Packages are popular with clients and attractive for cash flow: you collect money today for treatments delivered over the coming months. But a package priced from list price minus a round discount can quietly lose money, especially if costs rise before the sessions are used.
Start from contribution per session
For each service in the package, calculate contribution margin per session: price minus product cost minus provider pay. The package discount comes straight out of that contribution. A 25% discount on a service with a 40% margin leaves very little.
Set a maximum discount by service
Services with low product cost, such as many laser or energy treatments, can carry deeper package discounts. Product-heavy services cannot. Set a ceiling for each service based on its margin, rather than one discount for every package.
Plan for cost changes
A six-session package sold today may be delivered over a year. If product or provider costs rise during that time, your margin on the remaining sessions shrinks. Price packages with some buffer, or limit the time window in which sessions can be used, in line with the rules in your state.
Expiry and unused sessions
Rules on whether prepaid services can expire, and what happens to unused value, vary by state. Check with your attorney or CPA before setting terms, and write them clearly on the agreement clients sign.
Account for packages correctly
Money collected for future sessions is not yet earned revenue. It is a liability, often called deferred revenue, until each session is performed. Recording the full package as revenue on the day of sale makes that month look much stronger than it is and the following months weaker. Your bookkeeping should recognize revenue session by session.
Track redemption
Each month, review how many package sessions were sold, how many were used and the value of sessions still outstanding. The outstanding value is money you owe in future services. It should never be spent as if it were profit.
A simple rule
If a package's total contribution, after discount, is lower than the contribution you would earn selling the sessions individually to the same client, the package only makes sense if it clearly brings in new clients or commits existing ones to a treatment plan they would not otherwise follow.
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