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Hey med spa owners. Today, I want to walk you through a topic that is deeply relevant to nearly every practice owner I speak with: profitability management. Most med spas have some method—or at least a rough idea—of managing their finances, but very few have a clear, structured system designed to lock in profit, maintain cash stability, and ensure you’re truly getting paid as an owner.

My goal here is to present a simple but powerful approach for putting profitability at the forefront of your financial decision-making—not as something left to chance or whatever happens to be left over after everything else is paid. This framework is based on lessons I learned from an agency group I’m a part of, and it has had a transformative impact on our business. It’s also a system that med spas of all sizes can adapt, whether you’re doing $50K a month or several hundred thousand.

By the end of this guide, you’ll have a clear understanding of how to create a predictable, structured cash flow system that prevents “accidental broke syndrome”—where the business is growing, revenue looks great, but the owner feels financially trapped or stressed.

Why Revenue Growth Doesn’t Guarantee Profit

Many med spa owners assume that hitting higher revenue numbers automatically means their business is financially healthy. However, one of the earliest lessons I learned—particularly since 2022, when we became deeply involved in analyzing financials, customer acquisition costs, ROI, and cash flow with our clients—is that revenue and profitability are not the same thing.

A med spa can be doing incredibly well from the outside. High monthly revenue, a growing team, a busy location—yet behind the scenes, the owner is struggling to take home money, struggling to maintain cash reserves, or constantly stressed about expenses and payroll.

This disconnect happens because of one core issue:

Profit is not planned. Profit is whatever is left over.

And when profit is treated as an afterthought, it almost always disappears.

The Traditional Formula (and Why It Fails)

Most business owners use this formula—implicitly or explicitly:

Sales – Expenses = Profit

This formulation means:

• Profit is whatever is left.
• Expenses grow freely and automatically.
• Owners often make emotional spending decisions.
• Profit is unpredictable.
• Cash flow becomes inconsistent.

This “leftover mentality” puts you at risk because you never truly control profitability—it just “happens,” and only if everything else goes perfectly.

The Profit-Focused Mindset (The Formula That Works)

Instead, we need to flip the formula:

Sales – Profit = Expenses

This approach forces you to:

1. Decide—upfront—what percentage of revenue will become profit.
2. Set your owner’s pay as a fixed, non-negotiable part of your financial structure.
3. Treat every other expense as adjustable, flexible, and manageable.

This is the foundation of a profit-first system.

Choosing the Right Profit Benchmark

If you’re just beginning, your profit percentage may be small—1%, 5%, even a symbolic amount—to build the habit. But eventually, most healthy med spas should aim for 15% or more in true profitability, AFTER fair owner compensation.

For example:

If your med spa generates $100,000 in revenue, and you set:

• 15% Profit: $15,000
• Owner’s fair salary: Already budgeted separately
• Remaining expenses: $85,000

This $85,000 becomes your operating constraints. Not suggestions—constraints.

This simple shift is what hundreds of med spa owners are missing.

Step One: Determining Your True Owner Compensation

Before you can structure profit, you must determine your fair market salary as the owner.

Ask yourself:

• If I stepped away tomorrow, what would it cost to replace me?
• How many hats am I wearing?
  • CEO?
  • Injector?
  • Operations manager?
  • Marketing director?
• What would a qualified person cost in each of those roles?

This becomes your baseline “owner salary.”
Profit comes AFTER that—not instead of it.

This matters because:

• Your salary reflects the job(s) you do.
• Profit reflects the reward for owning the business and taking on risk.

Both must exist.

Step Two: Understanding the Impact of Parkinson’s Law

One of the biggest financial traps owners fall into is Parkinson’s Law, which says:

Expenses rise to match whatever money is available.

This is why:

• Owners buy new devices too often.
• They add staff before the business can support it.
• They upgrade spaces prematurely.
• They take on marketing expenses that don’t produce ROI.
• They justify purchases emotionally instead of strategically.

If the money is sitting in the general bank account, it feels “safe” to spend it—and the business bleeds profit.

The solution? Control the container.
You do this by separating your cash into specific accounts with specific purposes.

Step Three: The Simple Multi-Account Structure

The most effective system I’ve found involves using separate bank accounts, each with a designated purpose. Some of you already do this in a limited way, but most med spa owners manage everything from a single account—which makes overspending nearly guaranteed.

Here is the simplified structure:

1. Income Account

All deposits go here.

2. Operating Expense Account

Money is transferred here based on percentages—not impulse.

3. Tax Account

To ensure you never scramble during tax season.

4. Owner’s Pay Account

This is your salary—not profit.

5. Profit Account

The reward for owning the business.

Optional: Sinking Fund / Special Projects Account

For:

• Team training
• Conferences
• New devices
• Bonuses
• Retreats
• Marketing initiatives

This keeps “big-ticket needs” from draining normal operations.

Step Four: Implementing a Weekly Rhythm

Consistency is what makes this system work.

I recommend using a weekly allocation rhythm, just like we do internally:

• Every Friday
• Check income account
• Distribute funds into each designated bucket
• Stick to the percentages no matter what

When income is distributed weekly, you prevent overspending, maintain operational discipline, and control your cash flow rather than letting it control you.

Step Five: Target Percentages for Allocations

A general starting benchmark might look like this:

• 60% Operating Expenses
• 15% Taxes
• 25% Owner’s Pay + Profit combined

For example, if $100 comes in:

• $60 goes to operating expenses
• $15 goes into tax reserves
• $25 goes to you + profit

Your percentages may differ based on:

• Size of the med spa
• Growth stage
• How large your team is
• Whether you rent or own your space
• Device-heavy vs. injector-heavy model

But the point is to anchor your percentages ahead of time, not after the fact.

Step Six: Maintain 2.5 Months of Operating Reserves

This is a non-negotiable rule if you want long-term stability:

Keep at least 2.5 months of operating expenses in cash reserves.

If your med spa requires $100,000/month to operate:

Your OPEX account should maintain $250,000 as your baseline.

Here’s how it works:

• When your OpEx account exceeds $250,000, the excess gets distributed into profit, taxes, and owner pay.
• When it drops below $250,000, distributions stop until it’s restored.

This stabilizes your business permanently.

Step Seven: Pitfalls to Avoid

1. Overspending on Payroll

Payroll is the #1 expense that kills profitability.
Roles become vague, overstaffing happens, or you hire too quickly.

2. Device Purchases

New devices often drain cash reserves and rarely deliver immediate ROI.
Buy strategically, not emotionally.

3. Fluffy Marketing Expenses

If you’re trying to be profitable, you need your marketing dollars tied to measurable ROI.
Blogging, organic social media agencies, or early SEO can drain profit without producing revenue.

4. Blurring Owner Pay and Business Reinvestment

The owner’s compensation must be clearly separate from business reinvestment.
If everything goes back into the spa, you accidentally become an underpaid employee.

Step Eight: Profit as a Habit, Not an Event

The owner of a successful accounting firm, Greg Crabtree, once said something powerful:

Your tax bill is the best indicator of your profitability.

If you owe nothing, you didn’t profit.

Profit cannot be a fluke, a once-a-year surprise, or whatever is leftover.

Profit must be:

• Structured
• Allocated
• Protected
• Planned

You aren’t running a nonprofit.
A med spa is meant to generate income, margin, stability, and growth capacity.

Final Thoughts and Next Steps

If you want to build a financially stable med spa that:

• Pays you a fair salary
• Generates predictable profit
• Has cash reserves
• Avoids the stress of unexpected expenses
• Funds team development and growth
• Allows you to reinvest wisely
• Operates like a true business, not a passion project

Then this system is essential.

Your Action Steps:

1. Set up the accounts.
2. Define your allocation percentages.
3. Begin weekly distributions.
4. Protect your profit.
5. Clean up overspending habits.
6. Maintain strong payroll discipline.
7. Build and maintain at least 2.5 months of operating reserves.

If you follow this system, you will never again wonder where your money went or why your revenue feels disconnected from your take-home pay. You will own a business that supports you—not the other way around.

If you’d like to refine your marketing, reduce acquisition costs, increase ROI, or explore a detailed marketing plan tailored to your med spa, you can learn more at medspamagicmarketing.com.