Transcription
All right, thank you for joining me today. We're going to talk about something I'm incredibly passionate about. We're talking about selling memberships.
Memberships is not a passive strategy. Membership is a strategy that requires focus. It requires a coordinated sales effort. And I'm going to really talk to you about the details of not how to only just sell them, how to start them, but if you're already selling them, how to sell them at the highest level to really give you the best enterprise value for your business.
So, I'm Phil Statham, founder and CEO of PMD. We sell memberships all the time. We've generated 297 million dollars for our clients last year alone. About 49 million of that is memberships. I'm not telling you that to impress you. I'm telling you that to impress upon you I could be a total idiot and recognize the patterns and the systems and strategies our clients use to get the best results for their memberships. So, think of me as a conduit. I just look at the data. I'm just letting you know that.
So, what we're going to cover today: We're going to cover the membership stats and data. I always like to start with stats and data because it gives you that little push to say, "Oh, okay. Like, intuitively, I know memberships matter, but we haven't really taken it seriously as I should have or we should have just yet." So that's always impactful. I enjoy that.
The definitions you need to know. If you're going to do memberships, there's going to be certain terms that you, you know, a medical spa owner might not be familiar with. But the difference of knowing those terms and understanding the impact of those terms could be the difference of success and failure for you.
The impact of memberships. What is the impact? What is the financial impact? How does it actually increase the valuation of my business? Absolutely important. We're going to talk about that.
All the different types of memberships. Real membership success. My favorite part. We will dissect three different practice owners, real practices that have sold a lot in a very short period of time with memberships. What are they selling? How much are they selling it for? And how have they done it? We're going to give you their intel with like the whole playbook, and they've been very gracious to share that with you.
And then, uh, why memberships fail. Failure is up to you, right? Failure could mean, you know, when I'm not selling as much as I could or should be. Failure could be, "We tried, no one buys them." Or failure could be, you know, "We just haven't really started right." So we're going to go over the typical reasons why you fail at memberships and how to do more of them.
And then finally, three things you can do to sell more. I don't know if we'll have time for the three things you can do to sell more. Um, that's why I put a bonus. You know, 25 minutes is not that long, but we're going to try to get through it.
So, question for this audience so I know how to direct the conversation: Are you selling memberships today? Show of hands, please. Show of hands. Okay, so more than last year. I would say about 40, 50 percent of the room. And now, with that show of hands, if you're selling more than five thousand dollars a month in memberships? Okay, keep your hands up. If you're selling more than ten thousand a month? Twenty thousand? Anyone doing over 50,000 a month in memberships? Okay, sir, congratulations. That's a, that's incredible. Um, so yeah, this talk is going to be beneficial for both crowds. If we're selling them, how to sell more. If we're not selling, we want to get started. Exactly how we'll go over that.
So, memberships matter. With memberships matter, here's the data. Here's what I go back with my staff and I show, like, "Hey, this is what I want to talk to you about." Intuitively, I know what matters, but I need the data for me to get my staff and show them this so we can get kind of energized to start selling this.
So, first and foremost, 7 out of 10 patients want an ongoing membership. Aesthetic, aesthetic treatment. Just think about the room. 7 out of 10 patients want it. About 4 out of 10 practices have it. If they're not buying it from you, they will buy it from somewhere at some point. Might as well be you.
76 percent of patients consider themselves a lifetime visit after a third patient. What are we doing to make that first patient, that first visit? That's where all your acquisition costs and that's where you're spinning the SEO and the website and all that. It's your marketing costs for that first visit. What are we doing to guarantee a second visit? And then how do we, how do we get that hump over to that third visit? Because after that third visit, we own them. And that's an important place to be because that's where the relationship takes off. And that's where selling and high-margin services, all that becomes a lot easier. Super important there.
And 78% of Millennials prefer membership model pricing. It's interesting the way we think about Millennials. I think like we've already gone over this, but we think of them as like 25. Millennials all the way up to 40 years old. Okay, so Millennials and under, we budget the way that we shop is through membership models, subscription models, right? And if those are your clients, and if they're used to buying that way, you might as well start selling them the way they want to buy.
Businesses with a strong monthly recurring revenue base, MRR, two to three times greater valuations than those who don't. This is so important. And we'll talk a little bit about this. A lot of you in this room, if you have a lease, you don't really have a viable or sellable business. You have a lease that you operate the business, and hopefully the business makes enough money for you to make a return off of. They don't necessarily have a sellable business because the question becomes, "Hey, I'm Dr. So-and-so. I've built this incredible client base. They come see me, and they come see three, four, whoever you know, whoever's running the practice. They love us. I can't buy that business because if you leave, the business is gone." You wouldn't buy that business if you were an investor. But you would buy the business that has fifty thousand dollars a month, a monthly recurring revenue coming in, because you know while he's here at AM Spa, his business is still generating revenue, right? There's a difference there. I want you to think about that.
In the profitability, the profitability goal when we launch memberships, what's our goal? Well, the goal is to know what your overhead costs are and how do we cover that cost within the first six months of launching a membership. That's the number I would write on the whiteboard, and that's the number I would be selling with my, with my staff to achieve.
And then members spend 44% more on average than non-members annually. If they're coming in two times or three times for their Botox and leaving, it's like, "Okay, like, that's great." But a lot of you are on the race to the bottom with injectables overall. Everyone's trying to sell them cheaper to acquire the patient. If we can get someone in for a membership, well, all of a sudden, they're coming 10, 12 times in a year. Do you think it's easier to sell someone when you have 12 at-bats rather than three? It's much easier. You deserve that. And so we'll talk about how to get there.
You know, timely as well. This year, right now, a lot of you or many of you might have not felt, you know, the impact of a recession. But I know you felt the impact of inflation. And whether you think or you didn't, I'm here to tell you you have. Because even if you sold the same last year, you made less. If I sell the same, but things cost 20% more, I'd have to sell 20% more to make the same. And so when this came out, JP Morgan and everybody is screaming recession, that was in October. Well, now we're in January. So let's see if his predictions are right. Jamie Diamond, right? A lot of times, wouldn't bet against Jamie Diamond from JP Morgan. I think that he has understands consumer trends better than us, okay? And so six to nine months, we're talking March, we're talking three months after that, right? So something to consider is like, "Hey, if I need an extra push, like I'm going to want to retain my patients. I'm going to want them to come in more often because there just might be the possibility that they're going to come less this year."
As I said before, everyone in this room shops with memberships. Like, anyone not bought from any of these brands? These are just six of them, right? Like, if I put, I don't know how many slides I would need to show every, every business, every profitable business that runs memberships at a high level. But these are the brands that you shop with, and these are just a variety. So we just put a variety on there. Could have put a thousand different names on there. And also your brands, you know, different, different brands in this space do memberships. 40, 50 of y'all do memberships.
Here are the definitions. Here's where we're going to go to school with memberships and with the impact of these definitions, right? Because I want you all to go on the journey with me and say, "Hey, we're going to, we're going to sell memberships. So we're going to understand what are the definitions." Because I'm going to membership my business.
Monthly Recurring Revenue. What is the amount of revenue that you get in each month whether you're there or not? What is your MRR? Your monthly recurring revenue. It's the first question when you're a membership.
Number two, Annual Recurring Revenue. It's your monthly recurring revenue times 12. That's my annual recurring revenue. That's the revenue that I anticipate for my business to forecast to grow this year because of my monthly recurring revenue.
Churn rate. This is where many, many people mess up. Unless you build your business off of memberships, I'm here to guide you with this one. The percentage of your members that cancel per month. Okay? As a small business owner, let's say we have a hundred members, and out of 100 members, 10 canceled that month. Well, okay, not a big deal. I got 90 other members. No big deal. You know, things happen. You're in real danger if 10% of your members cancel and we annualize that. You're at a 120% churn rate. That means you have to resell your entire membership base plus 20% more just to keep selling the same. Your churn rate when you're selling memberships is something that you're really going to want to be aware of. What is good churn? Keep it 1 to 3% max. And understand that number. And if you're way higher, then we take a look at, well, maybe is it too expensive? There's not enough value. The thing is, you at least want to know the number because what we just talked about at, like, the forecast of the ability to grow your business. If you're churning 10% of your memberships, you have to sell the entire base again every year. It'll never really do the benefit of the business for you.
Annual churn. We talked about that. If I have a 10% churn rate times 12, I have a 120% churn rate. Okay?
And then Enterprise Value. What is the valuation of your business? Because memberships, and I'm going to show you very quickly on the impact, the valuation has in order to, to, you know, grow and sell the business. So many of you, you might want to sell the business, you might want to franchise the business, you might just want to have a legacy business. Regardless of what your intention is, like, this is going to matter for you to have your ideal outcome and to create that freedom that a business can actually give you.
Anyone want to take a guess? What percentage of businesses that want to sell actually sell here in America? 15%? Anyone else? 70%? Okay, so the amount of businesses that never get sold, 87%. Because you don't have a business, you have a well-paying job. If you do it right, I want to help you try to create a business, a business that doesn't rely on you, a business that actually can thrive because it's growing every year systematically. And a business that, if you choose, and I'm not saying you need to sell, I'm just saying, wouldn't it be nice that if you wanted to, you would have a pool of buyers, right? That's where we want to be.
Okay, so let's talk about the impact. What are the financial impacts of the memberships? Med Spa A, a three million a year fantastic. Three million of non-recurring sales. How do we value the business? 20% net margin, okay, 600k a year. It's a great paying job. Four times earnings, if the business were able to sell, 2.4 million of enterprise value. It's what that business is worth.
Med Spa B, 3 million a year, only 2 million of non-recurring sales. 20% net margin, same four times earnings, and a million of recurring memberships. Notice there's a difference. Six times your annual recurring revenue. Here's a nuance: net margin versus your annual recurring revenue. What's really nice about building a membership or subscription-based business is we get to value off your top line revenue, not off your bottom 20%. Watch the difference. A little bit different of a lifestyle there, folks. 2.4 million. All right. 7.6 million. Talk to your old friends at JP Morgan, maybe they'll get you a nice return on that. Year over year, you might never have to work again.
Types of memberships. Just like these beautiful pups up there, it's up to you. There's different preferences. What do you like? What don't you like? What's the right business? What's the right choice for your customer, your profile? Let's go over what those look like. Okay.
Talks membership offering. A discounted price per unit of toxin by purchasing a monthly membership. I didn't know what to think about this one, but I love it now because the difference is, most of your patients do this. How do I keep my patient? How do I, how do I keep them? So when that person is running the 97 whatever Botox special, your patient doesn't become their patient. It's a great way to do it.
A beauty bank. Like a savings account with perks. Also one of the ones I was very surprised by. I was like, "People actually do this?" They do it. It's like 20, 50, 100 a month. It gets a little beauty bank, and then they can blast all that cash into whatever treatment they're saving for.
Tier-based memberships. My personal favorite. Offering a variety of treatments for the patients to choose from with a variety of pricing tiers. Why do I like this? I don't necessarily love like a facial-based membership because I don't want a facial. I'm going to turn if you give me more reasons to come. Like, "Oh, you know what? I got a facial instead of I want to cancel because I don't want any more facials." Or like, "Oh, I've never tried an IV. Let me try an IV." Whatever it is. I really like tier-based.
Treatment specific. Offering a long-term series or maintenance program for a monthly cost. That one's great too. An M scope Neo is a good example for it. Like after the initial series, we sell them a maintenance plan. That plan is significantly discounted, but we know they're going to come in all the time to use it.
And then finally, annual or monthly pricing. It's a one-time annual fee. Memberships that offer you better deals or perks for doing it. Sonia is the best at this. They have a very coordinated sales uh force. It's like 200, and they get 50% off of everything. 50% off CoolSculpting, 50% off this. It's like, just go Google it. Like, like the Sonia model is really interesting for that. It's very high volume, but it also requires a very dedicated sales force.
Let's talk about real membership success. I promised you a playbook. I'm going to give you the playbook. I'm also going to give you a chance to scan a QR code to get this sent to you because it's going to be a lot to go over. So I'll go over it quickly.
Michelle Bauer, Corpus Christi, Texas. Generated 19,000 of monthly recurring revenue, 216,000 annual recurring revenue. You see those definitions? You recognize those now. 1.7 million enterprise value. What type of memberships does she have? Beauty banks, tier-based, treatment-based. There's a price point. What's really incredible about her business is we just looked at what her recurring revenue is. Now she's got you beat, sir. Seventy-six thousand is what she does. 76,000 a month. And this is about four months into it. She's here at AM Spa. Maybe we can find her and you can, uh, she can become a local celebrity now.
So what does it look like? This is what she does. Her membership benefits. Really interesting. It's going to be shocking for you all. All of a sudden, you're going to be like, "What? How does the math make sense?" Uh, me and my co-founder, we were like, "How does this math make sense?" And it really makes a lot of sense. So she gets 169, 269. They're the treatments. Won't go over that. But upon buying, you get 150 units of Botox or 200 units of Botox. And that might melt your mind immediately. You'll be like, "What? The how does she?" It's because she requires a 12-month commitment. So she's almost financing that ability to take those Botox, those units on a given course during that 12 months. And so that's the secret of what she does. She knows she will outcompete you, and she's doing 76,000 a month because her bonus, the way she positions it, it's not necessarily bonus, it's part of the membership. Is you get 200 units of Botox for signing up. Brilliant. Am I saying it's your strategy? I'm not saying that at all. I am saying for her, it's worked very, very well.
Dr. Teresa Camden. Generated 43,000 a month in monthly recurring revenue, 516,000 of annual recurring revenue, four million in enterprise value. Style of memberships. And I saw Chris here. Chris, right there. Chris Camden, my man, here with Dr. Teresa Camden. They're doing, what do you do now? 56, 60,000 a month. Sixty thousand dollars a month. Already having conversations with private equity. They crushed it. Okay. And we'll go over that. And thank you for allowing us to share this.
Question: VIP Tox, twenty dollars a month. Her Lipo Gone in a Forever Sculpt. Not going to get into the details of this, but I want to show you. She has this VIP Tox program. So she's got a variety of price points. And with this, 365 a month is an expensive program. She sells a lot of it. It's because you can go treat other parts of the body. It's incredible what she's done. I will say with her, this is everything for her. The coordinated sales process. She is now a membership-forward practice. Meaning, if a patient comes in, it's not a question if you're signing up for the membership. You are signing up for the membership, right? Like that is the practice now. And because of that, they get to now pick and choose who wants to buy to who, how they want to run their business because it's a viable, it's a sellable business.
Dr. Kate Holcomb, Pure Dermatology. 38,000 a month recurring revenue, about half a million AR, 3.6 million enterprise value. Why wouldn't you show you hers? Is because you can have anything you want. Like it's like, "My God, what's not on here?" And what's interesting about hers, and when you look at the details and you download the presentation, you'll see some of these are even, you know, they're even like demo treatments. She does really great on controlling her churn because there's so much availability for that user, for that patient to try other things. I love what she does because it's not a question also if she's a membership business. She is. And she's a dermatologist. She never had memberships before. And now she's outcompeting med spas like you wouldn't believe because of that. But for her, branding is everything. She did a launch party. She created membership exclusive events. Which is a definite what you want to do with memberships. Why would you have an event and not make it a membership event? Like we're making badass membership events where you have to come, you want to be there. But no, no, you can't be unless you're a member. That's how you become a membership of style practice.
So let's talk about quickly why do memberships fail? All of those practices incentivize our staff. In fact, 100% of members of membership practices that do over $5,000 a month incentivize their staff. Because why on earth would I go sell a membership if you're not incentivizing me to do so? And just the reality for us, it's 100%. If you didn't incentivize your staff, probably not going to do super well because it's a new coordinator, it's a new sales coordination event, right?
Number two, you don't have that coordinated process. Like Dr. Teresa Camden and Chris Camden, right? You're kind of like half pregnant. Like, "I kind of got membership." "Yeah, yeah, we got them." It's like, "No, it's not like, like how serious are we going to take this? We're going to do it? Or are we just going to have them and make it a pain in the ass, right?" We can't be half pregnant here. We're either doing memberships or we're not doing memberships. It's not even worth it if you don't. And you're not using membership stop sell. Why on earth would we give out a discount for a treatment unless you're a member? Think about what I just said. Why would I give you a discount unless you're a member? If you want to be a membership-focused practice, I'm happy to give you 25% off. That's for our members. Got a membership starts as low as $20 a month. It's a game changer because now I get to upsell the membership.
Credit card dunning. What I call the ultimate failure when it comes to memberships. Any given month, you're gonna have 5 to 15% of your credit cards decline. Probably higher in January. If you're anything like me, and December is a big spending month, right? My wife's Latina, so you can imagine we have 500 family members. So create with credit card dunning. What happens? The card gets declined for various reasons. You know, the stolen, the, uh, it just doesn't work anymore, expiration, this and that. Most of you running memberships don't even know. Like, you're just like giving away free treatments. I didn't even know. And the challenge is, what you're going to do is you're going to, like, become successful selling memberships. You're gonna have 100, 200 members, and then you're going to have such a nightmare with credit card running, and you didn't staff for that, you didn't make it a focus, and it's going to feel like your success was failure because it's going to stress you out. And we've all been there where we finally hit the pinnacle of success, something we finally wanted to do, and it wasn't everything we imagined it to be. I'm telling you right now, though, foreshadowing, having a credit card dunning process, being aware of who canceled or whose credit card declined, and making someone own that or system own that is very, very important.
And you're missing an all-in-one system. You know, I have, there's a local IV clinic. Their client now, but at the time they weren't. I would go in, I would get my IV, and then I knew they did memberships and I was interested. But after my IV, I didn't like take the time to go to the front desk and read the pamphlet and give them my card and sit there for another 20 minutes. Like after my IV, I'm done. I'm ready to go. And you can't buy that membership outside of their practice, outside of their nine to five. Do you think that you would drive? I'm like, "Okay, I need IV. I'm going to drive and I'm gonna go drive over there, come back in, talk to the front desk, give them my card." It's not how I buy. It's not how you buy. The moment I think about it, I just want to double-click, Apple Pay, be done with it. Show up, get my appointment, leave. You want that. I want that. We all want that. Is that what your patients get to do? Let's get them there.
So, this membership masterclass. We have a similar recording. You can scan there. If you love the presentation, scan that QR code. All you do is put your email, we'll send you a copy of this presentation. That's my gift for you to you. We appreciate your time. I know it's incredibly valuable. You have a hundred different things to choose from. So thank you for joining with me today.
Here's my contact information. We do have a booth here. If you have any questions, we do not have time for Q&A. We have a beautiful rose gold booth. We're giving away Louis Vuitton purses. Like, you should check it out. If you have any questions, happy to answer as many as I can. We also have a team that can answer questions. We do this for a living.
And here is what you can do today, no matter what, to sell more. Number one, we talked about this. I gave you the hint. Do not offer discounts on anything unless they buy a membership. You will increase your memberships immediately, overnight. That's a benefit for being a member. You get 20% off. Let me talk to you about that. Such an easy upsell. You know what they're going to say? "I didn't even know you had memberships." And then you're going to be able to sell it really easy.
Number two, offer the first month free or 50% off. You've got a badass membership. Most people need to know about it. New patient, "Hey, we're offering all of our new patients 50% off of first membership or the first month free." It's a choice. You have to look at your cost. But are people going to be more interested on joining your membership against what you got? You got the credit card. How many of you in this room signed up for something and you forget to cancel it every month? All right, well, there we go. We just increased sales by 20%.
And then become a member-first practice. It is a decision to become a membership practice. It is worth your time. It's worth your energy. It's worth your effort. But it is a coordinated event. It's a training event. It's not, "We just have memberships on the wall." And the, you know, we reign patients who buy memberships. They're desperate for them. It's not that. Okay? It's it's an event. It's a training. It's a retraining. It's a coordinated sales event. It's not something we do passively. It's we become a membership practice. And I'm not saying that's all you have to do. I'm just saying when we become it, like I walk in and somebody in your practice is talking to me about it. That's a, that's what we want to do there. But you know how we want to launch? We want to launch with a membership event. We want to launch. We want to have champagne. We want to have a red carpet. We want to have some social media, whatever on there. We want to make it an event that you have to know about. We want to give away a Louis Vuitton bag at our membership event. Trust me, it works. It's worked on a lot of people here, right? So like, let's make it something. Let's like make it special. Let's launch something.
And with those things, I promise you, whether you work with Repeated MD or work with anybody, you will sell more. Thank you for your time.
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