Before we share our philosophy for service provider compensation models, we have a question:
How do most practices get the majority of their patients through the door?
• Referrals from service providers
• Robust marketing campaigns
You may be asking how marketing applies to compensation models. Too often, we see medspas providing their aestheticians, nurses, and injectors a service-based commission. Service-based commissions eat away at your ability to properly market your practice. If you spend 10-15% of your monthly sales goal on marketing tactics, how can you then give your team 10-20% of services provided and expect to remain profitable? As our senior business consultant Robbi Grayson always says: “You cannot budget with service-based commission.”
Service-based commissions lead to out of control compensation plans. As revenue increases, your overhead will ALWAYS increase. This service-based model is unsustainable and does not lead to a scalable or profitable practice. You need a compensation plan that you can build on. Hire employees with a set and fair wage for your marketplace, and build on this wage. Here are three ways you can manage employee salaries and incentives while preserving your bottom line.
Incentivizing Your Team
We are realistic about creating an environment that leads to increased sales and growth. Incentives are very important for a team of service providers. You want everyone getting excited about the growth of your company. This is exactly why we believe in providing 3% of sales, split among your entire team (in a variety of ways). Keeping commissions at 3% is a great way to ensure that your compensation lends to having a profitable practice.
As you budget and forecast the growth of your business, it is appropriate to provide valuable and high-performing employees with pay raises. This is an excellent way to show your gratitude for their work, based on key growth indicators, while also keeping their wage at a controllable rate. Contrary to service-based commission, you control when and how much your team is compensated and provided with increases.
Be Cautious with Change
You need to be very careful not to drastically change anyone’s compensation as it can lead to a demotivated team and a poor reputation in your marketplace. You also need to be cognizant of human resource compliance rules and regulations when adjusting employee salaries. Always speak with your attorney before making any major alterations.
If you have a broken compensation model and need to make a change (to increase profits and steer your business towards sustainable growth), it’s important to focus on keeping an employee’s overall wage consistent. For example, if your nurse made $50,000 with a 10% service commission, you want to keep him/her as close to a $50,000 base as possible with your adjustment but incentivize them with a new team-based sales goal. This way, when sales spike, you aren’t compensating at an uncontrollable rate.
The most important thing to remember as your practice grows and performance reviews roll around is that you can give appropriate raises, but don’t cut off your ability to grow a business’s profits.
For more tips on compensation models for your practice, contact the aesthetic medical business experts at Acara Partners.