In this episode of Medical Millionaire, host Cameron Hemphill breaks down why your bottom line is just as important as your top line in the medical spa industry.

As a seasoned veteran with Growth99, Cameron dives into essential accounting concepts, explaining the difference between top-line and bottom-line revenues, the importance of maintaining healthy margins, and how smaller revenue businesses can sometimes be more profitable than those with higher gross sales.

He shares practical examples using real numbers and offers valuable insights on managing fixed vs. variable costs in your med spa business. Whether you’re an esthetician, injector, or plastic surgeon, this episode provides crucial financial knowledge to help take your practice to the next level.

Transcript: 

hey everybody. Cameron Hemphill, here your host for medical millionaire. Hey, first off, thank you so much for tuning in taking the time to listen to our podcast. Our goal is to give incredible value and insight into the medical spa market. So if you’re an esthetics, if you’re an injector, plastic surgeon, participate in cosmetic surgery, invasive or non invasive, this podcast is for you. Growth. 99 in our team, we work with medical spa owners in the esthetic space all over the country, and we’ve been consulting them for years. So what’s cool is we see businesses that are absolutely thriving, practices that know how to run like a business. We also see other ones that need a tremendous amount of help, right? And so as we consult our clients, go to medical spa shows, go to the esthetic shows, go to the cosmetic shows. We’re constantly engaging in owners at all different levels. And so what’s nice is we can absorb all of that data, all of that feedback and input, internally, digest it, and then push it back in valuable content channels such as this one. So throughout this journey together, our goal is to help you take your practice to the next level, no matter what level you’re at. And in this episode, I want to get into why your bottom line is just as important as your top line. And I’m going to get into some accounting here. So so let’s geek out with me when it comes to the books. And so the accounting and the revenues are the heartbeat of the organization, okay? And as you break this down, you have top line revenues and you have bottom line revenues. So if you’re using sophisticated accounting programs such as QuickBooks. I think there’s, there’s some other Fresh Books. Is another one that I’ve heard, but the one that I’m very familiar with is QuickBooks, in which most organizations use, which is built by Intuit, and there’s an offline version and an online version. Personally, I’m a big fan of the online version, just because you can access it, obviously through your mobile devices, and then any internet advice that you that you’re available, and then also your CPAs can easily get access to it and help you with bank reconciliations. I’m not a CPA. I don’t give you know financial advice. I’m not a financial planner or advisor by any means. But again, as you’re growing a business, this is just some great consulting that I want you to be aware of and and really, this is an area of expertise that I have spent a tremendous amount of time in my career digesting and looking at. So I would consider me somebody that knows a lot about the space. When you’re growing your business, it’s important to have sales. In fact, early on in my career, I had a consultant that always told me sales cures all problems. Okay, because the revenues can solve problems if you have expenses, if you have employees to pay, if you have to buy product, if you have an inflated credit card, if you have outstanding loans, right, you have sales. Can cure those problems because they create revenues, right? But it needs to be managed correctly, okay? And sales, when you’re selling a product or a service. It’s very important to drill in on the margin, right? What are your overall margins? What are your product costs? What is your service time cost? So you have two levels of margin. You have the service like your time, what is your dollar per hour generated? Right? And then also, what is the actual cost of the overall product and inventory? Okay? And then, as you mathematically weigh those out, you want to get your margins as high as you possibly can, because, therefore you can actually create less revenues and create more profit, right? Unless you have very high ticketed items, you can bring your margins down slightly, because the sale is so large on the gross level that it’s actually going to increase your profits, right? So for a quick example for you, let’s say you’re selling $1,000 service, right, and your margins are 50. Percent on that on that deal. Okay, so that’s a pretty decent margin. You know, in this space, again, we’re not selling technology where technology margins are higher in whatever industry you’re in, but I’m just using just basic math examples, $1,000 sale, 50% margin, gross profit should be 500 bucks, your overall cost, 500 bucks, right? So that could be the product cost. Now, what about factoring in your time? Okay? And then, as you duplicate yourself and you have another service provider and another service provider and another service provider, how are you duplicating that, monetizing that to ultimately scale. And these are the things that I want you to start thinking about as you’re trying to scale your practice. Because as you’re looking to bring on new products, looking to bring on new people, it’s going to be super important to understand every single data point on how to scale and then plug those into your channels to create that automated machine. Okay, so let’s get into some of the top line revenue components here.

The number one driver is going to be in house sales, online sales. You can create reoccurring like monthly reoccurring revenues through membership channels, right? That’s going to create your top lane revenues, okay? And then what comes down after that? Well, after the month is over, the quarter is over, the year is over, you can actually all of this data should be plugged into.

Again, I’ll roll back to like a QuickBooks environment, and then it can be reconciled and matched. So as the revenues come in, it will pour it into the bank account. Of course, bank account hooks up to QuickBooks, and then it can be line item and itemized, right? And so what you can see is, let’s say you have, let’s just do a 30 the 30 day run rate. Okay? You have a 30 day run rate. You just closed out June. We’re just, this is July 1 today. And let’s say your overall total gross sales, top line revenue.

In other words, gross sales, top line revenues is $100,000 okay? And if you run that over the course of 12 months, obviously, that’s a $1.2 million business, right? Based upon top line revenues, okay, sounds pretty good. Now, let’s just take it to 200,000 you have a $2.4 million business in terms of top line revenues, $200,000 a month times 12 months, 2.4 million, right? I’ve seen businesses that are more profitable running a $1 million business in top line revenue versus a $2 million business and top rent top line revenue because of several different reasons on the bottom line right the in between costs. So I’ve seen people that, hey, I have a, you know, I’m doing two and a half million.

I’m I’m doubling what my, you know, cohorts are doing right across other states. Well, why are they making more, more bottom line profit than you and again, like I’m exaggerating the cost. I’m just trying to make math a little easy in this example, but I’ve seen it. I’ve seen it to where you have businesses that are doing that, call it two and a half million dollars, and they’re making less profit than the $1 million business, okay? And again, it’s really good to dissect the reasons why. And a lot of times, when you get into the data points inside QuickBooks, it’s going to come down to your overall margin costs on your product and your time costs. Okay, then you’re going to have employees.

Maybe you have some rent, right? Those are basically your fixed costs, right? Employees could be fixed because, let’s say, you know, I have three employees. I have to have three employees to run the business. One leaves. I need to get another one that can be a fixed cost. Your rent is going to be a fixed cost. Your website’s a fixed cost. Your marketing is a fixed cost. Maybe you want to add some additional ads that could be a variable cost as well, right? You have softwares that are fixed costs, like, you know, the same amount every single month insurance, right? All of that stuff is basically like factored in those your fixed costs, right?

And then you have your variable costs, something that is very important to pay attention to, since we’re using products and we’re rendering services based on time, is that margin? Okay? You want to get that margin as high as you can. The higher the margin, the higher your bottom line revenue is, and the bottom line revenue is the most important part, because that is what’s going to show the overall profitability of the business. Okay, so as you’re looking at every single line item, what did I spend on marketing?

What did I spend on employees? What did I spend on taxes? Where can you overall negotiate and cut those expenses to increase that profit? Right? So, this is an exercise that I would encourage everybody to go through either on a quarterly basis, a monthly basis, depending on how you want to adjust, quickly, to pivot and put yourself in a position to gain more profits. As you have a narrowed focus on this, you can then predict your overall bottom line revenues, usually in the first week of the month. That’s when you become really good at understanding your business. You can look at historical data, and you can say, we, you know trend about 100,000 to $120,000 a month, give or take.

Maybe there’s a slow month here or there. Maybe there’s a holiday special here or there. Okay, you can basically, it’s pretty easy to understand your top line revenues because you have historical data. And as your bottom line revenues kind of sway like a like a wave, that’s where you need to zero in on it. Okay, so have conversations with your vendors, have conversations with your employees, have conversations with your tech companies.

Have conversations to make sure that you’re constantly monitoring your bottom line right, and that bottom line based on your profits, depending on how you’re structured, if you’re an S corp, if you’re an LLC, however you’re structured, is going to basically give you the distribution, and that is what’s going to be the most important on growing the business, because then you can make decisions on Okay, last month, our top Line revenues was $100,000 and our overall net right was 20% okay?

And if your overall net is a 20% meaning your bottom line, revenues, your bottom bottom line, that means that you profited $20,000 that month, okay? And then from there, you can make adjustments. You can say, Okay, if we run this for a 60 to 100 day run rate at these predictable bottom line values, then you’ll know on 120 day runway rate at 20% Bottom line of 100k revenue. Top, you know that in that position, you’ll take $20,000 times 120 days, that is what, $80,000 right? So that, and at that time, you can basically predict, okay, what are the major expenses?

Is there taxes coming up? Do I want to purchase a new machine and some new equipment? Do I want to invest in something, right? So, so that’s what’s going to be extremely important to monitor and zero in. I would encourage you to, you know, talk with a very robust CPA, talk with somebody that has some accounting backgrounds that understands really where the numbers are with overall costs, right?

I know everybody has different margins, and there’s different margins on different products, but if you can zero in where your your leaders are, like, what services do we do the most that produce the most margin in the quickest amount of time possible, and if you can market those items, and be successful in those items where it’s turnkey and it’s something that you love to do, and you’re constantly turning it over, you’ll quickly see, like, holy cow, we can do the same amount of top line volume, and maybe we can increase that bottom line up to.

With 28% 30% 35% okay? And then if you can run that at a run rate, and let’s just say you increase it to 30% that’s a 10% increase times that by 120 day run rate, right? That’s gonna put you in a position to where you have an extra $40,000 giving you another $120,000 okay, so it’s something that you want to pay close attention to, and I would suggest that you think of this in a short term win so you can predict long term profits.