Day Spa Startup Insights: If Only I Knew Then What I've Learned Since!

By Douglas Preston

Considering the startup of your very own day spa? A parade of beautiful, customer-filled spas and retreats has finally tempted you to bet with the players in this glamorous business. Let's assume that you've done your homework well. Feasibility study by an industry expert? Done. Stealth visits to your local competitors? Done. Trade show research on equipment, marketing, products, service menu, feng sui, and scented candles? Done. Bank loan? Done. Location and lease? Pending. You've planned, and planned and planned, and waited long enough. What more is there to do? Just one thing: reading this article!

I've assembled some testimonials from experienced spa owners that were willing to share hindsight lessons gained from the months and years since starting their businesses. All believed that they had conducted adequate investigation into the realities of costs, management and future trends prior to opening their spas. And while it's normal and expected that any good business plan will require adjustments as you go along, here's an opportunity to learn what other spa owners wished they'd known earlier than they did. So get out that completed business plan and double check it against the pearls of wisdom that others suffered to offer you!

Monica S., day spa operator, northern Ohio: on partnerships
I had a successful career in real estate but had become burnt out from the 7-days a week grind of paperwork, sales, open houses, and property tours. The stress of this career was partially relieved through regular visits to a massage therapist, one that had a dream of opening her own day spa. She had the industry expertise and skills, and I had saved enough to fund the investment so it seemed as though we had the perfect plan. Our troubles began soon after opening our six-room "dream". We spent much time developing the look and feel of the spa but in hindsight, virtually ignored other seemingly less significant details such as our roles and responsibilities, communication styles, and personal accountability. Since I needed to maintain my sales career in order to support myself while we built up customers, it was important that I remained free to see clients and prospects as before. I quickly learned that my business partner had neither the ability nor the desire to manage people, plan marketing, or even to balance a checkbook! She had also become steadily more resentful of my absence from the spa—although I thought we had agreed to that— and reflected this by spending more and more time performing massage while allowing day-to-day management to flounder. It wasn't long before our spa's service reputation was nearly shot, I was pumping even more money into the business, and my partner and I were barely on speaking terms. Since then we've been locked in a lawsuit over my proposal to take over the business and let her just walk away. She feels that she's earned thousands of dollars in sweat equity, and yet I'm the only one that's ever contributed a single dollar into the project. At this point I'm more deeply invested in this thing than I ever expected to be, am emotionally and physically drained, and there's no end in sight to all of this.

If I could do it all over again I would have chosen a partner more carefully, properly defined our roles and activities, and discussed how to handle disagreements or conflict before going into business. I'm amazed and embarrassed that I overlooked such an obvious trap!

James R., day spa operator and esthetician, WA: on management
In deciding to expand from my small, busy skin care practice to a 2000 square foot day spa, I knew I didn't have the time or desire to be its manager. Honestly, the reason I expanded the business at all was because of all of the new clients I had to turn away—it just drove me crazy doing that! At first I only wanted to add a couple of new facial rooms but then it seemed smarter to try and attract customers for services we didn't already offer yet—massage, body treatments and reflexology. I wound up spending more money that I had planned to but figured that it would pay me back pretty quickly. Boy, was I wrong about that, but that's another story! I then quickly found out how hard hiring an experienced spa manager was going to be. Not only was it a struggle getting anyone to even apply for the position (we had advertised in our city newspaper for three weeks) but, when someone would show interest they weren't even close to being qualified. This was a major shock for me, and I panicked as the finish date to our expansion got closer and it was looking more and more like I was going to personally manage the place. Since opening the new spa almost two years ago we've been through two managers and are searching for our third. My sister-in-law has been helping me with some of the management duties but is pregnant and needs to stop soon.

Looking back I can see how much I would have benefited from taking a closer look at our management needs and the local availability of skilled personnel—like making sure we'd be able to find what we needed before needing them. On the other hand I've had to learn more about my business than I might have otherwise but I'm still reluctant to slow down my practice and take on this job.

Cassandra L., day spa owner and former chiropractor, 3-locations, FL: on business growth
How many times have I kicked myself for not listening to my business advisor's advice? There I was, all in a lather worrying about some hot, new day spa opening up and stripping away my hard-won customers! I knew it was only a matter of time before we had to deal with that so I made up my mind that I had to corner the market on spa services in our area. There went my life in one crazy decision. Suddenly I had three locations all with eight miles of one another, debt for the first time in years, and more hats than heads to wear them. Now I'm dealing with higher employee turnover, frequent customer complaints, and the world's worst landlord. To really salt this self-inflicted wound, I now make less money than I did before the expansion got underway—a LOT less! So, instead of freaking out about potential competition I'm totally swamped with trying to make these spas survive. And the worst part is that I now have two competitors nearby anyway.

My lesson? Having foolishly overridden my advisor's warnings even though I knew (and feared) that he was right. I should have remained calm, waited to see who might come along while spending my time improving our product and service sales. I'm still optimistic about getting through this mess but I can't help wishing that I hadn't been so headstrong at the time.

Lindsay S., operates a day spa she purchased from former owner, Lake County, CA: on facilities
When I bought my day spa from its former owner, everything told me that I was getting the deal of a lifetime. Health problems were forcing her into an early retirement, demanding the sale of her business. The décor was beautiful, most of the fixtures and equipment were like new, and the lease was affordable with an extension. After two years in operation the spa was still a fairly new business, and I saw lots of potential for service improvements and new clients. What I didn't know then but wished I had thought to investigate was how the facility actually functioned as a facility. I hadn't actually ever had a service there myself and had no idea what the working environment was like when in normal use. Since purchasing my deal of a day spa 18 months ago I have had to invest considerably more money to correct poor soundproofing in the walls, replace an inadequate water heater, upgrade the cheap carpeting, and implement a better working point-of-sale system. So far, my total out-of-pocket cash has soared to almost $11,000. It scares me to think of what might come next.

I would recommend that anyone thinking about buying a business do the following before signing on the dotted line:

  1. Have a service or two in the spa and pay attention to the building more than the therapist or the treatment itself.
  2. Spend some time in the lobby during a normal business day to get a feel for the flow and functionality of the working area.
  3. Ask to see a copy of any recent building inspection, if possible (will possibly require the cooperation of the landlord if the business space is leased.) Termite repair may be someone else's responsibility but tenting or reconstruction will certainly affect your business income.
  4. Closely inspect the quality and source of the equipment and fixtures you're about to buy—maybe they only look good.
  5. Learn as much as you can about POS systems so that you'll know in advance the difference between high and low-performing programs.

John W. MD, medispa partner, TX: on compensating employees
I think that my physician/partner and I soundly reinforced the cliché of doctors as poor businesspersons by adding a spa component to our dermatology practice. Evidently, we had become intoxicated by the trade articles and presentations touting the merits of a spa as an added marketing and income source. Our area had become increasingly populated by medical services, so we felt that having a spa available for patients would provide us with a competitive advantage. It's probably too soon to know if the experiment has proven correct or not but one thing we did realize soon after opening the spa: it was far more expensive to operate than we originally believed. Our weekly payroll was killing us and we didn't think we could sustain the cash drain rate for more than a year, maybe less. While we came to regret it we had based the rate of employee pay on local averages and the results of a survey published in a spa trade magazine. I'm not sure how others have fared with those pay programs but they seemed to be failing us.

Our solution was to hire a highly regarded spa compensation consultant who overhauled our plan and instituted an intelligent merit system that rewarded productivity. The change wasn't exactly well received by the staff, resulting in some employee turnover, but the situation has stabilized. We're not making impressive money yet but our cash flow is positive and we're finally positioned to grow the business.

Janette K., day spa director/owner, AZ: on leadership and boundaries
I'm a big pushover and I admit it. I just had no idea how that attitude would haunt me while trying to act as the director of my spa. We're not a large business—only 12 employees including myself—but it's still more than a full-time job for me. I've got a young daughter at home and a husband who travels for his career so there's a lot of responsibility both in and out of the spa! The trouble I have is in saying no to people when I know that I should. I imagined that my employees would be more like family and that, as professionals, would behave as such. While most of my staff is very cooperative, there are a few that are really demanding and lean on me pretty hard to get their way. They constantly push for work schedule changes, more personal time off, and privileges like free spa services and expensive training classes. It's not that they're rude about this, but the constant demands and my old inability to draw a line between my employees and me has been a real hardship. I think that I lost control of my business from day one and just didn't know how I was going to fix the situation.

At this point things are beginning to improve quite a bit but are by no means fully corrected. A friend of mine that has attention deficit disorder raved about a personal life coach she began working with to help her manage her family life and career, and how helpful it's been to work with someone who understands her challenges. I made an appointment with the coach and in our first meeting she described a plan that would help me become more assertive and set some personal boundaries with both employees and, sad to say, my daughter who has become quite the controller thanks to my permissiveness and my husband's long absences. We now work on weekly goals, set boundary limits, and then I am given little challenges to test my commitment to improving. All I can say is that it's really worked for me. Initially I was worried about being the bad guy with my employees, and some of them clearly resented my sudden no-ness! But I also have less day-to-day stress now and feel a lot more confidence and self-respect. I think most of my staff like the change, too. Anyway, before becoming a people manager I would highly suggest that boundaries-challenged persons like myself read books on assertiveness or get some professional assistance in that area. It'll save you a lot of misery, that's for sure!

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