Med spa profit margin, staff utilization, and more ways to measure your business health

Medspa services are a fusion of aesthetics and medicine — art and science. Running a medspa is much the same. Your business sense and unique perspective on what your clients want and how to deliver it constitute the art. We have plenty of other resources to help you cultivate your business vision, but this article is all about finding the metrics you need for medspa growth and profitability — in other words, the science.

To have the best shot at success, you need a platform that makes it easy to surface and track relevant data through powerful and customizable reports. But no matter how you find and organize the data, we’ll help you find the most impactful areas to focus on, starting with one you’re likely already familiar with.

How important is your med spa profit margin?

Your med spa profit margin is a helpful snapshot of your business’ financial health, but it should always be considered in the context of other metrics to get the full picture. First things first, here’s how to calculate your med spa profit margin:

100 * (gross profit of your business / total revenue of your business) = med spa profit margin

Profit margin is a particularly helpful measure of medspa growth and profitability for owners and investors — it answers the question “is owning a medical spa profitable?” as of this moment. Yet focusing on profit margin above all other metrics risks giving you tunnel vision.

For instance, investments into the client experience, such as new equipment, software, or staff training, may lower your med spa profit margin in the short term. But strategic investments that cut your profit margin now could pay off with an even higher one later.

7 metrics to track medspa growth and profitability

Ready to learn more ways to apply the scientific method to running your medspa? Here are 7 more key metrics to consider.

Average revenue per client

Finding your average revenue per client will help you focus on cultivating clients with the biggest impact on your bottom line, rather than simply trying to get more people through your doors. First, settle on a time period to track (monthly is a good start), then:

Total revenue during a time period / total number of clients during that time period = average revenue per client

Compare time periods to see how your average revenue fluctuates, then see if you can correlate those trends to other factors. Did you see a dip in average revenue per client after you did a sale on gift cards? Did you see it increase after you refreshed your selection of add-on services?

Rebooking rates

All self-care businesses thrive on turning first-time clients into regulars. Calculating your initial rebooking rate will help you track how many of your clients make that vital leap:

100 * (total number of new clients who rebook after their first appointment / total number of new clients) = initial rebooking rate

It’s also helpful to track how many clients come back overall:

100 * (total number of clients who rebook after an appointment / total number of clients) = ongoing rebooking rates

Your ongoing rebooking rate will likely be higher than your initial one as clients naturally build relationships with your business, but keep an eye out for shifting ratios over time.

Membership rates

Memberships are one of the best ways to build recurring revenue for your medspa, both from the membership dues themselves and from the fact that members are more likely to keep coming back to your business.

100 * (total number of clients / total number of members) = Membership rate

It’s just as important to track how many clients decide to end their memberships — this is your churn rate.

100 * (total number of members / total number of members who end their memberships) = membership churn rate

A certain amount of churn is unavoidable. But if you see a marked increase, it’s time to start looking for any issues that could be driving clients away.

Marketing ROI

It’s easy for marketing to feel like a “black box”; you put time and money into marketing, and then clients come to your business, but you’re not quite sure how one influenced the other. Calculate your marketing return on investment (ROI) to find out for sure:

100 * ((growth in sales attributable to marketing - marketing costs) / marketing costs) = marketing ROI

Let’s talk a little more about that “growth in sales attributable to marketing” part. Just because you spent a bunch of money on a marketing campaign and more people showed up doesn’t mean they were all influenced by the campaign. Whenever possible, look for ways to attribute bookings. For instance, you can use built-in attribution methods for online bookings, or ask new clients how they heard about your business during their first visit.

Retail-to-service ratio

Most medspas bring in revenue by selling services to clients and by selling goods to help them look and feel their best between appointments. Here’s how to quickly tell how much each aspect contributes to your bottom line:

100 * (total retail sales / total service sales) = retail-to-service ratio

Your ratio will differ from that of other medspas depending on the types of services and products you offer. Achieving a healthy mix of the two is a great way to diversify your revenue, which makes for a more sustainable and resilient business.

Employee utilization rate

Medspa professionals want to help clients — it’s why they got into the business. Yet if they spend all their time in appointments, they won’t have time to do the other work that’s necessary to deliver an excellent client experience each time. Monitor your staff utilization rate to keep each staff member in the sweet spot:

100 * (Hours booked with clients / hours worked overall) = utilization rate

If your utilization rate is low, you may need to bring in more bookings to keep your people busy. If it’s too high, it may be time to grow your team!

Measure your success

The ideal metrics for one medspa may not make sense for another. But one thing is true for every medspa: the more you measure, the more chances you have to optimize your business. That means happier clients, more fulfilled employees, and a healthy medspa that’s in a great position to keep delivering all of the above for years to come.