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Compensation Strategies: The Five Non-Negotiables

When we work with our clients, one of their top three pain points that comes up again and again is compensation. There is a lot of frustration and confusion as to whether or not they are utilizing the most effective compensation strategies in their practices.

That’s why our team at Terri Ross Consulting has developed a simple system and structure to create a win/win for both the practice and the provider, which is included in our comprehensive, brand-new Financial Foundations online course. You can learn more here.  

This is Part One of a series of articles we’ll be sharing regarding compensation strategies for your practice.

Here are a few questions to ask yourself about your current compensation strategy as you read through this information:

  • How did you develop your current compensation plan? 

  • What prompted you to create your pay structure this way?

  • Are you losing money or is the plan pay for performance?

  • Does your current pay structure reward behavior? And if it does, which behaviors is it designed to reward?

  • Does it fit into the goals of your practice? Or are you trying to make your financial plan work around your compensation system?

The 5 Non-Negotiables for Compensation Structure

  1. Must be Sustainable. It must be sustainable for the practice based on:

    • Length of time open (if you are a brand-new practice without a positive cash flow, your bonus system will be different than a practice that has been open for many years).

    • Fixed overhead (If you are in NYC or LA, your overhead is higher than in smaller cities).

    • Projected profit (if established – does it fit within your financial plan?)

    • Fall within industry benchmarks 

  2. Must be a Controllable Expense. For a financially healthy practice, you must have a compensation system that allows you to budget and assure future profit.

  3. Must be Legally Compliant. Your compensation plan cannot have a per patient reward. It can’t be based on value (or dollar amount) or a volume (number of patients) as that is not legal. Of course, you should consult an attorney and review the laws in your state, but it is not legal to pay primarily commission in a medical aesthetics practice.

  4. Must Reward Skill and Behavior. Your compensation strategy must:

    • Align with performance reviews. When you are just paying a percentage, the only thing that matters to the employee is the service that was rendered. That’s why there should be a compensation system that is also aligned with your performance reviews. You may have an employee who does beautiful work and clients love them, but they might cause problems by being habitually late or costing the practice money, etc. That’s why you want your compensation system to reward good behavior.

    • Encourages growth and increase in productivity. For example, increasing revenue per hour by developing treatment plans that combine multiple modalities for better patient outcomes. 

    • Rewards new skills and certifications. This could be taking a sales training course or learning a new technique or procedure and or getting trained on new equipment.

    • Rewards achievement of goals. When your bonus system is tied to a goal, that’s where the bonus compensation kicks in. 

  5. Must Provide Clear Guidelines for Individual Growth. 

    • Set pay guidelines based on identified criteria.

    • Create a career path within the practice. When you bring on a new employee, it is always exciting, but do you have a clear career path written out on paper to show them how they can grow within your practice? Employees want a career and a place they can stay. You want them to be happy with their compensation, so you need to tie your pay structure to the career development path. 

    • Managing and developing employees. This takes time but it is critical. 

    • Communicating regularly with employees on their progress and revenue goals.

    • Clearly defined goals and a bonus system in place. 

Stay tuned for Part 2 in our compensation series coming up about setting compensation goals and structuring your compensation. 

To learn more about how our proven programs have helped others and can help you, please visit and book a call with one of our business advisors to see which program is best for you.

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