Consultant Terri Ross on What to Know When Expanding Your Plastic Surgery Practice with a Med Spa

Join Plastic Surgery Practice Editor Alison Werner as she talks to aesthetics practice management consultant Terri Ross about expanding your plastic surgery practice with a med spa, a topic she recently wrote an article about for us. Ross is the founder and CEO of Terri Ross Consulting and the founder and co-CEO of APX Platform, a business intelligence growth and training platform for the aesthetic industry. 

Med spas are the fastest growing segment of the global cosmetic surgery market. The global market for med spas is projected to reach $25.9 billion by 2026, according to Ross’ article. Moreover, a 2022 State of the Industry report from AmSpa states that the average med spa revenue is close to $2 million per year. With these figures in mind, Ross explains why incorporating a med spa into the plastic surgery practice creates a vast opportunity from a patient care perspective. Surgery is one thing, but building out non-surgical services within the practice creates sustainability, increases the lifetime value of a patient, and improves patient outcomes. 

As Ross explains, plastic surgery practices have two options when incorporating med spa services—one, expand their offerings to include additional med spa services, or, two, build a standalone med spa. She talks about the business dynamics of each choice as well as how to go about doing the market research to understand if a standalone med spa makes sense for your market and the most common pitfalls of going this route. In addition, she offers advice on identifying the services your practice should add (focus on those non-surgical services that augment your surgical procedures). 

And once a plastic surgeon has their med spa in place in their practice, whether expanding services or building a standalone, Ross shares the key performance indicators, or KPIs, they should be tracking to ensure their med spa venture is successful. What’s more, Ross talks about the importance of data to the overall success of a plastic surgery practice and why plastic surgeons need to be just as focused on their business as they are on clinical outcomes to ensure a successful practice. 

To close out the episode, Ross talks about the APX Platform. The platform, which combines business intelligence, training, and community, not only gives practices tools to translate their raw data into actionable insights, but it also provides on-demand sales, finance, and operations training for staff, and a community in which users can receive coaching from Ross and her team. As Ross points out, plastic surgeons have  all the clinical training to be excellent surgeons, but they don’t necessarily have the training to be successful business owners. APX Platform was created to help fill the void. PSP

Podcast Transcript

Alison Werner:
Hello, and welcome to the Plastic Surgery Practice Podcast, a part of the MEDQOR Podcast Network. My name is Alison Werner, and I’m the Co-Chief Editor of Plastic Surgery Practice. Today we are talking to world-renowned Aesthetics Practice Management Consultant, Terri Ross, about expanding your plastic surgery practice with a med spa, a topic she recently wrote an article for us about and which you can find on the PSP website.

Alison Werner:
Now, Terri is the Founder and Co-CEO of Apex Platform and Terri Ross Consulting. A well-known international speaker, Terri has spent 15+ years in the aesthetic industry working for Fortune 500 medical device companies and the leading sales teams. In 2019, she was selected as the official Practice Management Consultant and Sales Trainer for the American Medical Spa Association. But Terry is perhaps best known for the APX Platform, which she launched in 2021 to respond to the real-world challenges facing aesthetic practices. Terri, I’m so glad to have you join us today.

Terri Ross:
Alison, thank you so much for this opportunity. I’m really excited that we connected and thrilled about the opportunity to contribute to the magazine and be here with you today.

Alison Werner:
Yeah. Yeah, excellent. And I should tell our listeners that you are actually going to be podcasting with us on a regular basis and writing for us, so we are so looking forward to that. So we’ll have many opportunities to dive deeper into kind of the issues that are affecting plastic surgery practices, so thank you.

Alison Werner:
So let’s get started. We’re going to set the stage first. In your article, you talk about how med spas are the fastest growing segment in the global cosmetic surgery market. And the global market for med spas is projected to reach $25.9 billion by 2026. What’s more, you cite the AmSpa’s 2022 State of the Industry Report in your article, which states that the average med spa revenue is close to $2 million per year. So what’s the message here for plastic surgeons in private practice in the United States?

Terri Ross:
Well, first and foremost, I think every plastic surgeon has just a vast opportunity, from a patient care perspective, number one. Surgery is great, right? But most clients need more than just that. And the non-surgical space is what is going to create the sustainability, the lifetime value, increase the lifetime value, and improve patient outcomes. So I think that plastic surgeons coming out of fellowship, deciding whether to go in private practice or stay in a hospital setting or going into business, should absolutely incorporate the non-surgical services.

Alison Werner:
Mm-hmm. Okay. So in the article, you say that plastic surgery practices essentially have two pathways here. One, they can expand their offerings to include additional med spa services, or two, they can open a standalone med spa. Can you expand on what each of these options brings to the practice?

Terri Ross:
Yeah, absolutely. Again, if we’re going back to just pure patient outcomes, that’s always my first and foremost. It’s never just about the revenue. But I think that, and I say this often when I lecture, as medical providers, you are also an entrepreneur. If you’ve decided to go into business for yourself, that means you have to really have the character traits to be a good leader, to run a great culture, and to understand the business dynamics of what it takes to run a practice. It’s not just being a good surgeon.

Terri Ross:
And I think when we’re thinking about two capacities of standalone, obviously, that’s a whole nother cash outlay if a doctor wanted to open up a standalone practice. Clearly, it’s going to have a name identity ranked to it. But personally, I think if somebody is going to go into practice for themselves, they should just build enough square footage that whatever their specialty is in surgery, whether it’s facial plastics, body, ocular, it doesn’t matter, that their offering adjunctive non-surgical services to again augment, because they’re going to have greater cash flow. And ultimately, again, better patient outcomes as it relates to, again, not just doing the symptomatic thing and just doing the blepharoplasty or the rhino or just the surgery by itself, but adding on multiple modalities.

Alison Werner:
Right. Because what we’re talking about is creating that long-term patient retention opportunity or increasing that lifetime value of the patient.

Terri Ross:
Yes, absolutely. If you think about it, if you’re a surgeon that doesn’t offer it, frankly, you’re hurting yourself, and then your patients are going someplace else for the longevity of their initial investment. So why wouldn’t that be in your practice?

Alison Werner:
Well, and you talk in the article about the consumer spending for facial care and beauty regimens, and the fact that if a practice isn’t kind of getting into that, becoming a part of the consumer’s routine as they’re coming to them for facial procedures, it’s kind of a lost opportunity from a retail perspective, too.

Terri Ross:
From every perspective. But I think there’s a bigger systemic problem, and we’ll talk a little bit later, I’m sure, is why APX was developed with that. When we think about anybody coming out of medical school, you’re not taught the business fundamentals and you don’t have a salesmanship attitude. And while, at the end of the day, we hate to kind of correlate sales with medicine, but you are selling. You’re selling yourself, you’re selling an outcome, you’re selling results, you’re selling patient experience, and you’re selling the ability to treat that consultation as not just, “I can fix your nose or your face or your boobs” or whatever it is, because you probably can do that as a surgeon.

Terri Ross:
What’s the harder part is to be able to get the client to understand that a treatment plan is best for the patient. And surgeons, with all due respect, typically don’t have that mindset. They’re kind of in and out. And so, I’ve worked with so many surgeons and the opportunity is to really say, “How much do I value the time in the room with the patient?” Because that’s the only time you can’t give back, to build that trust and rapport and to educate. So while we’re selling something, you are educating the patient on what’s possible for them to achieve, the best outcome on a long-term basis. And when they do that, that’s when patients really don’t want to go someplace else.

Alison Werner:
Yeah, exactly. So, how does a practice assess whether they should just expand services and keep within their four walls or when they should go bigger and open a standalone med spa?

Terri Ross:
They’re almost, Alison, two different business dynamics. I think that look, it’s very costly to open up a standalone med spa. It’s very costly. So I think most practices that I know of, even if they’re small, can incorporate the appropriate non-surgical services. So I guess number one, I would say if money is no object and you are in a market that demands the services, and you’ve built up brand equity, you could open up a standalone center. And the typical kind of square feet is maybe around 1,500 or more to have a standalone center, to be able to adequately provide the services you need. But more importantly, if you’re a surgeon, I think the expanding of the non-surgical services is the easiest thing to do with a lower amount of overhead other than your cost of labor for the providers to be doing it.

Alison Werner:
Yeah, exactly. With a standalone med spa, is it better to co-locate it with the practice itself, or is that something where it’s okay to go into a different space maybe a couple blocks away, depending on your location?

Terri Ross:
Yeah. It’s very rare, in my years of experience, that a surgeon… Not that they can’t, but it’s very rare that they have an offsite center, if that makes sense.

Alison Werner:
Okay. So they’re keeping it close by.

Terri Ross:
Most surgeons keep it within their own practice.

Alison Werner:
Mm-hmm. Okay. And is it branded as part of the practice or does it have its own brand? What do you think is more conceptual?

Terri Ross:
Oh, it can be both. I’ve seen it both ways.

Alison Werner:
Okay.

Terri Ross:
Yeah, I’ve seen it both ways. We have key opinion clients, both husband and wife surgeons in Santa Rosa, and their plastic surgery practice is one name, and their med spa, they have two locations. One location is within their surgical practice and the other is in a different city. And it has a different name, but they’re associated. So that is really going to be the fundamentals of the business, in and of itself.

Alison Werner:
Okay. Well, so there’s a lot of data that practice centers need to gather to know which is the right option for them, whether to incorporate more services or to open a standalone practice. And some of that data can include whether or not their local market is already saturated to who is the target patient population. Who should be doing the market research? The doctor is not necessarily going to have time to go gather this data, so who do they turn to? Who should be looking for that? Or is there someone who can help them?

Terri Ross:
Yeah, that’s a great question. So obviously, a part of Terri Ross Consulting and now part of the APX platform, we’ve opened up over a hundred medical spas across the country, whether they were adjoining to a business or standalone, right? And these were the standalone. There are companies that will do a feasibility analysis. You could go to your local city and gather market demographics and patient demographics, household incomes, who lives in that, or we’ve done it ourselves as part of working with our company.

Alison Werner:
Okay. Oh, okay. For those practices that are designed to expand on existing services, do you have any advice on how they should identify the services that make most sense to add?

Terri Ross:
God, yes. I love this question because, oh my God, you can get me off my soapbox here. There are a couple fundamental things that we teach that most people just don’t know, and it’s no fault of them. They have to know it, but there’s been no place until APX or working with the private consultant that you would actually know these benchmarks.

Terri Ross:
But there are fundamental benchmarks, in terms of revenue per hour for a surgeon, for a non-surgical room, for what the treatments need to yield. So number one, now again, if you’re a surgeon, you’re going to have a higher gross profit on surgeries, which is usually around 90%. If you’re offering non-surgical services, the gross profit needs to be well over 50%. I’m going to say 60% or more, because if it’s not, I haven’t paid labor yet and I’m losing money.

Terri Ross:
So I say that habit makes sense. People always say there’s riches in the niches. People try to be everything to everybody. If I’m a facial plastic surgeon, then you should offer things that augment the face: the Botox, the fillers, the laser skin resurfacing, microcurrent, things like that because it augments facial plastic surgery. Now you can get into body if you choose to be a full-blown medical spa offering everything, and that’s fine, too.

Terri Ross:
But I think to your initial question, “How do they know what to do?” You need to pick procedures that, again, augment your surgical practice and you need to pick things that ultimately make money. I’ve seen way too many practices bring on services. They didn’t know that the gross profit needed to be over 60%. They don’t know what cost of labor needs to be. And at the end of the day, they bring on services that fundamentally make them no money, and then they’re wondering why they’re not cash positive.

Alison Werner:
Okay. Now, for those practices that opt to build out a standalone med spa, what are the pitfalls you advise them to keep an eye out for?

Terri Ross:
They don’t have enough cash. One, I think, again, I hate to say it in this demeanor, but the reason this industry is growing is there are so many people, especially if you’re a dentist or an OBGYN or an internal medicine, if you’re a non-core, meaning not a plastic of some sorts, there are a lot of people trying to get out of the insurance reimbursement and getting into the space, which is great. There’s enough business for everyone.

Terri Ross:
That being said, there is a lack of understanding of what it actually requires, like what is the average startup cost for a medical spa? And to do it right, it’s probably about $1.2 million, right?

Alison Werner:
Okay.

Terri Ross:
And then you have to say, “What is my cash reserves? Am I going to go to get an SBA loan? How much capital equipment am I going to buy? What’s my overhead going to be?” So the cost to build a standalone center, it’s pretty costly. So we have to back into that and say, “I’m going to one, identify what is my brand? What’s my unique value proposition in the market? Why would people come to you?” And we have to get very clear on that, “What is the brand equity?” And then build the services around what that brand is, and then make sure again, the services are profitable.

Alison Werner:
Mm-hmm. Okay. Once a plastic surgeon practice has their med spa in place, whether expanding services or standalone, which data should they be tracking to ensure the venture is a successful addition to the practice?

Terri Ross:
Absolutely, my God, so many things. And I wrote an e-book that people can find and download on the top 10 medical spa and top 10 plastic surgery KPIs. But number one, what is your profit margins? So you’re going to have higher profit margins as just a surgical practice. Profit margins should be well over 20% to 25% in the non-surgical space.

Terri Ross:
You have to be looking, again, at your gross profits on your procedures, which I mentioned is well over 60%. Your cost of labor needs to be under 20%. Your revenue per hour needs to be over $3,000 for a surgeon, between $600 and $1,000. So there are certain specific things, your cost of goods, your payroll, your rent. I can’t control rent. If you have a space, I can’t fix the rent price. But then I do have to make sure all those other KPIs are aligned with the benchmarks. Otherwise, people are, again, way off the mark and almost thinking, “Okay, I have money in the bank.” But the money in the bank doesn’t mean that that’s your profit.

Alison Werner:
Right. Well, you talked about the fact that plastic surgeons come out of residency and they don’t have a business background. And you just talked about some of the data they should be tracking. So how good are plastic surgeons at tracking data and being aware of those practice management KPIs that they should be looking at?

Terri Ross:
Yeah. Gosh. Well, you literally hit the nail on the head. I don’t want to jump into APX, but number one, there is no place to go. While there’s a million societies, and I speak at most of them, they’re very clinically heavy, which is amazing. But in terms of the pure, just, “How do I run a successful practice and what should I do?” There’s really nowhere to go. I say it on stage, “There’s no MBA School of Aesthetics to learn ‘What am I supposed to do?’” But yet, I’ve met some phenomenal surgeons that were great business people. The majority are not. And again, it’s just from a pure lack of knowledge and education on where to go do this. But there’s no other way. I’ve just seen too many practices, especially obviously these couple of years we’ve all spent in COVID, where while practices were shut down, my private consulting business went up 70%.

Terri Ross:
And I think physicians were forced to look at their books, recognizing things were not as they planned. But I also think it’s a time commitment to work in your business, not just on it, but you have to know what the hell you’re looking at, right?

Alison Werner:
Yeah. Exactly.

Terri Ross:
You have to know what to look at, like, “What practice management software am I going to have?” It’s going to be only as good as what you put into it. And so, I always say, “Garbage in, garbage out.” When I’m analyzing data, half of it is that they’re not taught even how to set up their practice management software.

Alison Werner:
Exactly.

Terri Ross:
And those companies aren’t trained as consultants to help practices do that. So there’s just so much involved with really getting the business to a stable place and then making sure they’re tracking and/or hiring a really good practice manager who can understand what to measure every month to make sure the business is on the positive trajectory.

Alison Werner:
Yeah. And to take advantage of this boom, for example, in the sector of med spas. Clearly, the money is there to be had, and to take advantage of the market. But if you don’t have the right financial analysis and business practices, you’re going to lose the opportunity there.

Terri Ross:
Absolutely.

Alison Werner:
Well, talk to me a little bit about APX Platform. Okay. So it was specifically developed to help plastic surgery practices better used data to produce actionable insights, right?

Terri Ross:
Yeah. That’s one little piece of it. As I mentioned, I had worked for a couple Fortune 500 medical device companies in aesthetics, and I managed sales teams. I owned a medical spa in Beverly Hills with three surgeons and a derm that quickly scaled and sold to a bigger entity. And I’ve been consulting for the past, gosh, well over a decade and working with practices across the country. I think that I’ve seen the best of the best. I’ve seen the worst of the worst. And what APX was designed, it stands for Aesthetic Practice Accelerator, and it was really incubated out of the pure desire for me to reach and help more people.

Terri Ross:
As a private consultant, my team and I, your training time per dollars, you can only help so many people. And as I mentioned, when COVID hit, at a time when I was a little worried, frankly, about what was going to happen to the consulting business when practices were closed, it went up and I could not handle the capacity.

Terri Ross:
And so, APX was born out of looking at the market as a whole, looking at all the Aesthetic Society conferences, looking at the practice management softwares out there, looking at what was out there which wasn’t much, in terms of, “How can I build a platform that is affordable, that’s business intelligence, that’s like hiring me?” And people would pay us between $40,000 and $100,000 for a private retainer engagement.

Terri Ross:
But I realized that if we’re doing the work for you, practices just tend to go back to their normal ways, because there’s not enough education for the team, right?

Alison Werner:
Yeah. Exactly.

Terri Ross:
The managers, the staff, the front desk, the providers. So APX basically is a combination of business intelligence, but it’s around three core components, which is the education. Training is at the forefront. There are on-demand courses in sales, finance, and operations so that practices can have a sustainable repeatable model. “How do I do it? Why do I do it?” And then from the training components, which is an enterprise learning management system, there’s certifications, there’s accountability. You can say, “Hey, I want my front desk to take this. I want my providers to take this. I want my management to take this.”

Terri Ross:
They’re courses. I know you guys can’t see it, but I can show you, Alison.

Alison Werner:
Yeah, it’s a thick book.

Terri Ross:
The manual is going to school. So it’s based on Training, Analytics, and then our Community. And the analytical side is we worked with a CPA firm for over a year. We built financial tools because we also know practices, again, don’t have the business acumen. So some of it is as silly as what we just talked about. If they don’t understand the benchmarks or the KPIs, how can they possibly run a business?

Terri Ross:
Your software is raw data, right? “How much did Dr. Smith make?” Okay, well what if Dr. Smith could have doubled that? So we built financial analytical calculators that spit out gross profit revenue per hour, how to compensate, how to build a forecast and a budget, just the tools they need. Now, they can actually make an informed decision by looking at these tools to say, “This is working. This isn’t working. I’m going to change this or add that.”

Terri Ross:
And then we build dashboards so they can track, real-time, the 30 top KPIs, given at any time.

Alison Werner:
Oh, okay.

Terri Ross:
So they can again, make informed decisions. And then our community is really about being there to support practices on a group level. It wasn’t just something that you buy and we’re like, “Good luck. Good luck with that.” I think that the consulting piece is still a big heavy piece, and people learn not only from us, but they learn from each other as well.

Alison Werner:
Right, exactly. So, given your experience, what do you think plastic surgery practice owners or plastic surgeons should be thinking overall in terms of the role of a med spa for their practice? What’s the big takeaway here?

Terri Ross:
I think the big takeaway is that it’s another business unit that can produce a significant amount of revenue, that can create, again, sustainability, lifetime value, better patient outcomes. And that it’s not, I don’t want to say a loss leader, but sometimes it can be like, “Oh, well, I just offer these services,” like it’s an ad-hoc and “Oh, if you want to,” versus, “This is my business. Period. I’m not just a surgeon. My holistic approach to treating the patient isn’t just surgery, but if I need a tummy tuck, well, I might need skin tightening, right? I might need multiple things.” So really looking at the aesthetic space as a whole and saying, “Surgery is just one thing, but what are all the other things the patient can do that keeps them in my practice, keeps them happy, and again, like I said, for sustainability?”

Terri Ross:
So I think that’s the big takeaway, that this is a business model in of itself. And ultimately, when you’re deciding, you really need to incorporate it because ultimately that’s your goal, to give the patient the best outcome, not let them go to all these other places, because it can become a group… If we look at people, I always ask clients, “Are you a volume-based business or are you a concierge-based business?” And so, it’s either the Groupon coupon model, where you can go on every corner and get these services done, and/or you are this high-level, Four Seasons business offering this holistic and comprehensive approach.

Alison Werner:
Great. Well, Terri, thank you so much for that. I think this has been really informative for our listeners. And I want to remind our listeners that Terri will be back with us for future episodes of the Plastic Surgery Practice Podcast, as she will be a regular contributor. And in the meantime, Terri, if our listeners want to get in touch with you to learn more about your services or to learn more about the APX Platform, how should they go about getting in touch with you?

Terri Ross:
Oh, thank you so much. Well, this is such an honor, again, to be here. I love educating and I hope that you guys found this valuable. You can certainly reach me at terri@terriross.com and/or go to apxplatform.com and you can fill out our discovery questionnaire. Our team would be more than happy to talk with you. We would love to get to know you a little bit more and see how we can support you in your endeavors.

Alison Werner:
Great. Thank you so much for that. Well, to our listeners, be sure to check back soon on the MEDQOR Podcast Network for the next episode of the Plastic Surgery Practice Podcast. And in the meantime, to catch up on the latest industry news, please check out plasticsurgerypractice.com. Until next time, take care.

Published at Mon, 26 Sep 2022 15:18:14 +0000