As just one company, there is nothing you can single handedly do to prevent a recession. Like a weather event, a disturbance in the economic environment is simply something to prepare for and handle. Whether it’s a pandemic, political unrest, a recession, or an “act of God,” you can make your med spa business ready for any situation. 

There is no such thing as recession insurance. Luckily, a medical spa is a particularly recession-resilient business. This is because beauty is not a luxury item but a human necessity. In times of heightened stress, people are even more willing to spend on looking good as a way to feel good. 

Even during wartime, people are willing to spend on making themselves beautiful. The sociologist Juliet Schor defined this as the “Lipstick effect.” A study by the Economist magazine noted an uptick in the sales of premium cosmetics during difficult times: brands like Estée-Lauder and Chanel, for example, saw increases of 11% during the recessions of 2001 and 2008.  Take a look at our own industry: during the past two years, pandemic and all, the medical spa industry has actually grown by about 15% each year.

Currently, whether it’s a brief dip or a long couple of years, inflation, global volatility, and uncertainty are some  certainties for the foreseeable future. From interviews with the CEOs of several multi-million dollar med spas, here are the Top 4 recommendations on how to insulate your business in a recession.


Get a Flexible Lease

You don’t get what you deserve, you get what you negotiate.  

In normal times, commercial landlords often demand 3–7 year terms. In today’s terms, that might as well be a century–you will likely either outgrow your lease or it will outgrow you. So, you need to make sure there are provisions in the lease for when and if you need to make a change.  

Besides a shorter term (1-2 years is ideal), there is a lot you can negotiate in a commercial lease.  You can negotiate a “Good Guy Guarantee” vs a personal guarantee. A “Good Guy Guarantee” in place of a personal guarantee limits your personal liability. If you can’t pay rent and agree to leave the space in great shape, you won’t owe all the rent of your lease term. Make sure the contract includes approval to sublease the space, which allows you to leave if you find someone else to take over.

You can also negotiate for a lower security deposit, a reduction in rent if you’re doing renovations, and even free rent for a few months. Additionally, you want to make sure that your lease provides an out in case of an Act of God/Act of Violence. In case of what we call “force majeure” events occuring, like pandemic shutdowns, partial closures, political unrest, or other catastrophes, you want to ensure you are not paying rent for a space you cannot use.  

You might not get everything you ask for, but a landlord eager to rent a space that’s been vacant for a while might be a very agreeable negotiating partner. 


Make Flexible Employment Obligations

In Los Angeles and San Francisco, where earthquakes are a threat, tall buildings are built to sway as much as ten feet in any direction, which keeps them from shattering. So too, if a skyscraper can withstand an earthquake, your medical spa can ride out a shakeup in the markets. Flexibility is the defining theme of a recession-resilient business.

Because of increased uncertainty, a traditional employment contract that gets renewed once a year might not be realistic or feasible. Current events change rapidly—and so do people’s plans. When you have multiple practitioners sharing the work, it’s easier to navigate weekends/holidays and you are less reliant on the vicissitudes of any one person’s life. 

Though most clinics will generally have a core staff of at least one practitioner and one receptionist, many of the procedures at a medical spa can be performed by independent operators. It’s your choice: you can have a full-time nurse practitioner on payroll to operate a laser that gets used occasionally, or you can partner with an independent medical contractor who comes in twice a week to take care of your patients. 

A contractor might be more expensive on an hourly basis, but they will often have their own professional (malpractice) insurance and you do not have to pay their overhead. If someone needs to shift their hours or if your business has fluctuations, it’s much easier to make changes. 

Performance-based employment agreements can also be a good way to bring someone on board without making a huge commitment. These contracts offer a bonus based on performance in exchange for a lower base salary. A good strategy with these agreements is to have a performance-based practitioner for newer procedures you are just testing out or which don’t yet have a lot of demand. For the most popular (and profitable) procedures in your spa, it is a good idea to have a consistent group of professionals on fixed salaries doing the work. Remember: as profit goes up, performance-based salaries take a bigger and bigger bite out of the bottom line—fixed salaries don’t. Performance-based compensation is also legally restricted in many states.


Diversify Your Revenue Streams

Just like in fashion, there are trends in aesthetics. Some treatments fall out of favor, while new ones develop. Kim Kardashian posts a selfie of a vampire facial and everybody wants one. Somebody goes viral on TikTok with overpuffed sausage lips and your filler business is down for a few weeks. It’s hard to plan for everything, so it’s important to have a diverse business that isn’t overly reliant on one service. 

This is a good strategy even when not in a recession. Botox is generally injected every three months, while fillers generally are done every six months. In order to have a steady stream of patients you must offer treatments that can be performed more frequently. It isn’t expensive to invest in the equipment for microdermabrasion facials, chemical peels, laser hair removal, body contouring, and teeth whitening. These treatments have immediate, noticeable improvements that keep patients coming back every one to two months.

A bigger menu of treatments means a more diverse pool of customers, so your business is less affected by downturns in specific industries–even if all the bankers lose their jobs, the lawyers may still keep coming. 

Selling skincare products is another way to increase revenue while also increasing the results for your patients. Skincare products are like homework: every aesthetic treatment has a skincare product that could complement it. Over 50% of medical spa patients buy a skincare product within a few days of their aesthetics treatment. Why? They want to protect the investment that they just made in themselves. Make sure they buy that product from your practice. 

Automate and Outsource

One fixed reality of the aesthetics business is a high Cost of Goods Sold. Because aesthetics treatments rely on brand-name, patented, and FDA-approved products, they can be quite expensive. A medical spa spends 30-50% of its revenue on the cost of equipment and medicines every year. 

Pharmaceutical vendors generally charge a business recession-proof prices, so the best way to get a decent slice of profit is to be very efficient with how you run your business. 

Cutting down on operations costs means developing a systematic approach and outsourcing as much as possible. This involves investing in automated processes and sometimes hiring people across the globe.  

At one point in history, outsourcing customer communications was strictly for giant corporations. Today, it is possible for even very small businesses to use an overseas call center.  Fast, inexpensive communication tools—like instant messaging—make it possible to have a team member in the Philippines book appointments for your patients in Columbus, Ohio, while an employee in Jamaica gives directions to your medical spa in New York City.

Of course, having such far-flung associates requires a high degree of organization and training. This requires investing in telecommunications technologies and paperless, digitized record-keeping processes.  But overcoming these obstacles will save you thousands every month on office space and salaries.


One Last Thing to Remember: 

Avoid getting stuck in a recession mindset.Eventually, the downturn will be over, and you want your business to be primed to ride a new wave of economic growth. The biggest long-term returns on investment come from developing new processes, custom software, and novel ways of automation. Technology companies routinely have multiples of 10x and up, while that valuation is 1–3x for plain old medical spas. For the maximum valuation, you should strive to be a tech company in the aesthetics space, not an aesthetics business that uses some technology. 

If you spend the recession streamlining and systematizing your med spa using these tips, you will be ready to capture market share and scale up once the economy is booming again.