How We Started A $700K/Month Aesthetic Dermatology Business

Hello! Who are you and what business did you start?

Hello, my name is Scott Melamed and I run ProMD Health, along with my co-founder/business partner and close personal friend Dr. George O. Gavrila, MD. ProMD Health operates in the Aesthetic Dermatology space, but we are so much more than that. I believe that it is every company’s duty to do their part to change the world for the better and we accomplish that mission by delivering great results, taking care of our patients, our staff, our vendors, and the community at large through a number of charitable initiatives under our corporate giving program ProMD Helps.

Our core services are focused around helping people to Look and Feel their best. Utilizing the latest tools in Aesthetic Dermatology, think Botox, Dermal Fillers, and Aesthetic lasers, combined with our unique approach to total wellness featuring tools and programs such as Bio-identical Hormone Replacement Therapy (BHRT) as well as lifestyle coaching and weight management.

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What makes us unique is our focus on bringing power back to the Physician by allowing them to have their own independently owned and operated ProMD Health. We are also experts at providing service to what we call the underserved patients in our industry. While we do see many patients from the typical 35-65 wealthy female demographic everyone thinks about when they hear the word “botox” we pride ourselves on our ability to bring our products and services to people from all races, genders, creeds, professions, and walks of life. Whether you’re a male or a female, a social worker or a business executive, a beauty newbie or a fashion expert, we do our best to create tools and pricing structures to fit the needs of anyone seeking to look and feel better about themselves using the services we provide.

ProMD Health started as a single location practice and has quickly grown to include 4 offices, a franchise, a philanthropic initiative, a tattoo removal business, a telemedicine company, and so much more. Since inception, our CAGR has been over 40% and we are rapidly expanding through our independent ownership program aimed at giving physicians from any industry seeking to enter this space the tools and training they need to succeed as the owner of their own ProMD Health.

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What's your backstory and how did you come up with the idea?

The concept for ProMD Health was initially created by my partner Dr. George Gavrila. Believe it or not, he began by treating toenail fungus using a single laser in a 1 room medical office. He was our first receptionist, medical assistant, and physician. He saved every penny he could from that to get trained in Botox and thus ProMD Health was born. We are now one of if not the largest purchasers of Botox and Dermal fillers in the Mid-Atlantic and one of the top practice groups in the country.

From day one he had the dream of building a company that brought the flourishing industry of Aesthetic Dermatology to more than just the elite while also finding a way to bring the power back to the physician so that they could own their own practice and share in his dream in light of heavy pressure to join ever growing HMOs or multi-physician owned large practice groups.

But he couldn’t do it alone, he recognized the need for a partner.

At the time I was working in management consulting for a Big 5 firm while concurrently launching a different aesthetic dermatology group with a team of friends. I completed my undergraduate and graduate training at Johns Hopkins University and the Johns Hopkins Medical Institutions respectively. Before that, I was a firefighter/EMT in New York. I bring this up because it is important to note that as an entrepreneur it is critical to remember your background and everything you learned along the way as you never know how those experiences may prove useful to you later.

Fate brought us together and made ProMD Health a reality at a conference by happenstance. Dr. Gavrila was attending to learn about new innovations in the field and I was there with my (then) Aesthetic Dermatology startup team recruiting physicians. I had strategically placed our vendor booth next to the massage chair booth and Dr. Gavrila happened to sit down for a massage. We got to talking, I sold him on joining my venture and we became fast friends.

He shared his dream and vision with me and I shared mine with him. At the time I was having concerns about my current partnership and the direction the start-up was heading in. To make a long story short, I made a moral and ethical decision to leave my start-up. Dr. Gavrila and I joined forces, and the rest is history. Side Note: Managing partnerships can be one of the most difficult pieces of starting any successful enterprise and it is important not to lose yourself or lose sight of your vision in the process. If you are having partnership issues or concerns and need some advice feel free to reach out to me.

Anyways, then the real work began.

Take us through the process of designing, prototyping, and manufacturing your first product.

As a management consultant and through the process of starting my own companies as well as touring practices under my old aesthetic dermatology venture I had seen a breadth of different ways of doing things. So step one was to examine the current business and “trim fat” where needed while implementing the sound business practices that would lead us into the future.

ProMD Health was designed from the ground up to operate like a Fortune 100 company, even though at the time we were very and I mean very small. I created operating models, organizational charts, core values, mission statements, vision statements, implemented employee benefit and retention programs, service awards, you name it.

Looking back at some of our old documents is pretty amusing as we had several people wearing so many hats, filling positions we knew we would need as we grew. I believe this is what led greatly to our success. Take the time to build your business right from day one. It is much easier to scale and grow into already developed processes than it is to go back and try to retrofit your business into things as it grows. Plus as your employees mature and want to grow with you, you already have positions for them. There is nothing worse than losing a great employee because they’ve outgrown their entry-level position and you have nothing left to offer them.

We set out to do things that few else in the industry were doing. Starting first with vendor relationships. I examined the industry and recognized that while it was growing year over year it was lacking in key business practices. Largely due to the fact that most physicians, for better or worse, are more concerned with medicine and never took the time to learn about business.

The simple adages heard in the halls of major firms went simply missed such as “never eat alone” and “take every meeting”. Vendors were often shooed out of offices without being given the time of day. ProMD Health changed that, by developing close-knit relationships with every vendor, even those who sold products we weren’t interested in. This put us at the top of the list for vendors when they acquired new products or services, made sure we were always in the know and gave us access to the best pricing. The pricing we would use not only to improve our bottom line but would enable us to spin up corporate giving campaigns and improve access to our more cost-prohibitive services later. Treat everyone with respect and take every meeting, you never know who will be pivotable to your success down the road.

We began capturing, analyzing, and utilizing data to drive our business in new and unique ways. We did lean six-sigma implementations which I had learned while working at Johns Hopkins Hospital, we examined the patient base and potential patient base in our area to determine where the low hanging fruit that our competitors had missed was. As a small example, due to my time in the public service world as a firefighter, I recognized that with overtime police officers and firefighters were bringing home pay well above the average for the area. In addition, I was aware of how often these valued members of our community and their spouses meet for union events, fire department dinners, police balls, etc. Yet not one of our competitors was advertising to this group. So we partnered with their unions and began offering a fire-police-ems & military discount to show our appreciation.

Once we identified all the consumer bases we wanted to target, refined our internal processes, got the vendors on board, built our team, and created a truly reproducible business system we were ready to launch and grow in accordance with our Core Values.

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Describe the process of launching the business.

For the purposes of this article, I will define “Launch” as the process and eventual launch of the ProMD Development Group, which gave physicians the ability to own their own ProMD Health location as that process involved first refining and essentially relaunching the ProMD Health corporate brand and locations and I think this group will get more out of it as it is more directly applicable to any business trying to scale.

In order to prepare any business to launch to the scale, you must first begin a ramp-up phase. We did a SWOT analysis, identified skill gaps, established our core team, and made sure that everyone involved understood the mission and vision.

Without clear direction and bottom-up buy-in of your mission and vision, there is no pad to launch from. A quick note on staffing and teams. There is not a single member of my team that I wouldn’t grab a beer with or mind being stuck at the office in a snowstorm with. In consulting, we called this “the airport test”. I would rather be surrounded by a team of mid-range performers who care about the mission and vision and bring the collective team-up than be surrounded by high performers who kill our culture. I strongly advise you to build a team full of members who bring the who business up overall rather than seeking out a team full of people who are great at bringing up some key metrics but bring the overall team down.

After the ramp-up phase, we began to further hone the system. Making sure everything was easily repeatable and reproducible and getting ready to expand to test it for ourselves. We examined every area of the business to see where we could improve. We partnered with vendors to see about training opportunities and speaking opportunities to grow and establish our credibility. We took a look at our marketing and laid out a plan, more on this in the next section. Honestly, fully explaining how and why our marketing would have to be its own story, but I will do my best in the appropriate section later.

We identified and opened a new location in a test market and began to test our methods to see if they could be reproduced by our existing team in a new location.

The next step was to truly burn in the model. Here we really started to get creative with our data capture and analysis. Looking at things like how consumers behave during certain times of the year, on certain days, around the holidays, what items they were purchasing together that could be bundled to drive sales, etc.

We became a data-driven business. As an example, we studied how our consumers were acting around holidays. Were they coming in more since they had free time? Were they coming in less because they were traveling or with their families? We identified gaps and took proactive steps to modulate their behavior in order to get them to come in when the data told us the schedule was historically light and we ran promotions to get them to make the most of their appointment during holiday weeks when the data told us appointment counts were historically low.

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With a burned in and proven system backed by reliable data we opened our next location with new staff to see if the model could be reproduced by “newbies”. Here we learned a tremendous amount.

The key takeaway was that living and breathing inside a model everyday makes things seem routine that isn’t. When we were teaching new staff we left out key explanations because we assumed they were known since they were routine to us. As an easily understandable parody when a friend asks you for directions to your house you probably wouldn’t start with “Step 1: Walk out of your house and get into your car.” We would assume that if they are asking for directions they inherently know all the steps before getting on the nearest interstate. But we learned that if we wanted to make this work with true reproducibility we had to get very granular in our explanations.

We also learned what in my opinion was the most valuable lesson: People remember “how” to do things better when they understand “why” they are doing them. Taking the few extra minutes to explain how and why we came to the conclusion that what we're telling them to do is the best way does 2 important things: 1. It gets their buy-in and prevents re-training later. 2. It allows them to truly understand the thinking behind things and more importantly gets them thinking themselves about ways to improve upon our “best practices”. We have an open-door policy when it comes to doing things better, many of the processes we use today were created by team members recognizing ways to do the task they were given in a way that is better than what was in their initial training.

After we were comfortable that our system worked, could be reproduced by those other than members of the core team, and was safe and effective to both the patients and the brand, we began to expand regionally and launched the independently owned and operated growth model.

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Since launch, what has worked to attract and retain customers?

The ability to acquire and retain quality customers is becoming more important every day. I often jest that in order to succeed in today’s business world every company has to be a marketing company in addition to its main line of business.

I think what has worked well for us is our ability to step away from the traditional marketing philosophies and instead try to open the kimono and really share with the potential consumer who we are what we are about. But before we talk about what works from a marketing perspective it is important to lay the proper foundation.

The absolute best things any business can do for their marketing efforts is to set proper expectations when it comes to their product and service, deliver consistent and excellent products/results as promised, and manage any issues as they arise. If you aren’t doing those three things then you can bring in all the new business in the world, but the bad reviews and opinions of you in the marketplace will quickly outshine your marketing efforts. I often say that “I would rather have 10 happy customers who will come back and bring friends than 100 unhappy customers who are indifferent or worse when it comes to my success.”

If you set proper expectations your customer won’t be upset when you don’t deliver the impossible. If you deliver what they were expecting as you promised you will gain their trust. If you manage issues that arise whether in your control or not you will gain lasting repeat customers for life. See the service recovery paradox:

Now onto the fun part.

We began marketing, like most companies, in the traditional fashion. I.e. Talk about what you’re offering, why it’s so great, and why the value received outweighs the cash outlay. We hit the traditional channels, just like our competitors, etc etc. It worked, but it wasn’t anything to write home about.

We challenged ourselves to go deeper, to study great advertisements in the marketplace across all industries, and to see if we could improve our efforts and do things outside of the box that our competitors weren’t doing. We began to shift away from the traditional advertisements showing product features or before/afters of our services and instead tried to connect with the consumer in a way that showed who we are and showed them that we understood their needs. This allowed us to be a little more playful in our marketing and hit new channels.

We began to focus more on associating positive feelings with the brand and making people want to check us out to learn more about who we are what we do. Capture their attention, make them feel a positive emotion, and then direct them to the good stuff on our website where they could learn about our services and see the excellent work that we do. It is of important note that this philosophy aligns perfectly in Facebook/Instagram’s advertising world where before/after photos aren’t permitted.

One particularly successful campaign was “Who does your Botox?” For this campaign, we micro-targeted segments of our consumer base, made a list of their core wants/needs, and then picked one to highlight to show that we “get it”. We then ask the question “Who does your Botox?” to make the consumer reflect and ask themselves “Should I be getting my Botox done by my current provider or by someone who understands what I am really after?”

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The above is an advertisement we ran both on social media (with geo targets for water surrounding communities) and in print in a community-focused around life on the water. The underlying message of the advertisement is that we understand the activities you would rather be doing (not getting Botox) and that you’d rather spend time with family (and not us). We understand that you want excellent results in a little time as possible so that you can get back to your life and your family. We also included the dog, because frankly, dogs are great for advertising.

With that in mind, we decided to have a little fun and make an unofficial mascot “Winston”.

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You’d be hard-pressed to find someone who doesn’t love this ad and that was done very intentionally. We’ve seen competitors try to copy this ad but make huge follies. One such folly was to change the tagline to “Does your face look this wrinkly?” Hearing that still makes me cringe. Why shame the poor dog like that? His wrinkles look great on him! Some people don’t mind their wrinkles or even like them and that’s great! The message of this ad isn’t to say the wrinkles look bad on him, its to say Botox looks good on you. Clearly our competition missed the point. Associate good vibes only with your brand and customers will seek to learn more about you, once they’re already in the funnel wow them with an excellent website that showcases your work!

In line with our good vibes marketing philosophy, we also contribute heavily to school fundraisers, charity events, and fun events like concerts and shows that our customer base attends. Donating products or services to charity functions or PTA events works wonders for this and it is in line with our win-win-win-win philosophy. The person asking for the donation wins, the customer receiving our excellent service wins, the vendors who sell the products win, and we win by gaining a new client and getting our name out there.

I am sure some of you reading this are cost-conscious. What if I told you that all of our latest advertisements, even social media shorts cost us less than $250 to create? It’s true! There are great sites out there like Pond5 and Unsplash that have incredibly high-quality content with little or no licensing fees. Work a little Photoshop magic and you can quickly create low-cost high impact targeted content for any consumer segment.

How are you doing today and what does the future look like?

Today is a good day and tomorrow will be what we make of it. Right now we are focused on continuing to hone our existing locations, after all, the price of excellence is eternal vigilance. We have also shifted some of our efforts to grow the market at large. The beauty industry and particularly Aesthetic Dermatology has a lot of growth potential. We are undertaking education efforts and partnering with vendors to fight some of the stigma associated with our products, such as people having an overdone look, or questioning their safety (though study after study shows that they’re safe and effective). We are even doing some unbranded marketing campaigns aimed at educating the public at large and growing the market as a whole while also sharing some of our best practices with “the competition”. We believe that all boats rise with the tide and we trust in our business practices and our marketing enough to know that we will capture our share of new business as the industry as a whole matures. If you can help someone, you help them. Yes, even competitors.

Our primary focus is being able to bring our best practices and the wisdom we’ve accumulated from both our successes and our failures to more patients by finding and training new physicians to join our independently owned and operated network. We are also constantly seeking out the latest new technologies to add to their service offering, renegotiating vendor contracts to improve their bottom line, and trying to stay ahead of the game with progressive marketing practices to drive new business to them.

Internally every year we run a major initiative focused around a key topic. Our first initiative was to hone our internal operations, our next was centered around taking care of our people and those around us. After that, we sought to help the community at large by creating ProMD Helps. Last year our initiative was Performance 2019 which was all about improving the “performance” we put on every day that we come to work. 2020 ushers in Thrive 2020 which is centered around ensuring that our team, our patients, our community, and ourselves all Thrive.

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Through starting the business, have you learned anything particularly helpful or advantageous?

I think the most important thing I have learned is that your business is your people. Not only the people you employ and your clients but the people around you as well. When I started down this road I told everyone that ProMD Health was going to be more than just the best Aesthetic Dermatology practice around, it was going to be a contributor to the community and a place where people come for more than just treatment.

Few believed me.

Now we host amazing educational events, fun community appreciation events, we donate and support some amazing charities, and our team members either grow with us, go on to graduate school, or get great jobs and become leaders in their chosen dream fields. From one small business we’ve been able to build a real community and that has been my dream all along.

I guess what I am trying to get at is that no matter where you are now and how small you are, you can always contribute to the greater good in a way that scales. We’ve always believed in managing by percentages, that is setting some variable costs as percentages of the businesses, for example marketing 3% of revenue, staff 20% of revenue, philanthropic initiatives as 5% of revenue, etc. When you start, 5% of $2500 isn’t much, but it is something. If you get used to giving back that 5% and commit to it, one day it can become 5% of $10MM or greater. You get back what you put out there and the returns for us have been pretty good.

What platform/tools do you use for your business?

Just to name a few…

To keep the team on track and together we deploy:

  • Trellofor organization and task creation
  • Slack for messaging

For data analytics we use:

  • Tableau for some really cool and impressive visuals
  • Excel (I can’t even begin to tell you how powerful a good old fashioned pivot table can be)

For Marketing we use:

Our EHR (electronic health record) is DrChrono.

We’ve recently “employed” Holly which is a machine learning AI tool that helps with appointments, reschedules, and cancellations.

We are always seeking new tools, so if you have a good one for me please reach out!

What have been the most influential books, podcasts, or other resources?

The one most influential book I have read at the time of this writing is How to Win Friends and Influence People by Dale Carnegie, I like it so much that I re-read it at least once a year. Some books and lessons stand the test of time, this is one of them in my opinion.

I’d also recommend Loserthink and Win Bigly by Scott Adams, it has been brought to my attention that those books are politically charged, I didn’t know that when I read them and I still contest that. If they are, ignore the politics and read the content, not the spin.

Umar Hameed has a great podcast called Unleash Your Crazy Sexy Brain!. It covers NLP based practices and really helped me to think outside the box in my marketing efforts.

If you find yourself stressed under the pressure of it all whip out How to Stop Worrying and StartLiving also by Dale Carnegie.

Advice for other entrepreneurs who want to get started or are just starting out?

I think the best advice I can give is to remember that there is no career path for entrepreneurs. There is no real training, no book, no manual, no formal education that can truly make or cause them to be lost without it. Perhaps that’s why many entrepreneurs shun formal education. Who you are and what you create is going to be a sum total of the experiences you’ve had, the people you’ve met, and the paths you’ve crossed along the way. The most insignificant details to others can change an entrepreneur’s whole world and become a major disruptor to an industry.

I may run a company in the highly specialized space of Aesthetic Dermatology, but I draw on experiences and people from all over my life. I guess this is as good a time as any to give some of those people the credit they deserve.

Dennis Sheridan, MBA FACHE: When I was a teenager I worked in a hospital thinking that I wanted to become a doctor. Mr. Sheridan was the first healthcare executive I had ever met, in fact, I didn’t even know that profession existed at the time. I thought doctors ran hospitals. He had this way about him that I would later learn is called “executive presence”. He really changed things for me because he was able to help patients in a way I hadn’t seen before, he made everything around him more efficient. That clicked for me and I knew I wanted that skill.

Prof. Lawrence Aronhime, MBA: Besides being one of the most influential college professors I have ever had he said something that changed my whole world. “Managers think in spreadsheets.” That really helped me to understand and organize my brain, to this day I still “think in spreadsheets.”

Bill Loeffert: He was a senior leader at a consulting client of mine and to this day is one of the most genuine people-oriented leaders I have ever met. He balanced his career, his family including a special needs daughter, and philanthropy in a way that I really look up to. He is a constant reminder that while being successful in business is important, it is a very small piece of what goes into being a successful human being.

Mike Tich: My current advisor, confidant, and close friend who runs a leadership group, called InSight, for local business leaders. He provides the sounding board I miss having as a consultant working with the “business elite”.

I’d actually like to touch a little bit more on that last point. As an entrepreneur at times, especially starting out, you’re alone. But if you do it right, you’re never truly on your own. There are so many start-ups and businesses focused around our “Biome” today, but I believe that there also exists a “Social Biome” made up of those around us. Don’t forget in the course of your work or even in the course of your success to constantly re-evaluate your “Social Biome”. Look for new friends, new colleagues, and especially new mentors. You may never know who might say something that changes the rest of your life.

Are you looking to hire for certain positions right now?

Great question. I tell people that we are never hiring and yet always hiring. We have an amazing team of people around us who can fill any role until we find the right person. When the right person comes along we find a spot for them eventually.

We are however always seeking Physicians or their business partners to join the ProMD Health community and open their own ProMD Health, so if you know anyone that you think fits the mold, send them my way.

Where can we go to learn more?

ProMD Health

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Scott R. Melamed,   Founder of ProMD Health

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