Magazine

How to Open A Day Spa
Day spas continue to be the strongest segment of the spa industry in North America, according to The Spa Association's 2004 Industry Report [editor's note: Melinda Minton is the founder of The Spa Association]. Although opening a new business can be a bit trying, the rewards are worth the effort - and there are a lot of resources available to you. The most crucial part of starting a business, however, is having enough cash flow to get through the start-up phase. Proper planning of the business is also necessary to ensure that the fledgling spa gets off to a good start.

As many spa owners will tell you, mistakes made in the beginning stages of the spa's development will come back to haunt you. In fact, some mistakes become permanent reminders of an initial learning curve.

For Linda McPherson, owner of Linda Michael's Day Spa in Great Falls, Montana, there were choices made in the building of her facility she wishes she could undo.

"While we were fortunate that we didn't require funding and our business took off quickly, the design of our facility is something that I would love to make alterations to," she says. "For instance, creating more spaces that are secluded and quiet; making the pedicure area more semi-private; and creating treatment rooms that are larger are all things that I now regret not having done.

"But, unfortunately, once it is built, there is very little you can do to change the floor plan," McPherson adds.

Leanne Lummis, owner of Visage Skin Care & Day Spa in Salem, New Hampshire, agrees that every day as a new owner of her spa brought a variety of learning opportunities.

Spa Business Resources
Small Business Association
www.sba.gov

The Spa Association
www.thespaassociation.com

"Over the last five years I have built a successful business that employs 15 people," she says. "In the beginning, though, I didn't have proper employee contracts and really went into a lot of the business blindly. I didn't have benchmarks for how much liability insurance would cost or how much it would be to heat our site in the winter months.

"A lot of little details add up when you look at the big picture," Lummis adds. This sentiment is common among most spa owners, who recommend that those considering opening a spa really do their homework. Lyn Winegar, owner of Renew Day Spa & Wellness Center in Marietta, Georgia, suggests that potential owners have a firm foundation of education and experience before venturing into owning a spa facility.

"Ideally, a spa owner should take business courses, have a solid understanding of esthetics and skin care, as well as be licensed to practice massage," Winegar says. "Visit as many spas as possible, and take the time to think everything through - from your long-term goals, to cash flow, to the amount of laundry your spa will go through every week. It all matters."

The Small Business Association (SBA), www.sba.gov, offers many resources, including information on types of loans. The SBA offers loans for almost every type of project: a loan-guarantee program that assists with a conventional bank loan; micro-loans that can help with small cash-flow problems; extra funding for start-ups; or funding for smaller projects, such as adding a treatment room to an existing business.

"We took advantage of the SBA's SCORE program that offers retired business advisors who can read your business plan, review your profit-and-loss statement, or simply consult on general aspects of your start-up ideas," says Carol Vaughn, owner of Escape for a Day in Gulfport, Mississippi. "It is a free service and helped us a great deal when we first opened our business."

Most new business owners get some kind of conventional loan to get their business going. There are several factors that bank representatives consider when reviewing a loan applicant.

"Having a background in the industry is one of the factors that we look at," says Rob Usher, a loan representative for vFinance, Inc., in Boca Raton, Florida. "We also take into consideration the individual's personal credit rating, collateral or equity in easily made liquid assets, and not [having] any derogatory items on their personal credit record.

"Even if the business is registered as a corporation or limited liability company, most banks view the loan as a personal loan and require a personal assurity for the amount," Usher adds.

Jamie Beacon, a small-business, direct-sales representative for Bank of America in Tampa, Florida, agrees that a great deal of weight is placed on the owner's personal financial data.

"We look for gross annual personal income over the last decade, as well as the amount of debt versus annual earning potential that the individual will experience over the first five years of the life of the business," he says. "We prefer candidates with very little debt, like car payments or home mortgages, and look for those applicants that have resources for earnings during the initial start-up phase of the business. That could mean that they have another primary income generator in the household or it could be earnings generated from an alternative salary or investment."

While all of this might seem overwhelming, tenacity and careful planning can go a long way toward ensuring a start-up's success.

"Networking with other spa owners and bodyworkers has helped our business to thrive," says Jonathan Kenyon, massage therapist and manager of Apollo Day Spa and Wellness Center in Waterville, Maine. "Not only do they help with generating industry resources, they place a more human face on the whole money-and-business component of owning a spa that can become draining."

Jim Powell, owner and stylist at Natural Concepts Salon Spa in Greenwood, Indiana, puts the start-up venture into perspective. "Owning a business can be stressful in the beginning because of funding and start-up issues," he says. "After that, there is a lot of long hours and hard work involved in getting past the break-even stage to where the business is really earning a profit."

"In the end, though, it is all worth it, because of people," Powell adds. "When you bring together a great group of employees and you have a regular base of happy clients, that kind of synergy is truly rewarding."