The Critical Element (Likely) Missing in Your MedSpa Business Plan

If you’re a MedSpa owner, you might find yourself with a stockroom full of incredible products – serums that you swear by, and sunscreen you can stand behind.  

But how many boxes of that serum do you have?  Is it time to re-order Botox? How do you know?  

Our clients are incredible clinicians, expert marketers, and ambitious entrepreneurs.  However, we are noticing that between appointments, staff management, and the many other hats they wear, MedSpa owners are not properly accounting for nor strategizing inventory purchases critical for a successful MedSpa business plan.

Whether a client aims to remain competitive, prepare for a partnership, or somewhere in between, inventory tracking and planning are critical for MedSpa’s success.  

What happens if you don’t have a MedSpa business plan?  

We see MedSpas that wants to sell or partner but hasn’t changed their inventory balances on their balance sheet in three years.  One owner who tried to sell to private equity reported the same inventory in 2020 as she did in 2023.  That’s not possible!  This gap in reporting equates to a gap in financial accuracy, which will impact how fast you can grow and to whom you can sell.  Even if an acquisition is the last thing on your mind, inventory management still matters because, without it, you don’t know what your true margins are. 

Hurdles to Inventory Planning

1. Bandwidth.  Most MedSpa owners aren’t doing an inventory check each month because of bandwidth!  Neither they nor their employees have extra time to count boxes at the back.  
   
2. Gut feeling, not data.  Sounds counterintuitive, right?  MedSpa owners, who often are also providers, are with customers daily; they have a sense of what they think they need.  They hear customer requests and make recommendations during multiple appointments daily.  Owners, however, aren’t counting.  They mistake their proximity to the client with actual data, and base purchasing decisions accordingly.
   
3. Persuasive vendors!  The vendors are really good.  With larger purchases, they can promise to “Tier you up”, offering a deeper discount, which theoretically offers a larger margin, right?  Not necessarily.  First, if you’re not inventory planning you don’t know if you even need the product.  Second, oftentimes supply reps will offer extended 90-day payment terms to help support larger orders. If your MedSpa is on cash-based accounting, these extended payables can distort your actual profit.

So what are our MedSpa clients doing instead? 

Instead of inventory planning as part of their MedSpa business plan, our MedSpa owner clients are simply asking:  Do I have enough cash to make this purchase?  

If there is cash in the bank, why not?  Plus, the volume discounts are so good (see above), that I must be increasing my margins.  

But the problem with this thinking is that if you do not have a true handle on your average inventory cost per item, you may not be aware of inventory price increases. You may be losing margin over time by not increasing your prices to keep pace with inflation.

How to Course Correct

If you’re a MedSpa owner with no inventory management experience, you can absolutely course correct, starting today.  Having the financial knowledge and skills to run your MedSpa will ensure its sustainability long term (versus the MedSpa down the street that is buying on gut feeling and could run out of cash next month).  

1. Familiarize yourself with your practice management software and the tools available.  Does it have inventory management functions, etc?
2. Are you properly accounting for your retail products? If so, how?
3. Pick your largest volume item – and start there. Referencing the past 12 months and record
   • the date of purchase
   • the purchase cost itself 
   • the total amount of units

Then, calculate the average cost for that item in each purchase order.  

Finally, count the total number of units you have in stock of the consumable.  Write it down in a spreadsheet.  

Spending time in your practice management software, your reporting for point-of-purchase retail sales, and taking one step towards clarity on consumables, will be what keeps you competitive and prepared.  Then, you’ll be able to better plan for repeat clients, cash forecasting for new services you may want to launch, and more.  

Summary

If you want to remain competitive and develop your skills as a business owner, a deep dive into your inventory purchasing program may uncover opportunities for your MedSpa.  Think through what bandwidth hurdles, assumptions, and vendor relationships may be getting in the way of accurate and often time-consuming inventory planning work.  Then, get to know your practice accounting software to see if there are reporting functions you can use to help you gain clarity on how much consumable inventory you have.  Finally, consider running a report on just one consumable you stock.  Whether you are looking to find out what you’re “really making” (not the same as cash in the bank!) or prepare for something bigger in the future, your MedSpa – and peace of mind – are worth inventory planning today.