Understanding how to effectively run a medical aesthetic practice can be overwhelming when you are not equipped with the tools, resources, and information to be
successful. Although many aesthetic owners are experts in achieving optimal outcomes, most have little or no experience in how to operate a successful business.
Creating key areas of focus can simplify the how and where owners can impact their clinic’s revenue, profitability and/or efficiency.
Key performance indicators (KPIs) can be defined as what we measure to understand where to focus our time and attention on within our business. KPI’s provide us with valuable information to make better, more informed business decisions.
However, knowing which metrics to track is one of the biggest challenges.
It’s all in the Method…
Understand how to calculate the three most impactful KPIs.
First, we need to understand some basic terminology to gain clarity on what the numbers mean.
- Revenue is the money that is generated from the operations of your business, this is through the services you provide as well as the products sold.
- Gross Margin is the amount of money earned after deducting your cost of goods for your services. (Revenue-COGs) For example, if you generated $100,000 of revenue from injectables and you spent $60,000 on supplies that are directly used for those treatments, your gross is $40,000
- Net Revenue is the amount of money left after subtracting all your business expenses such as overhead, marketing and payroll expenses. (Revenue-all expenses). For example, your total revenue is $100,000-$80,000 (all your expenses), therefore you net is $20,000. This will allow you to know how profitable your business is currently.
- Profit Margin is the business profit expressed as a percentage. This will allow you to understand your profit and be able to compare it year after year. This is generated by diving the net revenue by total revenue and multiplying by 100. For example, your net is $20,000/$100,000 (total revenue) =0.2 or 20%
The three most impactful KPIs to track within your clinic to measure performance, efficiency, and profitability.
Revenue per provider
This is the amount of total revenue generated by one provider divided by the number of hours they worked. For example, total revenue generated by provider A is $40,000 divided by 160hr worked equals $250/per hr from provider A.
Why we care?
This is used to measure how productive your providers are at generating revenue each hour they are working at your clinic. This will allow you to know how much money we are making from each provider. This will also allow you to compare providers to each other to know who is generating the most amount of revenue.
Revenue per patient
This is the amount of total revenue generated in a certain period divided by the number of patients seen within the same time. For example, the total revenue is $100,000 divided by 250 patient equals $400/ per patient average spend. This will allow you to know how effective your staff are with each patient treatment or service.
Why we care?
This will also give you an average patient spend to determine what you may need to improve on with your cost of services, consultation process or staff performance.
Profit per treatment
This is the amount of revenue generated (after expenses) for each treatment or service provide at the clinic. This is determined by adding the treatment expenses and dividing that by the patient cost of the treatment. For example, the clinic charges $300 for 30 units of Botox, therefore, if doing 30 units of Botox costs you $30 for supplies, $100 for staff and about $25 for overhead expenses then you know that $150 profit divided by $300 is 0.50 or 50% profit margin for that treatment. This allows us to know how much each treatment costs in supplies, staff, and general overhead expenses.
Why we care?
This will determine the profit each treatment brings in for the clinic and therefore, allows management to make decisions based on profitability such as marketing focus and spend.
As a business owner, it is important to have a clear and concise understanding of where and how your clinic generates money. This allows you to know how to market your business, support your staff as well as invest time, resources, and energy. Not only do Key Performance Indicators (KPIs) allow for business owners to create revenue targets and goals but they also allow for benchmarks and measurements for tracking their business growth and development.
Reach out if you have any questions.
