Note: This blog post is part of a series on the secret sauce ingredients that grow a company to the next level AND make a business saleable.
Each week we will put the spotlight on a particular industry to highlight what changes need to be made to improve profitability, breakthrough growth barriers and be ready 2-4 years before your exit date to be attractive to buyers.
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Iâ€™ve had my share of spa experiences. Lots of atmosphere, personal service, intriguing and unusual treatments (chocolate bath!), chilled light bulbs and even horizontal pedicures (me, not the pedicure!). The industry runs the gamut from big brand names with tip toeing practitioners occupying a rabbit warren of spa rooms to the solo-prenuer answering phones while exfoliating clients.
But both types of businesses no matter how successful have a problem when it comes to becoming saleable and growing to the next level: Service-based companies are hard to position well so they are transferrable, growing, predictably profitable and saleable.
In the past, the entrepreneur would have to go big, or go home, as the saying goes. The thinking was to invest heavily in the establishment so that it is memorable while wooing in talented aestheticians who could also sell products and try and win more revenue. A risky juggling act that required active business development (not just waiting and hoping women would call to book their next brazilian or facial on their own initiative) and aggressive product sales to cover all those fixed costs.
Every business owner has these challenges. What turns a successful business into a saleable business is showing predictable revenue. And predictable stable and growing margins. Thatâ€™s hard to do by selling services. You have to think differently.
ProActive Planning and Tracking
In a service business you have to sell the talent you have. Every hour that they are not active with a client is not just lost revenue but represents costs that are not covered which will affect next monthâ€™s cash flow. Tracking that information is how you can manage to stay out of the hole. If you have five full time employees, you have 200 hours to sell in a week. That is the maximum revenue you can gain from paying their wages.
200 hours is also the goal that needs to drive your business development activities so by the time the week starts, you have the calendar full.
Donâ€™t Sell, Be an Expert
Yes, you can grow that revenue with high margin products but how you do that is complicated by how well your aestheticians are trained in product education, influencing and selling up. There is also a catch 22 in this situation where your employees are expected to sell the products that they have just used with a client. Do you want the client to come back to get the service treatment that uses this product, or buy it themselves and do the treatment at home? Selling products is a two-edged sword for spa owners. Finding an Aesthetician and someone comfortable influencing (not selling, persuading, pushing or avoiding product sales) is very difficult.
Every spa has the same attributes which makes one hard to distinguish over another from a customer perspective. The service experience and the problems that it caters to are what brings people back. The biggest problem that spa owners have is the un-predictability of the returning client.
Donâ€™t Discount the Basics
With Groupon, prospective clients have bought deals from numerous spas to find the particular one that meets their needsâ€¦ and they donâ€™t go back to the rest of them. Thatâ€™s a waste of your financial resources! Owners should only use Groupon for attracting new prospects to aÂ new offering framed as a solution, not for the same commodity services everyone else offers. Thatâ€™s just a recipe for low margin sales that donâ€™t cover costs.
Think Solutions Not Services
To have a saleable growing business, spas need to do more than differentiate themselves with dÃ©cor and services. They need to stand in the shoes of the people who use spa services consistently, then consider those that show up occasionally and finally those prospects that have yet to experience a spa.
Your business has to grow the pie, not just your current share of the small pie. Those people that consistently go back to spas are the backbone of your business but in the minority because of the way services are marketed. You need many more â€˜Consistent Conniesâ€™ to thrive. Why do they keep coming back? Because your spa solves a problem that Connie believes she canâ€™t do without. The inconsistent spa goer needs guidance and your expertise at drawing out the issues that trouble him or her. Education is what will bring Carl back.
You Need a Deep Market Niche
We donâ€™t buy massages, we buy relief from the stress of the week. We donâ€™t buy facials, we buy the feeling of being pampered, or the pride that we are taking care of skin effectively. We donâ€™t need hair removed, we want to be seen a certain way in public. We donâ€™t want to buy expensive products we donâ€™t understand, we want to learn how you use them to make us better.
What Iâ€™ve just described here is a certain kind of person who believes in personal maintenance plus those that know life would be better if they invested more in themselvesâ€¦ kind of like how yoga, veggies and the dentist have wooed people to become regulars.
If Iâ€™m the kind of person who takes pride in my appearance and has a certain standard I like to hold up, then I would want to make sure I scheduled all the â€˜solutionsâ€™ I will need into my month. I probably have friends that think in the same way. Why not come at the same time and make a social event out of it? Why not offer this package of solutions that offers me pride in how I take care of myself in monthly packages? And make sure I get the times I want in next monthâ€™s schedule!
To have a more profitable business that is growing, a spa owner needs three strategies:
- Track your utilization rate and enact a strategy to sell those hours.
- Go deep on a target market that wants to solve a problem â€“ from her/his perspective, not yours.
- Build branded solutions and a â€˜maintenanceâ€™ schedule â€“ you are the expert on what should be in that package and when each treatment should beâ€¦ just like your dentist and car dealer does.
Now your spa business is growing in the right direction and you can fine tune it based on the results you see each month. This is one example of how you can grow your service-based Â business to the next level, more profitablyâ€¦ and start the process of making it saleable.
Want to Â know more about how to plan and implement these ideas and craft your plan?Â Schedule your complimentary 30 minute call here.Â