Saying you’re the CEO of a six or seven-figure spa is no small accomplishment. Any Spa CEO should be proud of building a business to that level.
But (I know, there’s always a but), reaching a six or seven-figure milestone doesn’t feel so rewarding when you’re bringing home a very small slice of that pie.
While increasing revenue is critical to growing a business, what’s more important is keeping as much of that revenue as possible. You can have a million-dollar spa and still struggle to pay yourself consistently if your profit margins are razor-thin.
That’s where Profit First comes in.
The Profit First methodology, originally coined by Mike Michalowicz in his book Profit First, ensures you’re prioritizing profit from day one. When you follow this approach, you’re setting up your business finances to allow for sustainable growth, earning a steady paycheck, and gaining both personal and professional freedom.
This framework will help you shift your financial approach using Profit First principles combined with YNAB software (You Need A Budget) to manage cash flow effectively. This combination allows you to navigate variable expenses, seasonal dips, and significant cash flow fluctuations with ease while maintaining and growing your profit margins.
Month 1: Cash Flow Management Setup – Getting your financial structure in place.
Month 2: Assessment and Adjustment – Reviewing progress, making tweaks, and improving efficiency.
Month 3: Continued Tracking and Tweaking – Establishing long term habits for sustainable profit growth.
While this process is designed to create a significant shift in how you manage your finances over the course of a single quarter, the heaviest lift will be in month one as you get clear on your numbers and reallocate and organize your finances.
Don’t get overwhelmed or discouraged. This work can be challenging, but it’s necessary, and the freedom that flows from this effort is well worth it. Stay the course, and don’t forget to tap into resources and community support as you implement these changes.
Before implementing changes, you need to know where you currently stand.
Many spa owners operate under the assumption that if revenue is growing, their business is healthy. However, without a solid understanding of cash flow, it’s easy to end up with a business that looks successful on paper but struggles in practice because profit margins are slim.
Your Action Steps:
- Pull Your Profit & Loss Statement
Grab numbers from the last 12 months and year to date. Look at your total revenue, expenses, and net profit. Are you operating at a loss, breaking even, or making a consistent profit? If you don’t have your year-to-date numbers or need help with your accounting, we are big fans of Kickstart Accounting.
- Review Your Current Cash Flow
What’s coming in versus what’s going out each month? Identify areas of waste, like subscriptions or unnecessary expenses, that are not providing a direct ROI. This can be an emotional process. I’ve worked with spa owners who are actually spending thousands of dollars more than they thought they were. Give yourself grace and be proud that you’re taking the first step to understanding your numbers and your business.
- Analyze Your Operating Expenses
Are you spending on things that generate ROI? (Marketing, payroll, back bar inventory, etc.) Are you overspending in areas that don’t truly support growth? (Unneeded software, excess product stock, etc.) When you are sticking with the profit-first method, it’s very easy to see the category(s) where you are overspending or underspending. Most often, we see overspending in payroll or COGS.
- Determine Your Current Profit Percentage
Calculate the percentage of revenue you’re actually keeping as profit. Set a realistic profit goal based on your business. If you’re at 5% profit, aim to increase it incrementally rather than jumping straight to 15%.
To calculate your percentage, take your net profit, the amount that is left over after all expenses, and divide it by the gross revenue. That’s all of the top-line revenue that comes into your spa.
Example:
If your spa brings in $20,000 per month but your expenses are $19,000, you’re only left with $1,000 in profit. That’s just 5 percent.
Ultimately, we’d love to see an overall profit margin between 15 to 25% in a healthy and profitable spa, but initial small tweaks like lowering subscriptions or managing payroll more efficiently can help shift your profit to 10% or more quickly.
YNAB (You Need a Budget) is a powerful budgeting tool that aligns with Profit First principles by giving every dollar a job.
Unlike a traditional bank account balance, YNAB helps you see exactly what’s allocated for future expenses, so you never get caught off guard by quarterly tax payments, annual software renewals, or seasonal fluctuations.
Your Action Steps:
- Sign up for YNAB at YouNeedABudget.com and download the app.
- Connect Your Business Checking Account (and credit card, if applicable).
- Set Up Your Profit First Categories:
- Profit (15%) – Your take-home profit.
- Payroll (40%) – Paying yourself and your team.
- Operating Expenses (30%) – Rent, supplies, marketing, software, etc.
- Taxes (15%) – Set aside for quarterly tax payments (Confirm your percentage with your CPA).
Important Note: These percentages are guidelines only. Each spa model is going to be different based on your particular business structure, revenue streams, and overhead costs. The percentage that you allocate towards taxes will depend on your household income and tax situation. You should always consult with your tax or accounting professional and have them help you determine the appropriate percentage for your specific needs, then adjust the other percentages accordingly to ensure all categories total 100%.
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Get one month free of You Need a Budget (YNAB).
- Customize Categories Based on Your Business Needs
Determine if you need extra categories for retail product purchases, continuing education, or advertising costs. You can get as granular as you want based on your business needs, but the most important categories above are a great starting point.
Example:
Let’s say you realize you’re spending 50 percent of revenue on payroll and only taking home 5% profit. By adjusting your team’s commission structure and reviewing scheduling efficiency, you manage to reduce payroll to 40 percent, thus freeing up an extra 10 percent for profit.
One of the most important facets of being successful with shifting toward a Profit First-based business is to overcome any fear you might have about frequent check-ins and tracking of your finances.
Small, consistent check-ins can prevent major surprises and help you build confidence with your numbers.
Here’s an example schedule of what we’d consider an ideal financial check-in:
Monday: Review weekend transactions, categorize in YNAB.
Wednesday: Check cash flow and update targets if needed.
Friday: Analyze trends. Are you sticking to Profit First allocations?
This frequent check-in builds awareness and ensures you’re staying on track.
Over time, you can scale back on these check-ins to be on a weekly or biweekly basis, but checking in frequently as you make this initial shift will be instrumental in understanding the structure of the Profit First system and steadily shifting your numbers to align with prioritizing profit.
At the end of Month 1, run a YNAB Income/Expense Report and analyze:
Top Expense Categories – Where is your money going?
Subscription Audit – Cancel anything unused or unnecessary.
Biggest ROI Expenses – What line items are actively driving revenue and profit?
Adjustments Needed? – Are you hitting your Profit First targets?
Now that you’ve pulled your reports and assessed your numbers, it’s time to start calculating and adjusting:
- Calculate Your Current Profit First Percentages
What percentage of your revenue went to each category?
- Set Your Ideal Profit First Targets
If you’re not at 15% profit, adjust your operating expenses accordingly.
- Continue Checking In With Numbers 2 to 3x Per Week
Track progress and course correct as needed. Put your financial check-in times on your Spa CEO calendar. Make this a part of your CEO routines and ensure it doesn’t fall by the wayside by scheduling this time in your calendar.
After three months of using Profit First plus YNAB, reassess your progress:
Are you consistently hitting your profit goals?
Have you optimized your cash flow process?
Are there new opportunities to cut expenses or increase profit?
Plan for the next quarter: What’s working, what needs to change?
Example:
A spa that initially had 5% profit increased to 12% after three months by streamlining payroll, reducing unnecessary software expenses, and adjusting service pricing.
If we’re following the same numbers from our example in Step One, without increasing any revenue, a spa that brings in $20,000 per month that has increased their profit margin to 12 percent now brings home $2,400 rather than $1,000.
That’s an extra $1,400 per month, or $16,800 per year, without adding a single new client or service.
This system isn’t about restriction or merely slashing your business expenses. It’s about taking a critical eye to the job every dollar is doing in your business so you can ensure intentional spending and build financial clarity.
When you prioritize profit in your spa, you set your business up for sustainable growth, a steady paycheck, and long term success as a Spa CEO. You stop living paycheck to paycheck in your business. You stop worrying about whether you can afford your own salary. You start making financial decisions from a place of confidence rather than scarcity.
The beauty of Profit First is that it works regardless of your current revenue. Whether you’re bringing in $15,000 per month or $150,000 per month, the principles remain the same. You’re simply allocating percentages differently based on where your business is today and where you want it to be.
Now you know the roadmap, the next step is taking action. Start with Step 1, follow those action items, and commit to the process for the next 90 days.
Inside Growth Factor® Fundamentals, we provide spa owners with the exact resources you need to implement Profit First successfully, including a Profit First Calculator to help you determine your ideal percentage breakdown, a complete list of YNAB categories specific to spa businesses that you can upload directly into your account, and step by step trainings that help you understand and get comfortable managing your cash flow without fear or overwhelm.
For just $97/month or $997/year, you’ll get access to these financial tools plus the proven frameworks, done-for-you resources, and supportive community you need to build a profitable, systemized spa business.
Your spa deserves to be profitable. You deserve to be paid well for the business you’ve built. And with Profit First, you can start the path to making that happen in the next 90 days.
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About the Author
Daniela Woerner is the founder of Addo Aesthetics and creator of the Growth Factor® Framework, a proven system that’s helped hundreds of spa owners build profitable, systemized businesses. With nearly 20 years in the aesthetics industry, she transforms overworked service providers into confident Spa CEOs through strategy, systems, and soul-led support. Daniela is also the host of Spa Marketing Made Easy, a top-ranked podcast with over 1 million downloads, where she shares real-world strategies to help spa professionals grow with clarity and confidence.