The MedSpa boom is ending – here’s why

So there's an industry that has quietly boomed from, well, basically nothing over the past couple decades to an enormous $15 billion a year industry. And that industry is the med spa industry. And to put it in context, uh, just about 15 years ago in 2010, there were 1,500 med spas nationally in the United States. And since then, by 2023, we've gotten to have 10,000 of these things floating around in strip centers and malls around the country. Uh, and each one of them on average is doing $1.4 $1.4 million in revenue. And here's the crazy thing. Despite the industry and the number of these locations growing by sixfold, 600% over the past 15 years or so, industry analysts are predicting that it's gonna keep growing by 15% annually and they don't see it stopping anytime in the future. So pretty crazy story of how this whole industry emerged. And I think the story of how it emerged tells us a lot about where it's gonna go and frankly why I'm worried about anybody who tries to get in the industry right now. So that's what this video is about. I'll tie it all together and establish what we can learn as entrepreneurs from the med spa journey and what's come of it. And stay tuned. If you're new here, my name is Michael Girdley. I am a business nerd. I love studying how business works. Other people have real hobbies like driving race cars or playing basketball or flying airplanes or camping or whatever. I like to study and talk about business. And so I go for walks after reading up on industries and different things and make videos about them. So if you like that kind of stuff, please subscribe, stick around, I'll keep making more of these. Med Spas are interesting. You know, they're typically placed in pretty convenient places, not in normal kind of doctor's office parks or hospitals or anything like that. You'll find them in places like strip centers. And when you go into them, it's pretty interesting. They feel like a combination or a cross between a doctor's office and a beauty salon. And you go in there and they offer, well, basically a suite of services that are kind of semi-medical things, right? The most common one being Botox injections, which are commonly used to reduce wrinkles. But they do other stuff as well. Laser hair removal, CoolSculpting, you name it. They're inventing things and they're selling it inside of these med spas. And they're delivered by, well, medically trained professionals. They may not be doctors, but they're doing it under supervision of a doctor typically, and they've had some level of medical training. And what's interesting about all these procedures is they're different than your typical doctor's office. Whereas a typical doctor's office or a health provider does stuff using insurance as the payee. What's interesting about med spas, they're all cash. People are showing up and they're breaking out their credit cards, writing checks, all that kind of stuff to pay for the procedures. And that creates a pretty interesting business because, well, you can make a lot more money when you get to charge and set your own prices, unlike the insurance-driven world of regular healthcare. And if you saw the pattern of the services I talked about, med spas are generally meant to appeal to our vanity. They want to help us look younger. We're reducing wrinkles, we're getting rid of hair, all that kind of stuff. And in fact, they kind of feel like a beauty salon because med spas, well, they're an extension of the beauty industry. I mentioned there's 10,000 of these med spas across the country now. What actually started the whole thing goes back to 2002 with the invention of something we're all pretty all familiar with now. Botox. And Botox was originally approved by the Food and Drug Administration here in the US back in 2002. And the idea was that they would take Botox— by the way, it stands for botulism toxin. Like, by the way, if somebody gets botulism, it's food poisoning. Like, it's not good. Anyway, so that's why they couldn't call it botulism toxin. But anyway, that's how we end up here. But Botox was approved by the FDA for injection because it has medical uses. And one of those medical uses they discovered was that you could inject it in to relax nerves and muscles to do things like, well, help with some medical procedures. But another use of it was to get rid of wrinkles. If you want to get rid of wrinkles, you can relax people's faces. And Botox was invented. And the idea of Botox when they first went to market was that you would go into your dermatologist's office or a medical provider's office and the doctor would sell you these Botox injections to get rid of wrinkles. And that was a good idea. Well, or maybe it was. And so while the drug companies wanted dermatologists to be selling Botox injections, the dermatologists, well, a lot of them felt differently about it compared to what the drug companies wanted them to do. And to tell you how this worked, I actually spoke to my buddy who's a dermatologist, like literally a skin doctor. And he said that early on when Botox and lip filler and all this kind of stuff started to come out as options, he began to offer it. He tried it to offer it as part of his practice. I mean, who couldn't use more revenue? And he said there was a real problem with it, which was suddenly he was spending a lot of time doing low-margin work, which even though Botox injections are highly profitable, it was taking him away from doing things like skin cancer and dealing with like real health problems that people were having when they would come into his office. And he said the straw that broke the camel's back for him, since remember Botox and all these injections are typically cash pay, was when he saw people who were on public assistance kind of spending their last dollar to try to come in and get Botox injections. And he said, "You know what? This isn't worth it for me." And he ended up stopping to kind of offer these types of services as a dermatologist. So this ties to the kind of the core problem of when Botox came to market, which was the idea was the dermatologists and doctors would offer it. But my buddy was pretty representative of a lot of medical professionals. He wanted to practice medicine, not be doing cosmetic surgery on people. And a lot of them just said, hey, like, we're not the right environment for this. Our clinics are not set up for this type of stuff. Like, we typically know how to deal with insurance. Like, that's what we do. So dermatologists, like, like, they just didn't want to do it. And a lot of doctors didn't want to do it either. So this presented a real problem for, well, the people who were manufacturing and trying to get Botox to be used in the market. So this is where the people behind Botox and kind of the similar beauty and kind of aesthetic treatments like this that require medical stuff, right? That's where they they come in. And this America— and if there's a theme that you'll see from all my videos, where there's an opportunity to make money and the rules need to be changed to make money, uh, lobbyists will get hired to go change those things. And that's where, towards the late 2000s, the industry around kind of the, the med spa industry went and lobbied in Washington to say, hey, like, we don't have enough doctors to do these procedures, let's figure out how to allow other types of trained medical professionals like physician's assistants or nurses and stuff like that to be able to do these types things. And once they were able to get those rules changed by the FDA and the government, then the floodgates of supply could open up and we could have tons of people who are able to suddenly deliver these types of services and, well, do Botox and filler injections for people that wanted them. And most people don't really understand the scale of dollars that go in to lobby the government and politicians around pharmaceutical and these types of, you know, aesthetic treatments. I looked up the numbers because I knew they were huge, but I didn't realize how huge. $700 million a year in lobbying dollars goes out to try to create the rules in favor of the pharmaceutical industry. And look, you only need to put a fraction of that up in front of, you know, politicians to be able to make changes around some of these things like Botox and stuff like that. And so that's how we ended up with fixing kind of the supply side of this like med spa market. Suddenly you didn't have to be a doctor to deliver a lot of these things. And we could bring in folks with just a few months of training to be able to deliver lip filler and Botox and all that kind of stuff. And suddenly the supply side, well, like we had a ton of people that were willing to work inside of these med spas and the supply side was fixed, but that's only half the story. How do we fix the demand side? So while the industry had to work to go get the supply side handled and make it easy to staff kind of med spas, uh, the industry got some freebies on the demand side. Meaning, how do we create people who want to come in and pay cash for these services? Well, the industry actually got two freebies. And the very first one is an easy one. Social media. And what became predominant as the social media platform, especially among millennials and middle-aged people with money who were willing to pay cash for beauty treatments to stop their aging? Well, turns out Instagram's pretty important to them. And it's a dominant platform for many of them. And on Instagram, what matters? Well, what matters is how you look. It's the selfie generation with suddenly coming into money in the mid-2000s. And well, they got that for free. Social media suddenly convinced everybody that they need to look perfect. And if you were going to use an Instagram filter to make yourself look great in a selfie, well, how do you make sure that you're going to look great in real life as well? Well, you're going to need some Botox injections and some lip filler and some laser hair removal. The internet does a lot for our industry, whether you like it or not. The second freebie to create demand for med spas that the industry got was actually the aging population. And we actually, if you look at the post-World War II population demographics, there are two generations, the millennials and the boomers, that are basically enormous. Together, they're about 144 million people. And the interesting thing about this is the nature and the outlook and the desires of those two generations are very like appropriate for med spas. They're folks that really care a lot about outward appearances. They care a lot about how they're aging. And when you have those two giant, basically, generations coming into money and valuing their appearances a lot, well, that can turn into a ton of demand that just organically happens for these med spas. And again, it's a freebie. Like, they just got— the industry got lucky because of the nature of the generations post-World War II. Works for me. And look, looking youthful, like, becomes a status symbol. The average Botox user is actually 43 years old. It's a pretty interesting number when you look at it. And a lot of this crested in a stat I saw from 2017. They saw, based on that, that year, the use of Botox spiked 64% in the year of 2017. So what was going on? What changed? Well, young people, young millennials in 2017 decided that they needed to start getting Botox and laser hair removal and all these types of treatments that med spas were offering. So for the first time, even though the average age of Botox users is 43, what we saw was young people deciding that they also needed these beauty treatments, and that caused an enormous spike. So thank you, millennials. And so fast forward 7 years later and the med spa industry is on an absolute tear. And here's a stat that'll blow your mind. Only 6% of the US population of adults has actually used Botox. So this is one of the things that the industry likes to look at and thinks is hugely in their favor. Like, penetration is still very, very low. And the second thing that is a huge tailwind of potential for the med spa industry is the expansion of services where once it was just kind of CoolSculpting, a lot of Botox, and maybe some IV injections here. The suite of things being offered at these med spas is exploding. And one of those things is incredibly interesting, which is you're seeing a number of med spas getting into the weight loss game. And we're seeing the explosion of things like Ozempic, Bonjoro, all that kind of stuff. Uh, and the interesting thing about that from a med spa perspective is once you get on those things, like to keep the weight off, you tend to stay on those drugs for a long time. They're recurring revenue and high margin. It's kind of beautiful. And what you absolutely look for if you're in business is recurring revenue. It's much better than somebody that comes in one time. And a recurring revenue customer is great because they keep paying you for a long time. And the expansion of the product suite is potentially great for the med spa industry. Somebody comes in for lip filler or Botox and then you can upsell them to all kinds of other stuff. CoolSculpting, IVs, all kinds of different stuff. And then ultimately end up with maybe some weight loss treatments as well. Kind of beautiful and kind of something that, well, is kind of scary too, if you're thinking about the impact of the world and how much money people are spending on this stuff. But I think this is where things start to get scary. And to me, there are 3 headwinds happening in the med spa industry right now. Number 1 is oversupply. In preparing for this video and researching it, I went and looked at the number of med spas near my home. uh, here in San Antonio, uh, and I live in a pretty nice neighborhood, but I don't live in an exclusive, like, super high-end, you know, San Diego suburb type place. It's, it's nice, right? But even still, there are 5 med spas all selling exactly the same stuff, uh, within a few miles of my house. Like, that is a crazy level of saturation. And with the amount of money entering this space, entrepreneurs getting established and opening more and more clinics, like, there's a real danger that we end up with too much supply of these types of clinics. And look, if outpaces the amount of demand from consumers, suddenly you could see returns and potentially like failures of some of these med spa, basically shops and chains that are trying to emerge. And there's a big problem with the med spa industry as well, and why a number of people have been challenged to kind of scale. You know, private equity is coming in, they're trying to buy up moms and pops and small chains. But by and large, only a small percentage of the total marketplace is owned by bigger chains. It's a lot of mom-and-pops doing med spas. Only 3% of the industry is owned by private equity. And one of the things that prevents scaling is how things work with the customers and the providers. And what they've learned is that the customers of med spas are not loyal to your brand of med spa or to your location. They end up getting very loyal to your provider. So the person who's injecting Botox and all that kind of stuff. And it kind of makes sense that you would be loyal to those types of people because if Botox goes wrong, like You can look deformed, your face can get all messed up, uh, it can kill you, right? So once you find a good provider who understands you, your needs, you get along with them, and you know they're safe, like, you're going to follow that provider wherever they go to other clinics. And that creates a problem if you own a med spa. You are totally dependent upon the relationship that you have with your individual, like, injectors or providers, uh, to stay with you and also not to come and try to eat up too much of your profits. So it prevents— well, it basically makes it hard to scale when you have this type of situation where they're not loyal to you, they're loyal to your employee. And the second headwind that's potentially coming for the industry, uh, is the big bet the industry is making right now. The industry is hoping that the expansion of services beyond core Botox and laser hair removal into things like Ozempic and some of the other trends and products that are coming out, like, they hope that those things will boom as well as kind of Botox did back in its early days. And if things don't work out, that the expansion of services doesn't grow and those things don't stay popular, or for example, something happens that Botox becomes— or not Botox, Ozempic becomes like dangerous and people don't take it anymore. That could stop kind of these predicted growth numbers that are coming out of the analysts. And 15% year over year compounding, man, that's an aggressive growth target for an industry like this. And the third scariest thing for me with regards to the med spa industry is one of the things that helped it become a thing, which is demographic change. And the young people that are coming up now, the Gen Z folks, they have different value sets than the millennials and the baby boomers did. They very much care more about being real and authentic. And the idea that they, well, would want to live kind of an Instagram-ready life, a lot of them think that's pretty stupid. And I've talked to some of these Gen Z folks about kind of some of these Botox type and lip filler and all that kind of stuff. And a lot of them look at it as just kind of well, trashy. They think it's stupid. Like, why would you make yourself look that way in such an obvious fake way? And for Gen Z, that is a generation that cares about authenticity more than anything, like, they are potentially the antithesis of anything you would buy at a med spa. And to me, man, combine that with how small the Gen Z generation is, potentially that is a big headwind for these med spas, especially as baby boomers start to age out of buying these services entirely. And well, frankly, Gen X, my generation, like, we just don't give a crap. And you're starting to see some of this change in attitudes about med spas and laser treatment, all this kind of stuff, and fillers. You're starting to see a lot of that get reflected in the media. And one of the things that happened in 2024 that I found fascinating was Pamela Anderson, who was, you know, a made-up plastic surgery star from the '90s in Baywatch, right? She's starting to well, decide to age what she calls gracefully. She famously went to a number of award ceremonies, uh, with no makeup on at all. Like, when was the last time you saw a woman in her 50s or 60s show up at an award ceremony showing off all of her wrinkles and all of her true self without mascara, makeup, lipstick, and all that kind of stuff? Like, just kind of a crazy rebellion against this idea that, well, you have to present a perfectly youthful like Instagrammable face at all time. And you're seeing also this rebellion against what some people are calling Mar-a-Lago face, which I find one of the funniest branding of stuff. But you see these folks who just have obvious duck lips and overused Botox and laser hair removal and skin peels and all this kind of stuff, like just massively, like, well, messed up faces because of that kind of stuff. And people are calling it Mar-a-Lago face. And there's just a bunch of folks who are wanting to rebel against that. They don't want to go out looking like they've had a bunch of work done because, well, it just kind of symbolizes you're maybe trying too hard. So you combine the Pamela Anderson factor with Gen Z with kind of these changing attitudes that people don't want to be seen as having, well, well, do something they consider kind of fake and trashy and avoid Mar-a-Lago face. Like, potentially it's a headwind as well as people's attitudes towards the things that happen in these med spas starts to change. So what does this mean for us as entrepreneurs? Well, obviously the first question is, is this a good business opportunity? Like, should you or I be opening a med spa here in, you know, the early 2020s or 2024, 2025? And the reality is, like, I think we're too late. Like, I think the boom has happened. I think these tailwinds are starting to turn to headwinds. I think you're seeing the demographic changes coming. And frankly, like, I think there are better ways to go out and try to get rich if you're going to learn a space and start a new market. It. Now, it doesn't mean some people won't go in here and scrape out a living. There's lots of industries where you can do that. And the fact that, you know, demand keeps growing for this stuff, like, that's a good sign. But the reality is, if you want to get rich in this space, like, the time to do this was back in 2015. Uh, you're a decade too late. So you'd be better off inventing maybe a time machine and going back then and starting a med spa than try to enter this industry right now. At this stage in the life cycle of these types of clinics, I think there's an opportunity. And that opportunity is not to start new ones from scratch, but instead be part of what I think is coming next, which is private equity is coming for this market. And private equity are these firms with big pools of capital that buy and sell companies and make profits, well, by doing so. And right now, private equity and these big firms have a ton of capital, and they only own 3% of the total clinics that are outstanding. And the vast majority of the 97% that are left over, they're small moms and pops. And at some point when private equity comes hard into this space, they're going to want to buy these clinics up. And here's one thing private equity wants to do. They're willing to pay up to buy them 7, 10, or 12 at a time rather than buying them one at a time. And if you can figure out how to do that and do some of these small-scale roll-ups on your own, buy a handful of these clinics, get them operating well, and then flip them to private equity, like that's a 3 to 5 year journey that could potentially make you a lot of money. And I've had tons of friends that do this playbook. They find something that private equity will be wanting to buy now or in the future. They go do some of the hard kind of hand-to-hand combat of rolling up and buying a handful of these clinics, packaging them up, and then selling them, you know, in a bundle to private equity. And so I think that's where we are in this cycle. And I think that's where the opportunity is. If you were an entrepreneur wanting to get in and make money in the med spa industry, Don't start a new one. Go buy up some of the existing ones, package them up, and then sell them off to these guys out of New York with a lot of money, the private equity people. So in the end, I'll give you my hot take about the med spa industry. I'm kind of glad it exists. Um, and I know people look at it and you can see all the downside of Mar-a-Lago face and, you know, people doing this stuff. But ultimately, like, I'm in favor of any industry that's going to do something to make people happier. And a lot of people are happier when they get Botox, and a lot of people are happier when they get lip filler, and a lot of people happier and healthier when they take things like Ozempic and Mounjaro. So I'm all for it. It gives people jobs. It's done for love, done out of positivity. Yeah, are there bad corners of the industry? Are there providers who are messing up people's faces? Yeah, all that kind of stuff happens. But by and large, like, this is an industry that makes it easier for people to be happier and feel good about themselves. And man, that's a good thing. Can't go wrong with that. And it gives people jobs on the back end. Nothing to complain about there. So that's my take. What do you think? And tell me what you think about this video. I hope you enjoyed it. I had fun going for a walk today. It's starting to get hot.