Improving Spa Profitability – The Fundamentals

Posted on April 15, 2009 with No Comments

Business is a game. A serious game with real money with real careers, futures and success on the line. But, a game none-the-less.

In this game we have variables we can control and some we can’t. There is little we can do to control weather, suppliers, material costs, and competitors. There are, however, variables in this game we do control and can influence. Those are…

  • Revenue
  • Gross Margin
  • Expenses

While it’s often difficult to focus on these fundamental components as an owner/operator of executive of a mid-sized operation, entrepreneurship sooner or later comes down to these three key components.

For various companies I have been involved in, I have had to stop myself and our team to reminder ourselves to “block and tackle”. Improving a company’s profitability – especially a spa in a down economy – requires putting each of these components under a microscope and identify what you can do to win the game.

I guess if this were a play game, decisions might come easier, but discussion and planning should be fairly helpful.

For instance, sit down and consider all the things you can do to increase revenue. Consider advertising, flyers, partnering programs (with a salon for instance), or developing relationships with civic programs, churches, or schools.

From a gross margin perspective, push higher margin services, introduce new programs (expanding your service or product lines), add ancillary services (skin care products), find less expensive suppliers.

Expenses can be tackled from several angles. Shop for the best deal on office supplies, watch utility bills, opt for lower cost advertising – or free advertising by contributing to local newspaper or magazines; watch staff expenses.

Over the next couple of weeks I am going to break down some details of managing Revenue, Gross Margin and Expenses that might give you a few more ideas – specific to Spa, Salon or MedSpa operations . The bottom-line (literally) is to wake-up every morning and think “what can I do to affect these numbers?” Individually, get sales, margin and costs going in the right direction.

If all works out well, each will move simultaneously, and it will have a great impact on profitability!

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