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Planning Equals Profitability, Part I

By: Patrick Vande Weg
Posted: February 28, 2012, from the March 2012 issue of Skin Inc. magazine.

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The first step in evaluating the three key aspects—therapist compensation, products and supplies used in services and the cost of the retail products you sell—is to look at the numbers in total. If your total COGS is more than 55% of the total revenue you generate, then you have some work to do. Set a plan to operate at or below this goal, no matter the size of your skin care facility. Impossible? No. Daunting? Maybe. Doable? Completely. Here are the goals you must set for your COGS as a percent of each revenue category.

  • Therapist compensation—No more than 35% of total revenue
  • Products and supplies used to provide a service—No more than 8% of service revenue
  • Price you pay for retail products you sell—No more than 45% of retail revenue

Part II of this column, which will appear in the April 2012 issue of Skin Inc. magazine, will go into detail about how to achieve these numbers in all three categories,resulting in a successful, profitable business.

Patrick Vande Weg is a certified public accountant, and owner and CFO of the award-winning Stellar Spa in Corte Madera, California. He has been involved in the spa industry for 15 years as an owner, operator and business educator. Vande Weg’s “Planning Equals Profitability: Strategic Spa Business Series” is an advanced business education series developed and refined through years of practical hands-on experience and real-world challenges. He can be contacted at patrick.vandeweg@gmail.com.