to Success (part 1), By
I was growing up the most dreaded questions any adult would ask
me was about my future; “What do you want to be when you grow up?”
“Are you any good at it?” “Can you make money doing that?” “Where
do you see yourself in 5 years?” “How will you support your family?”
were very legitimate questions about my future and people who cared
about me had every right to ask them, but what really bugged me
was that I did not know the answers.
the less, my job today is to ask you those difficult questions about
the future of your dream Spa or Salon, and guide you through the
process, but rather than frustrating you with only the questions
I hope to point you in the right direction to find the answers as
a mighty oak starts with a single acorn, all great business successes
start with a seed of an idea. While it is not important to
see every detail at this point it is important to “Decide what you
want to be when you grow up”. Do you want to be a Salon, a
Day Spa, a Medi-Spa, a Resort Spa, a Skin Care Clinic, or something
else? Do you want to specialize in one or two aspects of Spa
related services or have a broad variety of services? What
will you offer to your Clients/Guests that they can not readily
about the services you might offer, think about the décor of the
facility, think about the level of customer service you wish to
provide and think long and hard about what will make your facility
unique. This is the fun creative part of the job that should
stimulate the creative part of your brain.
not worry at this stage about location, profitability, size, price
of services, the pay system you will use, or any of the other thousand
details that will come soon enough. Instead focus on the “Blue
Sky” and how it might look in your perfect dream.
some this is the easy part, while others will struggle, sometimes
this part of the process can last a few weeks and other times it
may take a few years, either way, just relax and try to picture
how your business might attract Clients/Guests and stand out as
a unique facility.
next step in the process is to find out “Can you make money doing
that?” Somehow you will need to take that dream and
reduce it to numbers and answer; “How much will it cost to set-up
and build?” “How much space will it require?” “How many services
will I perform, and at what price?” “What are my expenses including
the cost of labor?”
it is not important to have a location at this point, instead let
this exercise dictate how much space your facility will require.
We will need to start to look at some of the details that will impact
cost of set-up, operational expenses, and revenue predictions.
I have written before (“Are You Planning to Build-A-Spa” - Dermascope
- July 1998 & “Calculating the Cost of Each Service” - Dermascope
- December 2000 [you can re-read these two articles in the library
section of my website]) I believe the best way to perform these
calculations is with the “Module Method” where we learn 3 things
about each treatment room, amenity space, or piece of the facility:
How much will it cost to set-up? How much will it cost to run? And
how much revenue can it generate?
allows us to look at the cost to deliver each service, what services
are most profitable, staffing requirements, cash flow predictions,
break-even analysis, the optimum facility size, and much more.
Determine whether the profitability is at an acceptable level for
you to proceed, re-think the concept, or abandon the idea all together.
a Business Plan
has been said; “Failing to Plan is Planning to Fail!” and that is
never more true than in business. A Business Plan allows you
to communicate your dream to investors as well as solidify that
vision in your own mind in far more detail than in step one.
good business plan should include such topics as Statement of Purpose,
Opportunity Outline, Mission Statement, Objectives, Company Summary,
Company Ownership, Facilities, Products & Services, Detailed
Pricing, Pricing Strategy, Marketing Summary, Market Trends, Market
Growth, Competition Analysis, Competitive Edge, Marketing Strategy,
Management Summary, Organizational Structure, Management Team, Strengths
and Weaknesses, Financial Plan, Setup Costs, Projected Pro Forma,
Break-even Analysis, and Projected Cash Flow.
is important to state who you are and what your vision is, but most
investors will be asking two main questions; “What will this Business
do in order to Monopolize it’s Marketplace?” and “How much Money
can this Business Make?”. So it is vitally important to spend
extra time working on the answers to these two questions and make
them a significant portion of your Business Plan even if it requires
getting professional Marketing and Financial help.
Financing can be one of the most frustrating parts of the this whole
process, largely because so much of it is out of your hands and
dependant on someone else, often a stranger, saying “YES”.
you plan to lease space for your business it is even harder, because
most of the money you will want to borrow will be used for leasehold
improvements and marketing, very little of the money will turn into
assets that could be used for collateral. If you plan to attract
venture capital then you may have an uphill battle because the profit
margins in this industry are no where near what Venture Capitalists
are used to in other industries.
convincing someone to bankroll your venture comes from very careful
homework in the Business Plan, painting a clear picture of your
Vision, paying close attention to designing both Profitability and
Strategic Marketing into the very fabric of your business.
This type of planning is seldom done by one person and I again recommend
getting expertise in these areas which will lend credibility to
the projections of your Business Plan. One further note: bankers
and lenders seem to understand Real Estate deals better than the
nuances of your particular business so anytime you can involve the
purchase of land or buildings into the equation you are more likely
to grab their attention.
might be surprised to see that “Find a Location” is all the way
down at number five on our chronological list of steps to take.
The reason is “Timing & Emotion”, if you find a location too
early in the process then find out that the project is not feasible
or you can not get financing for it then you are left with 2 choices;
1- Abandon the Project or 2 – Proceed Without the Proper Funding
or an Adequate (Profitable) Business Model.
or Real Estate Sellers can not wait indefinitely while you get all
your ducks in a row, and the emotional attachment to a certain location
is sometimes greater than the force of gravity. This gravitational
force often leads potential business owners to make poor decisions
and proceed prematurely or too quickly. So my advice is for
you to wait until the previous four steps have been taken before
looking for the perfect location.
you know the 3 most important things about any business is “Location,
Location, Location”. The Spa/Salon business is no different,
I would rather have an imperfect facility in the perfect location,
traffic and signage wise, than the perfect facility that no one
will know about. The best and cheapest advertising that you
will ever do will be the look and signage of your facility in a
location that will show it off. Conversely it will take copious
amounts of money and time to make up for a bad location with advertising
a location has been determined and leases signed the process from
here down goes much faster, and many of the tasks below will need
to happen simultaneously, so take a deep breath at this point and
let’s move at a very fast pace as you are only 3-4 months from opening
and “Miles to Go Before You Sleep”.
whole trick with many of these steps is to have them all come together
at just the right time prior to opening. It is sort of like
aligning the planets, and the planets have names; construction,
products, menu, staff, supplies and equipment. Your job is
to make it all happen at just the right time, delays in construction
or delivery of something can throw the whole schedule out of whack
and cost even more delays. Keeping a careful eye on construction
will help you predict if it will finish on time.
of the most common mistakes made in the design of a Spa is the ratio
of “Revenue Production Space” to “Amenity Space”. We all want
beautiful wide open foyers and ample size changing rooms, we love
a tranquil quiet room and then there are offices, laundry rooms,
hallways, employee break rooms, etc., but none of this space, as
necessary as it may be, will generate revenue. The argument
might be that having beautiful space attracts more Clients/Guests,
and I would agree, however, carrying all this “Amenity Space” not
only means Less Revenue, but also More Overhead Expense, in a business
that already has limited profit potential.
look at any of your favorite spas out there, if you count how many
treatment rooms they have and multiply that number by and average
of 100 square feet (10 feet by 10 feet) you may be surprised at
just how little amount of the total square feet that number represents,
often as little as 20%-30% is used for “Revenue Production”.
What other businesses do you know that use such a small percentage
of their overall space to make money? I know of very few,
and the few that do, have much higher profit margins on their product
the lesson is to dedicate as much of the space for making money
as possible, here are some guidelines: Spa less than 1000sf should
use 70-80% of the space for revenue, Spas 1000-3000sf should use
about 55-60%, Spas 3000-7000sf should use 45-50%, and Spas larger
than 7000sf should use about 40%.
for an Architect that understands “Function before Form” instead
of the other way around and don’t be afraid to have a consultant
review the architectural plans for operational flow. Unless
an architect fully understands the operational aspects of a Spa
he/she can not be expected to understand why a laundry room has
to be close enough to the treatment rooms without being near them,
or why a Manicure station next to a Quiet room or Massage room may
not be a good idea, and why squeezing one more treatment room into
the design may mean the difference between success and failure.
the right General Contractor for the construction of you Spa is
priceless. Besides being honest, and affordable he/she must
be flexible and punctual. Every minute of the construction
phase is money, both money going out and the lack of money coming
in. A good Contractor will get the job done on time, be flexible
with minor changes throughout the process, not be unreasonable about
financial demands, and stand behind the work.
to visit the location at least once a day during the construction
phase so that you can foresee any logistical problems that may arise
before the corrections become expensive some good examples of this
are electrical outlets in inconvenient places, or doors that swing
the wrong way or swing into a piece of equipment you will later
put into the room.
the Marketing Process
the construction phase lasts 2-4 months (much longer if you are
constructing a building) and this is about the amount of time you
will need to begin the “Pre-Marketing” campaign. It may seem
early but believe me when I tell you it could mean the difference
of being profitable 2-4 months faster, which will make an incredible
difference in your first year cash flow.
you are not comfortable writing ad copy and/or you were not a marketing
major in college then I recommend hiring someone or hiring some
marketing firm to do this for you. Hold them completely accountable
for the results and work with them on a daily basis to insure maximum
return on your marketing dollar. Marketing is not easy, there
is a little magic to the whole equation and failure here will insure
failure for the business, and spending the money early means making
money faster, saving precious cash flow.
Go to Part 2