Case Study: The Overbuilt, Underproductive, Money-Losing Day Spa
"Laura" is the sole owner of a one-year old 5,000 square-foot spa situated in a hotly growing suburb of a large southeastern city. A full-time hairdresser with 25 years of working experience and a large following, Laura has hopes that her new, gorgeous spa will allow her to slow down a bit, while providing a secure retirement. She's tired, but has the energy reserves (partially kindled by the exciting spa project) to carry her through the hard work of launching a new business.
When "success" is supposed to arrive, Laura cannot say with certainty. But the projections cast by a skilled accountant point to a small profit within the first 18 months of operation. Trouble is she's already 12 months into those projections and, even though sales have been almost as strong as expected, there are few signs that her revenues thus far is leading to anything resembling black ink. Expenses have remained ahead of sales, and the gap seems to be growing.
While Laura is far from predicting doom, she's savvy enough to know that the present trend absolutely must turn around, and soon. Holiday gift certificate sales managed to keep employees and vendors paid but now the spa is facing a rush of redemptions, so the cash tide has suddenly reversed. Laura believes that increasing sales will solve the problem but, now that the holiday buying frenzy is over, is unsure of how to stimulate those sales.
Laura desperately wants help her with her situation. Let's take a sober look at it:
Identifying the real problem
Clients often ask me to "fix" an isolated problem that they believe is the root cause of their spa's disappointing financial performance. My task, from the client's perspective, is to treat the targeted malfunction and get the business on a healthy footing—which is exactly what I'm not going to do. But the source of Laura's troubles are embedded within a flawed initial plan—its systems—and manifesting as sporadic, persistent mini-crises.
Following a round of questions on the company's overall condition—available cash, debt, management systems, etc.—we search out the core causes of its underperformance.
At the core of the problems, is that Laura built a 12 room, 10 -hair station trap for herself and now she's thoroughly entangled in the mess. She invested in a spa with little more than a dream, high emotion, and a checkbook to guide her.
1. Accept the plain fact that your "plan" isn't working, isn't going to work, and never will work, because you never had a feasible plan to begin with. You set out became lost, and have remained so because you had no clear idea where you were heading. Until you stop running ahead of yourself and deal with the reality of your circumstances (as painful and embarrassing as they may be) you'll only sink deeper into trouble.
2. You must ask yourself, in all sincerity, whether or not you're genuinely willing to commit to the proper management of the business—your business. This will involve a major revision to your career and duties, and performing unpleasant or non-creative tasks such as cash management, employee training and supervision, sales promotions, and so forth. You can't succeed by hiding behind a salon chair or in a treatment room either. It's time to either face the music or fire the band.
3. Design a business plan worth working (and probably suffering) for. Wait! Don't toss the magazine! This should be a fun and creative activity. The financial wizardry can wait—and should wait—until you have a clear and motivating picture of the spa and career you really want, not just the one you've wandered into. Ask yourself the questions:
• How much money do I want to make running my business, and by when?
• What do I want this company to provide in terms of retirement or personal time?
• How would I define business and career success in personal terms? (selling the company, passing it to children, a national chain, etc.)
• What am I good at and what do I need to improve?
• What are my personal and business values?
4. Get some professional business help. Let's face it—you need this help. Look for a mentor who can separate business fact from fiction, someone who'll help you craft a realistic and achievable plan, someone who's been successful before you. Make sure that your chemistry (communication) clicks but don't chose a person who will allow you to slide back into self-delusion. The last thing you need is a repeat of the past. And if you think a consultant's fees are expensive then just continue operating the way you have been and add up the cost of that.
Take spa management classes, begin reading some of the "idiot-friendly" management books in print everywhere, and work on replacing fear with excitement. Remember: anything can be scary when it's unfamiliar to you. Fast-forward the picture in your mind by a few months. Whatever you do don't tolerate a situation you know isn't good for you. The one thing you can count on in procrastination is that what's bad now will almost certainly get worse!
About Preston, Inc.
Preston Private Label offers over 100 outstanding, results-oriented skin and body care products for both retail and professional use. We offer an excellent—-and free—-regional technical and career-building education program, affordable minimums, and fully custom labels, pre-applied. Choose from two packaging options and get the look that best suits your branding strategy. Generous margins that allow for markup from 150-700% mean you gain maximum benefit from retailing. From cleansers and toners to cosmeceutical serums, pro enzyme, glycolic and lactic peels to body contouring wraps, gift kits to aromatherapy oil blends and more, we have everything you need to create a highy effective, full range product line. Visit our website at www.prestoninc.net for more information!