Your Dream Spa Viable?
By Marc Williams
plans shape good decisions. That’s why good planning helps
to make elusive dreams come true.”
Lester R. Bittel, The Nine Master Keys of Management
successful in any industry is achieved by making good business
decisions. This could not be more true than in the spa industry,
an industry where the competition and the failure statistics are
growing every day. However many Spas are in trouble before
they open their doors.
any goal will always require good planning. The secret to
success is not just from having ideas, but also being able to
develop those ideas into a viable business model.
you ever attempted to assemble something without looking at the
directions first? Sometimes it is easy and you save a little
time. Other times you end up with several pieces spread
across the floor and nothing will go together. Then when
you finally go against every instinct that you have and pull the
directions out from the box you realize that you have to take
everything apart. With the directions in front of you the
problem becomes quite obvious, and had you looked at the first
step before starting you would be done by now. Hopefully
you did not break anything and all you need to do is start over
rather than going back to the store to buy a new one.
same is true with opening a Spa except that the stakes are much
higher. So many times we see people that invest everything
that they have without understanding the true potential of their
concept. Before the architect draws the plans, before the
contractor breaks ground, before the bank approves the loan you
need to understand the reality of making a return on your investment.
is always important when going into business to understand not
only if the business can make money, but also how large of a return
you can realistically expect. Understanding the true feasibility
of your business can help you decide whether or not the investment
is worth the time and risk that is required to make it successful.
a feasibility analysis for a Day Spa, Resort Spa, Med Spa, or
a Salon is far more complex than most businesses. Because
each Spa has widely different variables such as:
Offering of Services
of Compensation Systems
Spa Owners never have a clear understanding of where their profit
is coming from and what expenses are draining potential from their
business. Consequently, they take the risk of adding their
Dream to the heap of Spa Failures Statistics.
often we see spas that are struggling to make profit, and quite
often the problem is not a lack of customers or absence of revenue;
it is due to high overhead and low contribution margins.
However if you could see your business before you make the investment
and realize that you may have an extremely high break-even point
you might have been able to solve the problem before putting your
hard earned money into that lifetime investment. Furthermore,
if you had the ability to see where your profit was coming from
and be able to see where your money was going before ever being
in business you then have the option of modifying your plans
to turn it into a good business model that is designed to fulfill
contracted to do a feasibility analysis I use a method that is
designed with Expense and Revenue Modules. Picture a module
as one room of your spa. Whether it is a Massage room or a storage
closet you need to be able to understand what that module is costing
you every month and what potential it has on bringing money in
as well as how much it will cost to set up.
provides insight into each area of the facility. This method allows
for quick modification of the number and the mix of services,
along with the day-to-day operating costs, including supplies,
utilities, and staff hours. This gives you the flexibility
to look at the relationship between increasing services, the increased
revenue, and the increased expenses. It will also help you
to determine the optimum size of your facility.
you need to get a fairly accurate picture of what your expenses
will look like. Then you need to separate them into fixed
and variable expenses. By separating the variable expenses
(provider labor, supplies, cost of goods, etc.) from the fixed
expenses (rent, management, utilities, etc.) you can then determine
your contribution margin.
now know how much it will cost you to perform each and every service.
You now know what your price point will need to be. You
now have the ability to figure out the amount of each dollar that
you will keep in order to pay for your overhead. And once
you know that you can figure out how much business is needed in
order to be profitable.
that you know and can understand your “Break Even” point you then
need to decide if the business is feasible. If you are confident
in bringing that much business through the door then you can move
forward with your project. If you are not confident then
you have the option of revising your plans until it does actually
look feasible or deciding that the idea is not worth pursuing
the business seems feasible but not as profitable as you might
have thought, you may then analyze the plan and see if there is
an additional source of profit you could create, or maybe an overwhelming
expense that you could get rid of.
way that it turns out, you were able to see the viability before
you made the investment. And that is nothing more than just
good planning and good business.