How Much Does It Cost To Open a Medspa?
The medical spa industry in the United States is on the rise. If you’re considering opening a med spa, one of the first things you need to know is how much it would cost to make it happen.
What is a medspa or medical spa? How is it different from a regular spa?
A medical spa, or medspa, is a combination of a medical clinic and a traditional day spa or popular wellness. What makes medspas different from regular spas is that the latter focus primarily on relaxation. On the other hand, medical spas provide specialized treatments as well as cosmetic services under one roof.
Physicians or licensed healthcare professionals run medical spas. Doctors don’t perform every procedure, but all treatments are supervised by licensed physicians nevertheless. Medical supervision ensures the effectiveness and safety of the treatments. This leads to better results and greater client satisfaction with a low risk of complications. In contrast, licensed healthcare professionals don’t supervise procedures in regular day spas.
The exact treatments that med spas offer vary from one place to another. Most of them offer wrinkle relaxer injections like Botox, dermal fillers, microdermabrasion or chemical peels, hormone replacement, and medical weight loss management, among others. Also known as medi spas, these types of spas also offer treatments for acne and laser hair removal. In addition, they offer the same services as traditional spas such as relaxing massages, seaweed wraps, facials, and other luxury and rejuvenation treatments.
The story of medical spas started back in 1991 in Boston, Massachusetts. Today, medspas are among the fastest-growing medical tourism sectors in the United States. As of 2022, there are nearly 20,000 medical spas in the U.S. Around 70% of visits to medical spas come from repeat patients or clients.
Initial cost
The minimum start-up costs for medical spas are around $62 – though this is only for getting a business license. You will need more than that to make everything happen. Costs for med spas can be $35,923 on the higher end, with average costs around $19,267. The actual costs depend on the location and other factors. For example, start-up costs for opening a medical spa can even range between $700,000 and $1,000,000. This is particularly the case if you plan to provide a wide range of spa services including luxurious treatments.
Initial costs for opening a medspa include business formation fees and other expenses. The exact fees depend on the location such as city or state. You can expect to spend between $50 and $500 or more to set up a business: LLC & corporations. Certifications and licenses tend to cost around $700 whereas lawyer fees are around $1,500. It’s also recommended to get small business insurance, which costs anywhere from $500 to $2,000.
Every business needs a well-designed website. So does a medical spa. A domain name costs from $12 to $200 whereas website hosting is around $300. The costs of a website builder are about $500 while web designer fees may go up to $6,000. For a business email hosting service, you may expect to pay about $15.
Building a medical spa from scratch could cost $90 to $130 per square foot or $225k to $325k for a 2,500 square foot place. Elements that influence the cost of building or renovations include a timeline (when you plan to open it), square footage, materials, the scope of work, and custom requirements. In some cases, renovating and remodeling the existing space costs as much as building it from scratch.
Once the area is built or renovated, it’s time to set up furniture and equipment. The costs of furniture and equipment depend on the size of the spa. Basic facial machines, treatment tables, treatment trolleys, technician chairs, and office supplies require around $30 per square foot. The costs are higher for medical spas that provide expensive and medical-grade services.
While med spa business signage is optional, it can help you with marketing and promotion. You can expect to spend anywhere between $75 and $2,486 or more on signage. Speaking of marketing and promotion, social media pages play an important role in building the brand and reaching the target clientele. Expect to spend $30 to $50 a day per social media platform such as Instagram and Facebook when you first start running ads. Google Ads cost can be similar.
Recurring cost
The term recurring cost refers to ongoing costs of the company or medical spa in this case.
One of the biggest costs of a medical spa, or any other business, is rent. When it comes to renting and real estate, location is the most significant factor. For example, the rent for a med spa in Manhattan could cost more than $80,000 per month but around $1,000 in Tennessee and Florida.
Recurring costs also include professional fees. Besides initial professional fees such as paying website or interior designers, you also need to consider recurring costs in the form of salaries to employees and technicians.
While these salaries vary, the average hourly rate for medical aestheticians is $15, but it can range from $10 to $26. Hourly rates for registered nurses range from $27 to $47 with an average of $35. The hourly rate for a massage therapist is between $14 and $34 with $21 being the average. The spa manager’s hourly rate is $14 to $29 with $20 on average.
You need to take into consideration the number of employees and their roles to estimate how much you’ll spend every month on salaries.
Additionally, you may need services from various professionals frequently. Handyman services are common and you can expect to spend around $500 on tools.
The costs of WiFi are around $100, depending on the operator and the contract you have. Besides internet service, your recurring costs also include software subscriptions and similar services. The costs of CRM software can go up to $300 and IT support up to $2,000. At the same time, you may need to spend up to $200 a month on payroll software. Specific costs of software subscriptions depend on the brand or type of the software, as well as the user plan you choose.
Other costs
Opening a medspa involves various expenses. In addition to initial costs and recurring expenses, it’s also important to take other costs into consideration. These include amount of money for training, marketing materials, and restocking supplies.
One of the most important factors for successful medspa is the highly skilled staff. For that reason, it is necessary to train the staff so they provide the best quality of service, depending on their role in the medical spa. Team building is also a good idea, to make sure you develop a great team. Although costs vary and are case-by-case, it’s worth mentioning that in 2020, small businesses spent around $1678 per employee on training. Enterprises spent around $924 per employee whereas mid-size companies invested $581 on training per employee. The average training cost was $1,111 per employee.
Every medical spa needs products that technicians can use to perform their services. If you have an area of about 3,000 square feet and up to six treatment rooms, you will need one main skincare brand. One skin care line is enough, especially if you want to cut the costs while providing the best quality. You can augment that one brand with retail products like lifestyle and travel-size items. However, you can expect to spend $5,000 to $10,000 to stock all treatment rooms for three months.
As mentioned above, marketing is important for any type of business and a medical spa isn’t the exception. You can expect to spend at least $300 on direct campaigns including mailing and printing.
What is operating capital and how to calculate it?
Operating capital is the cash used for day-to-day operations in your medspa. Also known as working capital, it is vital for the survival of your business. Operating capital serves as an indication of the short-term financial health of a business; it also provides a deeper insight into professional efficiency.
Once you open a medspa, you need to have enough cash to fund everyday operations. This is necessary during the time between opening the medical spa and earning enough money to cover all the expenses. The exact timeframe is difficult to predict. For some business owners, it can take up to a year whereas others start earning enough in six months.
In order to calculate the operating capital, you need to subtract the current liabilities from current assets.
Current assets could be cash and cash equivalents, inventory, accounts receivable, prepaid business expenses, and other liquid assets.
On the other hand, current liabilities could be unearned revenue, short-term debt, a portion of long-term debt, accrued expenses, and notes and accounts payable.
The formula here is simple:
Current Assets – Current Liabilities = Operating Capital
If the medspa’s monthly expenses such as marketing, salaries, rent, and others sum up to $18k, that means it’s necessary to have an additional $100k to $200k in reserve to ensure everything operates smoothly until you start earning enough money to cover all the expenses.
One of the easiest ways to calculate your working capital is to multiply the square footage by $200 per square foot. That means the medspa that occupies 2500 square foot area will need $500k in operating capital.
What are the key factors for a successful medical spa start-up?
The most important factors for a successful medical spa start-up include the following:
· Great location, easily accessible, visible, and close to your target market
· Sufficient operating capital
· Drive to succeed and passion for the wellness business
· Wonderful staff with extensive knowledge and experience
· Well-structured marketing campaign
· Clear and understandable business concept
· Successfully differentiating from the competition
· High quality of services
· Keeping up with the latest trends and developments
· Fair business practices
How to start a spa business plan?
A medical spa business plan is important because it allows you to prepare thoroughly and identify compulsory tasks. A business plan allows you to make informed decisions, manage expectations, brainstorm, and create an extensive roadmap of the medspa.
Your spa business plan should contain:
· Executive summary – a short section that summarizes the entire plan and delivers information such as the vision of the spa, mission statement, project concept, proposed marketplace, and market strategy
· Finances – financial statements focusing on the future prediction of profitability. This section should include the income statement, balance sheet, cash flow statement, and annual projections
· Payroll or staffing – detailed staffing strategy and projected payroll expenses
· Office space – detailed vision of the facility including square footage, number of rooms, equipment, etc.
· Marketing – covers all aspects of marketing strategy to promote medical spa. This section should include the costs of print media, social media marketing, business cards, paid advertising, direct mail, brochures, promotion, and giveaways. (At Cherry, we provide free, medspa-specific social media posts and email templates for our partners.)
· Supplies and equipment – detail everything the medspa needs for proper functioning
· Inventory costs – product categorization and related operating expenses
· Wastage – wastage of products and materials
Is a medical spa profitable enough to create a spa franchise?
Medical spas can be very lucrative. The average spa of this kind earns $1 million a year whereas top practices earn between $4 million and $5 million. Most med spa owners, 80% of them, have a single location whereas the remaining 20% have two or three locations. Although this practice is a major challenge, it can become a profitable business venture that may pave the way to multiple locations or a franchise.
Summary of how to estimate the costs of opening a medspa
Opening a medspa comes with a lot of costs. It is necessary to invest a great deal of finances to get things started. Recurring expenses are also high, but their specific amounts vary from one location to another.
The best thing about these spas is that they are profitable in the United States. You need a well-structured business plan to avoid unnecessary expenses and focus on everything the spa truly needs.
Start with a business plan, carry out thorough research, and make sure to focus on the quality of equipment, services, and other processes.
Use the estimates from this post to put the expenses on paper. Make sure to research more precise costs in the area where you live. Strive to cover most initial and recurring costs as well as other expenses. That way, you will have a better estimate of the finances you will need to invest in this business.
References
https://www.verywellhealth.com/what-is-a-medical-spa-15896
https://www.laingbuissonnews.com/imtj/news-imtj/medical-spas-one-of-the-fastest-growing-medical-tourism-sectors-in-usa/
https://www.ibisworld.com/industry-statistics/number-of-businesses/health-wellness-spas-united-states/
https://www.starterstory.com/ideas/medical-spa/startup-costs
https://www.mindbodyonline.com/business/education/blog/dream-reality-how-much-does-it-really-cost-open-spa
https://www.payscale.com/research/US/Employer=Medi-Spa/Hourly_Rate
https://www.investopedia.com/ask/answers/071114/how-do-you-calculate-working-capital.asp
https://www.indeed.com/career-advice/career-development/operating-capital
https://www.americanspa.com/business/10-reasons-why-medical-spas-succeed
https://www.americanmedspa.org/news/376608/How-to-Build-a-Profitable-Medical-Aesthetic-Practice.htm
https://www.linkedin.com/pulse/understanding-med-spa-industry-vakidis-sales-and-marketing-expert/