It’s time to discover the Volume Per Guest Compensation model. It’s innovative and effective, it allows the team to get paid their true worth. Your compensation model must include a pay mix with a base pay, bonuses, benefits, and rewards.
Principles to implementing a performance-based compensation model for your medspa
Realize Your Compensation Payout Rate
Prior to developing your compensation model, it is essential to determine your financial ratios. Calculate your current compensation payout and discover what is your compensation rate from your overall gross revenue.
Example: From your P&L statement take the overall amount you paid out in compensation for the entire team and divide it by the total gross revenue – this will give you a percentage rate. What is that percentage? Is it more than 25%? If it is, you need to reduce it. The second ratio you need to know is your profit ratio. Is your profit rate between 10 to 20%? If it’s less, you need to get financially healthy.
Of course, the financial ratios may very due to several factors, its best to check with a medical spa business consultant and have them perform a detailed financial assessment to learn how healthy your business is and how to improve it. This is a good rule of thumb.
Determine Compensation Ranges by Position
Team Status –
Independent Contractor vs. Employee Status
Some medspa owners are still hiring independent contractors. If you are doing so be aware of the laws and guidelines for independent contractors. Status have changed, making it difficult to manage independent contractors and the IRS has strict guidelines for this classification. Its wiser and safer to hire employees. This will provide you the ability to manage, set expectations, and lead the team. Having employees will also raise your employee retention and loyalty. Yes, it’s a little more costly but the payoff in the long term is worth it. If you need legal guidance reach out to the Lengea Team for proper agreements.
Offering a Compensation Mix
Hourly or Salary
As mentioned earlier the hourly rate or salary should represent about half of their compensation opportunities. The remaining of the income are bonuses, rewards, and benefits based on performance.
Premium Pay or Bonuses for Medical Spa Employees
All you need to do is set VPG targets and it’s up to them to increase their pay by achieving it! You give them the opportunity and it’s up to them to step up and earn it!
Employee Benefits
To encourage team retention, you may want to offer benefits. This may include medical insurance, 401K plan, taxes, profit sharing, vacation, education, and other fun perks. The benefits will vary depending on the percentage you designate for benefits.
Rewards
Rewards are earned based on Key Performance Indicators – KPIs. You can reward the medical spa team on key indicators such as number of referrals, reviews, retention rate, cross marketing, member enrollment, hitting their targets, work ethic, training attendance, image, skills and more. Set targets for everyone on the team and at the end of the month you can reward them based on hitting their KPI targets.
Switching to a performance-based
compensation model has many benefits:
- Provides targets and goals to focus on and strive towards
- Encourages upgrade opportunities, resulting in increased Volume Per Guest
- Increases retail sales
- Promotes performance stretching to reach the highest target
- Rewards exceptional performance
- Provides a performance measurement tool to the leadership and the team
- Fosters a motivational environment
- Great management & recruiting tool
- Reduces payroll costs
- Increases profits
