t record financial data simply to be compliant and legal; they record financial data to help them make appropriate decisions that will affect the profitability and success of their business. They record and monitor every single number; every single week, or for large businesses; every single day.
They understand that accounting is the ‘language of business’.
WHAT GETS MEASURED GETS MANAGED AND WHAT GET MANAGED GETS DONE
So, what about you? Are you measuring the most critical aspects of your business right now? How are your financial and analytical skills? Do you understand this critical aspect of your business, or do you leave it to the ‘experts’? In any business, long term sustainability always comes from knowing what you are doing and measuring your progress. By just being more aware of what is actually happening on a daily, weekly and monthly basis, means that your numbers will naturally improve. However, by taking the time to not only measure but really understand your numbers, means you can take immediate and appropriate actions to improve them, now and not when it’s too late.
Think about it this way, there is not one competitive sport out there that has an announcer who says “Don’t worry we don’t have a scoreboard as no-one looks anyway”. But yet, that is how the majority of people play the game of business. The ability to read and understand your business ‘scoreboards’ is critical. As Billionaire Warren Buffet says; “If you can’t read the scoreboard, you don’t know the score. If you don’t know the score, you can’t tell the winners from the losers.”
UNDERSTANDING AND IMPROVING YOUR ‘SCORE’
Business is changing quickly, margins are tight and the competition is too fierce to rely on luck, gut or instincts alone. As a health professional, you know that staying good at anything, requires continuous learning and execution of the right skills and tools. Business is no different. The trick is to know and understand the underlying route cause of any offending outcome in your business and then change your activities now, to produce better results in the future.
Is your practice profitable? Is each patient you treat profitable? Did your latest marketing or advertising campaign produce a return on investment? Do you know your business trends? Your patient demographics? The number of enquiries you received through your website? Your conversion rates? Your most profitable procedures (don’t forget to take into account how much of your own time is involved)? What are your most popular procedures? Are you recording all complications and refunds?
All aesthetic business owners should be able to answer these questions quickly and easily. However, the reality is that for most, these questions are very difficult to answer, as they are either buried in a pile of paper files or simply not recorded at all.
Can you easily produce reports that tell you the following information?
Revenues / Profits / Highest spend / Most profitable patients
Number of new patients / existing patients seen per day, week etc
% of treatment, service and retail revenue & profits to overhead costs
Number of new enquiries (per marketing source) and conversion rates
Detailed demographics (to target the right marketing messages)
Average spend per patient
The lifetime value of each patient
Revenue streams and profit broken down by procedures and treatments
Waiting times and other key performance indicators
Cost to acquire a new patient (minus all marketing, overheads, staff costs)
Full details of any complications / refunds
Taking the time to determine the cost of acquiring and maintaining your patients is key to maximising practice profitability. Knowing the profit margin for specific patient groups and treatments can help you fine-tune your pricing, streamline your operations and zero in on your most successful marketing avenues; culminating in increased profitability. Don’t leave it until your quarterly review of your management accounts or the annual review of your tax returns to find out if your operation is in the red or the black. Remember, those figures are just a snap-shot picture of one moment in time, they are retrospective, historical, the activities have already taken place and it is too late to change them to produce a better outcome.
The lack of recorded data in the UK aesthetics market became apparent at the Question Time Panel on Saturday 8th March at ACE 2014, when it was discussed how the lack of recorded data made the job even harder for Sir Bruce Keogh’s Cosmetic Interventions Review team. It is now time for the whole industry to step up and start recording every single piece of useful data. Not just for the sake of understanding and improving individual business activities and profits but to help the Government and the public to be fully informed about the UK Medical Cosmetic market.
TOP TIPS:
* Start measuring critical drivers that are essential to the success of your business
* Get expert advice before you reach the VAT threshold
* Speak to your accountant about switching to ‘accrual’ accounting to get a true picture of your finances.