you planning to "Build-A-Spa"?
Importance of Planning and Analyzing Your Dream
Inc. Spa Therapy Development
& Development, Spa Financial Advisor
the past fifteen years the fitness-wellness-cosmetic salon industry
in America has experienced an enormous amount of growth into the
world of Spa treatments. Presently wellness programs require specialty
facilities in order to administer various water therapies, body
wrap/pack treatments and relaxation surroundings in a Spa facility.
have had the opportunity during these years to advise clients
in the financial and architectural planning of:
and Set-up Costs
Cash Flow and Break Even Analyses
information in this presentation has been gathered from these
many Spa projects, the experience of operating our own Spa center
and from the financial information of many other Spa businesses.
Spa therapy facilities and analyzing them, one can quickly see
the diversity among Spa projects. Diversity that is in no way
limited to "physical attributes". An owners concept
or dream, the cost of a building, location, the market, the Spa
treatments offered, make comparisons difficult, even among Spa
facilities within the same category. Construction costs vary,
some regions have a large, others a small employee pool from which
to draw from, some are part of a larger property while others
stand alone, some include fitness and/or salon services, and the
variables go on and on.
you cant make comparisons, how can you answer relevant financial
questions, and quantify your dreams? How much facility can you
build and operate at a profit, given the amount of funding available
to you and given the strength of your potential market?
you were in the manufacturing industry you would analyze first,
the strength of the market, and then the cost of making the product,
raw materials, labor, and the overhead each direct dollar has
to carry. You would do this because your product is labor intense.
you were in retail sales you would analyze the profit of each
square foot and change the product mix until you have the most
return on each square foot. You do this because your product (if
you will) is your location and the use of the space available
dictates your sales success.
a Spa therapy center both labor and square footage are important
to you, for the exact same reasons as in manufacturing and retail.
Why then shouldn't you analyze both labor and square footage in
your facility? What is the cost per treatment? Is a bath, pack,
facial, wrap or a massage most profitable? Would the square feet
occupied by a pedicure station be more profitable than additional
retail space? Do you have enough square footage, treatment rooms
and retail space to support your fixed expenses? What are your
direct (fixed) and indirect (variable) expenses? How many people
will you need to staff your dream facility? Did you plan too many
or not enough facial/wet/tub/massage rooms or retail space for
your available client base? What is your "break-even point"?
How many treatments do you have to perform to make a sound profit?
What is your Return on Investment?
answers to these questions become more important as the Spa business
becomes more competitive. We have seen hot service type businesses
from the 1970's and 1980's, such as health clubs, video stores
and quick lube businesses, get swallowed up or pushed out by larger
chain businesses that know the numbers and have their "act"
get us wrong, marketing analyses, product mix, employee training
all enter into the success equation, but you first need to know
the important numbers that will make your Spa a viable business.
the answers to the above questions are not transferable from facility
to facility, yet knowing them is important, how do you analyze
and predict them?
may be a few ways to do the analysis, whereby most CPAs
might just sketch a projected "Profit and Loss" statement.
They hope that, fingers crossed, it will match the budget.
believe, the "Build-A-Spa" method described below, will
give you more accurate information, and gives you the ability
to make business changes in mid stream. After all, as a business
owner you need to know a lot more than a bank might require. You
want to know the cost of each Spa component, to build, to run
and to market, and then the same costs for the complete Spa operation.
down a Spa operation into its "planned Spa components",
or "possible Spa components", allows you to magnify
the detail of each part of your operation, and you are less likely
to forget any part of this puzzle in your planning. Subsequently
we will refer to these Spa components as "modules".
us look at the example of a Wet Room Module:
many square feet are required for each wet room?
equipment and fixtures are desired for this module?
the square footage and multiplying it times the construction
cost per square foot, and adding this result to the equipment
cost, enables the
module to answer building and setup cost.
much will each treatment cost?
much in the way of supplies are needed for each treatment?
much will you pay the treatment provider?
many treatments can you sell?
the answers will allow you to project a "break-even point"
within that treatment module, and to project the revenue and
the same questions for the all other desired Modules
above procedure tells you everything you need to know about one
wet room module. You analyze every "module" by applying
the above procedure for any additional treatment rooms, for the
front desk area, for hallways, bathrooms, showers, locker/changing
rooms, utility rooms, waiting area, etc..
summarize your planned facility by multiplying every module times
the quantity of each treatment room desired. For example you might
want 3 wet rooms, 4 massage rooms, 3 facial rooms, 3 tub rooms,
2 changing rooms, 1 front desk, 2 utility rooms, etc. until your
desired facility is represented.
financial model approach allows you to not only make a projected
"Profit and Loss" statement, but also it allows you
to project construction costs, setup and equipment costs, compare
treatment profitability, project payroll, ongoing expenses, calculate
the "Break-even" point, compare use of square footage
and Return on Investment. This financial model provides all information
broken down by individual module and/or total facility.
you do these calculations in this manner on a Lotus or Excel Spreadsheet,
it is very simple to make changes.
if you want to change your construction cost per foot?
if you decide that you need 7 massage rooms?
if you find a better price on equipment?
if you need to adjust your providers commission rate?
Fig. 1&2) (and Fig. 3&4)
change the numbers and then let the spreadsheet change your charts,
graphs and do the rest of the work.
and Continuous Analysis
exercise should be done continuously at each planning phase of
a project. You should analyze your project when you are planning
your Spa, when you have the building, when you have an architect/contractor,
when you know your market, when construction or remodeling begins
and yet again 3-4 months after opening and yearly. Careful planning
and continuous analysis is never easy in any business and especially
in the growing Spa business. In this growing Spa industry it is
essential that you continuously analyze your business for success