5 More Tips On Financing Your New Medical Spa Start Up

 In the last issue, Jeff Barson reviewed how important sound financial planning is to a new or expanding medical spa business. Part one of "Smart Financing" covered why medical spas need a solid business plan to get financing, how to secure a loan or a line of credit, and other funding options. Part two of this series covers essentials to think about when planning how to use that funding.

You've written your business plan, visited the bank, and possibly rounded up a few dedicated investors. Now that you've got the money you need for your medical spa business, what are you going to do with it? Smart financial planning doesn't end when you cash the check. Here are some common pitfalls and good tips to keep in mind.

Watch out for easy answers from Medical Spa Franchises & Consultants.

Franchise marketers and consultants love to talk about turn-key solutions. The idea is an attractive one: Expensive experts claiming to have all the answers will guide your steps to financial glory by managing your marketing, financing, training, and more.

But I would give this advice: Buyer beware. What you may end up with are manuals, pre-written sales scripts, and bad ad-slicks. You can also get locked into specific technologies that might be second-tier (the franchise gets kick-backs) and be forced to spend money you could use elsewhere. You may also have to pay royalties on all of your income. The franchises that offer everything for a flat fee are an even worse idea. They have absolutely no obligation to help you build your clientele because they are paid the same whether you succeed or fail, and are less helpful when additional questions or problems arise.

Some franchise groups have more serious problems. One medical spa franchiser in California was shut down last year for selling medical practices to non-physicians (remember that non-physicians cannot legally employ physicians, fulfill medical oversight requirements, or address a number of other regulatory issues). They've since reopened and are among the most aggressive online advertisers.

Don't guild the lily.

Many start-up medical spas face cash-flow problems. In the excitement of planning a new business, revenues and growth projections are commonly exaggerated in the business plan. I know of one medical spa start-up that spent $350,000 on building, equipping, and furnishing the facility and had no money left to attract patients. They were out of business in four months. Before you invest in embroidered leather treatment tables, make sure you can pay your bills and have money to drive patient flow.

Choose the right medical IPL and laser technology.

I always think of the way one physician described the pair of Intense Pulsed Light (IPL) devices that he'd bought as $80,000 towel dryers. When trying to decide on the equipment and supplies to purchase, you're going to need to crunch the numbers. How many shots can the IPL heads deliver until they need to be rebuilt? How much customer support is included? What kind of training is provided? Does the device work better than its competitors? Before you sign your next few house payments away, make sure your technology decisions are sound.

Leasing is the best option if you want to pay for your equipment as you use it while preserving your capital. Many technology companies offer delayed payment plans of up to six months. Buying used equipment is another great way to save money if cash flow is not an issue. You can often save up to 40 percent off the retail price of a new machine if you have the cash on hand and know where to look. Surface Medical Spas, for example, purchases used medical lasers and IPL devices online from a trusted broker, and sometimes negotiates for other physicians.

 Control your appetite.

After some initial success, many physicians and medical spa owners attempt to open additional locations. These second locations often don't achieve the success of the first clinic for a very simple reason: They're completely different animals. Multiple-location medical spas are outside the abilities of most physicians and involve a much greater financial risk, increased staffing and human resources, compounded legal issues, and broader medical oversight. Most fail within the first year.


Fast finance facts
Successful multi-location practices are built around systems, not individuals. If your first clinic doesn't run without you there, you're not ready for a second. Expanding too fast is a sure way to overextend your resources. If you quickly open and then close your second clinic, financiers are going to be wary of lending you money in the future.

Big dogs eat little dogs.

Making smart financial decisions now will help you to survive the impending showdown. You're going to need to do some research. Find a mentor, someone who's done it before and knows what to avoid. It pays to learn from the experience (and mistakes) of others. And remember that the most common reason businesses fail is not for lack of capital, but because of poor business decision-making.