Reaching out of your 'comfort zone' for ancillary revenue stream

CST Web Exclusive: The medicine-marketing medspa mix
Reaching out of your ‘comfort zone’ for ancillary revenue stream

Nancy A. Melville
Senior Staff Correspondent

National Report — As baby boomers embrace cosmetic surgery as a rite of aging gracefully, the temptation has never been greater for physicians to branch out into the potentially lucrative realm of medical spas and cater to the wrinkled, sun-damaged masses.

Selling medical procedures for ancillary profit, however, can mean turning the practice of medicine into much more of a business venture, and for some would-be entrepreneurs, that can mean unique challenges for which all of those years of medical school offered no preparation.

Decisions on everything from medspa location to marketing strategies and whether to join a franchise can make or break the best-laid medspa plans, yet, amazingly, many doctors jump into the fray with little or no preparation.

Failure Rate
“Our data indicates that as many as 65 percent to 70 percent of medical spa failures are due to a lack of a simple business plan,” says Eric Light, president of the International Medical Spa Association and president of Strawberry Hill Group Consulting, Cincinnati. “Common mistakes doctors will make include overbuilding a facility and undercapitalizing the marketing,” he adds.

With the number of medspas growing exponentially in recent years — from 500 to 700 in 2003 to the current number of 1,250 to 1,500, according to Feedback Research Services — trends are emerging that provide clues to which strategies are working, and which aren’t.

“We started noticing medspa failures in the spring 2006, and when we looked at which ones were doing really well and which ones were doing poorly, we determined that the stand-alone medical spas were the ones really having difficulty,” he tells Cosmetic Surgery Times.

The investment necessary for opening a stand-alone spa makes it a greater risk and increases pressure to generate more business. “Physicians may need to drop $700,000 to a million dollars on a second location, whereas they may only have to spend about $200,000 by integrating the spa into their practice; so it really can be a huge investment,” Mr. Russell says.

“You need to do a lot fewer Botox injections on a $200,000 loan, versus a $900,000 loan,” he adds.

Medspas linked to franchises also have been struggling, and even though they only make up a small percentage of medspas, many doctors in franchise agreements want out, according to Mr. Light.

“I can tell you every doctor I’ve spoken with has wanted out of their franchise,” he says.

Without naming names, Mr. Light says he knows of at least two major medspa franchises that are facing lawsuits from franchisees, with the key complaint being a lack of marketing.

“The ideal premise for a franchise would be to start in one location and expand regionally to establish a national brand, but almost all medspa franchises are lacking in national marketing for their brands, and doctors really need that,” says Mr. Light.

Whether or not a medspa is part of a franchise, marketing can be very tricky territory for physicians, whose traditional role, after all, is fundamentally to try to treat problems so that patients don’t have to come back.

The Cross-Sell Challenge
That approach, of course, directly contradicts the repeat business that’s needed for a profitable medspa, and some physicians simply may have trouble wearing both hats for marketing and medicine.

“The key to longevity and success with a medical spa is cross-marketing, and some physicians may not comfortable with that, but it’s necessary in order to be successful,” Mr. Russell points out.

“Patients may come in for laser hair removal and you need ask if there is anything else they need to change. You let them know about Botox or Restylane and at the same time perhaps recommend a physician-directed skin care program at home — it’s a constant selling,” he adds.

Brand It
Monte O. Harris, M.D., co-founder of Cultura Medical Spa in Washington, D.C., agrees that medical spas challenge doctors to come up with entirely new business skills, but he says physicians can avoid the hard-sell by using other strategies, such as building their own unique brand.

“Running a medical spa definitely involves taking doctors out of what would be considered their traditional comfort zone of seeing patients,” he says. “You can wind up, to a certain degree, being more of a businessman than a service provider and some physicians are able to juggle those responsibilities well and others are not.”

“The key is to really establish a brand and differentiate yourself from all of the others,” he explains.

Dr. Harris founded Cultura with partner Eliot F. Battle, M.D., about five years ago, and the medspa has differentiated itself by carving out a niche in treating darker skin types in an upscale market. The spa has a walk-in storefront and offers standard services including laser treatments, injectables and retail products. In addition, Dr. Harris has a national reputation as an ethnic rhinoplasty expert, and he attracts a nationwide clientele for those surgeries.

Instead of advertising, Dr. Harris says the medspa started by simply doing its own public relations and built the business from there based on word-of-mouth.

“In looking at the ads that were out there, we purposely did not advertise because we wanted to make sure our brand was going to be represented in the right fashion,” he explains.

The physicians’ expertise, of course, can be a critical factor in the building a brand, as patients need faith in the quality of care they’re receiving.

“Some medical spas that are business-oriented or link with a franchise may deliver treatments that are sometimes more focused on generating revenue and not in the best interest of the patient,” Dr. Harris says. “I think that will always be that conflict in this elective-based cosmetic arena, particularly if there is not a physician-driven focus.”

Reputation Is Everything
Even having a strong local reputation can make a big difference in mitigating the need for heavy marketing, in the opinion of Laurie Casas, M.D., a Glenview, Ill.-based plastic surgeon who has run a medical spa out of her office for 15 years, and who opened a stand-alone spa in November 2006.

“I have never marketed myself or paid for advertising, but I’ve been in practice for 17 years,” says Dr. Casas, who is a board-certified plastic surgeon and an associate professor of surgery at Northwestern University’s Feinberg School of Medicine.

“I think the most important ingredient for a stand-alone medical spa is that the physician who is owning, operating and directing it has a reputation. That’s what brings in the patient base and then your patients generate additional word-of-mouth business.”

“If you advertise but you’re someone no one knows, then I don’t know how effective your advertising is, unless it’s just a one-time deal where the person comes in for price,” she says.

Instead of advertising to the general public, Dr. Casas’ office uses internal marketing such as mailings and emails, and she sends out a quarterly newsletter to her existing database.

“It’s going very well, but I see it as an engine that’s slowly picking up steam, rather than having peaks and lows every month when people see advertising.”The approach offers a lesson for physicians lured into the medspa business with the promise of fast profits and patients lined up at the door.

“Physicians are hearing stories of profit margins that are 30 percent to 50 percent,” Mr. Russell cautions.

“The margins can indeed be better than a standard medical practice, but you really need to carefully consider a projection. Physicians think they’ll have 15 clients coming in the first day and that’s likely just not going to happen.” CST

For more information
Eric Light
[email protected]

Jeff Russell
[email protected]

Monte O. Harris, M.D.
[email protected]

Laurie Casas, M.D.
[email protected]