Cost of Goods Sold: How to Accurately Calculate Margins on Treatments
Understanding your true profit margins on treatments is impossible without accurately calculating your cost of goods sold (COGS). Yet many medical spas only track the major expenses (like injectables) while ignoring the numerous smaller costs that add up significantly over time.
To calculate accurate COGS, you need to track every product used in each treatment. For a dermal filler appointment, this includes not just the syringe of filler itself, but also the numbing cream, alcohol wipes, gauze, gloves, needles or cannulas, ice packs, and any post-treatment products given to the client. While individually these items may cost just pennies or dollars, collectively they can represent 5-15% of your treatment cost.
Once you have comprehensive COGS data, subtract it from your service price to find your actual margin. Many medical spa owners are shocked to discover that their most popular treatments have much thinner margins than they assumed when they only factored in the primary product cost. This information is crucial for strategic pricing decisions, promotional planning, and understanding which services are truly driving profitability versus simply driving volume.
For example, if you're charging $600 for a syringe of filler and you think your COGS is $350, you might believe you have a 42% margin. But when you add in all the ancillary supplies, practitioner time, and allocated overhead, your true margin might be closer to 30%. That difference matters enormously when making business decisions.
Pro Tip: Track Waste Separately—It's a Valuable Business Metric!
One of the most overlooked aspects of medical spa inventory management is waste tracking. Many businesses simply write off waste as an inevitable cost of doing business, but treating it as a separate, trackable metric can reveal significant opportunities for improvement.
Waste in a medical spa comes from various sources: unused portions of opened vials that can't be saved, expired products that weren't used in time, supplies used during staff training, samples given to clients, and products damaged or contaminated. By categorizing and tracking each type of waste separately, you can identify patterns and make smarter purchasing and operational decisions.
For instance, if you notice that a particular injectable is frequently wasted because opened vials aren't fully used, you might adjust your scheduling to book similar treatments back-to-back, maximizing the use of each vial. If certain retail products consistently expire before selling, you can reduce your ordering quantity or discontinue the product line entirely.
Medical spas that implement comprehensive waste tracking often reduce waste by 20-30% within the first year. When you're dealing with high-value inventory like injectables and premium skincare products, that reduction translates directly to thousands of dollars in increased profitability—all without increasing revenue or cutting service quality.
Taking Control of Your Medical Spa Inventory
Effective inventory management is one of the most impactful yet underutilized strategies for improving medical spa profitability. By implementing robust tracking systems for injectables, products, equipment, and waste, you gain visibility into exactly where your money is going and where opportunities for improvement exist.
The key is treating inventory management not as an administrative burden but as a strategic tool for business intelligence. The data you collect doesn't just prevent losses—it informs better purchasing decisions, more accurate pricing strategies, and more efficient operations overall.
If you're struggling to implement these inventory management systems or need help understanding the financial impact of your current practices, our team specializes in bookkeeping for medical spas. We understand the unique challenges of your industry and can help you build tracking systems that protect your profits while staying compliant with industry regulations.
Ready to stop throwing money away on poor inventory management? Book time with us to chat about how proper bookkeeping can transform your medical spa's financial performance.
