Setting Clear Goals: How to Manage Compensation Expectations for Non-Surgical Providers

Compensations and incentive plans are often among the first issues addressed when adding a non-surgical provider to an aesthetic medical practice. By jumping straight into compensation discussions, owners are missing out on an opportunity paramount to provider longevity and retention—outlining the full cost the practice incurs when hiring an aesthetic provider.

Having this discussion with new—and existing—providers ensures that both parties understand the actual costs associated with the position, helping to dispel assumptions and alleviate tension. When business owners are transparent with providers regarding cost, realistic revenue goals can be set, leading to higher job satisfaction and less turnover.

Scenario 1: a New Provider

Recruiting, onboarding, and training a new provider takes time and considerable investment. Openly discussing the various expenses and revenue considerations listed below before making an offer to a new provider ensures the provider understands his or her net value to the practice and, in turn, the basis for his or her compensation.

• Costs absorbed by the practice. Discuss how base pay is just a part of the cost to bring on a new provider. The practice also absorbs the cost of payroll taxes, benefits, continuing medical education (CME), dues, and licenses, among others.
• Variable expenses. Outline the price of cosmetic supplies, retail products, medical supplies, and other cost of goods associated with the provider’s role.
• Fixed expenses. Detail costs associated with hiring a fully burdened new employee (marketing expenses and new equipment purchases).
• The “breakeven” point. Use the expenses above to clearly explain that the net income available to the practice is often negative in the first year of hiring a new provider; at best, the business may breakeven on its investment, meaning the provider generates an amount of revenue that matches fixed and variable costs. Only after the breakeven point is surpassed does the practice and its owners make money on the provider.

Imparting this knowledge to potential providers upfront is particularly useful as providers with different experience levels might expect a certain amount of pay. It helps circumvent potential compensation pitfalls early in the discussion process and allows for realistic revenue goals and long-term planning for the next three to five years, including incentives.

An experienced provider. If your prospective provider is coming from an established practice, he or she may feel entitled to higher pay due to an existing patient base. However, in many cases, patients stay with the provider’s former practice. Should the provider retain a majority of his or her patient base, you can have short- and long-term goals that reward the provider for helping the practice’s bottom line and exceeding expectations quickly.

A novice provider. There is a different set of expectations for a prospective provider who needs more time to formally train and get certified in a specific area of expertise. Frame expectations by explaining what revenue they will need to generate for the practice just to breakeven. Establish stretch goals and explain how, if those goals and their thresholds are met, the provider can make more money, as it helps generate additional revenue for the practice.

By transparently setting compensation that considers all these factors, business owners can prevent providers from feeling unfairly compensated and ensure all parties have “skin in the game.”

Scenario 2: Existing Provider

Eventually, existing providers will request a higher share of the revenue they generate. This can cause business owners frustration due to provider costs and other associated variables already eating into their profit margins. Owners may be perplexed to the actual amount of net income the provider is generating—in some cases, it can be negative or just breaking even when all provider expenses are considered. When compensation has been previously set in a way that doesn’t benefit the owner or the provider, properly addressing a pay raise request is a must.

While it may seem difficult to “put the toothpaste back in the tube” after compensation has been established, having a conversation about what fair compensation looks like is possible with a little preparation. Use the discussion points outlined below to reset compensation expectations and revenue goals that better align with the practice.

• Illustrate provider importance. Explain the importance this provider plays in generating revenue for the practice. Emphasize that your goal is to help him or her understand how to make more money while also helping the practice become more profitable.
• Outline the cost of doing business. Put variable expenses and fixed expenses into perspective using practical examples. Providers often think they have been extremely profitable for your business by generating, for example, a gross revenue of $600,000. What they often do not fully consider is that the cost for injectables and fillers alone can eat up to 50 percent of that figure. Once this is outlined—along with their salary (i.e., $100,000), payroll taxes, retail products, and any incentive pay—providers will see that the actual net revenue available to the business owner can be as little as $75,000. Gaining this perspective can help the provider align with the owner so mutually beneficial revenue goals can be discussed.
• Set new revenue goals. Outline new revenue goals that benefit both parties. As the owner, outline a clear plan detailing how you will help the provider hit these targets. That plan may include posting more social media messages credentialing the provider or before-and-after pictures on the practice website showcasing the provider’s results. The provider should feel empowered and fully supported, with a clear way to put more money in their pockets as well as the practice’s.

Losing an existing provider over a lack of communication or understanding around compensation is costly to a practice. Use these tips to foster a mutual understanding of practice finances and what compensation is feasible and fair for all parties.

Honesty is the Best Policy

Whether discussing compensation with a new or existing provider, ensuring that everyone understands the actual costs associated with the provider’s position can help alleviate tension. With full transparency, a well-thought-out and mutually agreed upon compensation plan can be created. The ideal plan balances the needs of the provider with the revenue growth goals of the practice, thereby ensuring a happier, more productive experience for all parties.