Are you thinking about starting or buying your own Spa?

Do you know the most important thing to focus on during your first year of ownership?

Well if you don't know, it is customers. You need to be thinking about how to acquire new customers and keep current customers happy.  

Anyone who has been in business for more than 5 years will tell you that it is far easier and cheaper to keep an existing customer than it is to obtain a new one.

So the most successful companies in the world integrate customer acquisition and satisfaction into their daily business routines. So what are some of the things that you can do that will help you get and keep customers?

I believe it all starts with having a solid customer database.

A database is a file that allows you to store information about whatever you may want to analyze at a later date. The best businesses are always combing through the information in their customer database in order to see where the trends are that can help them get in front of customer demand.

For example, if you go out to eat regularly you'll notice that the largest restaurant franchises want you to enter your information into a birthday club or a VIP Club. The reason they do this is to be able to reach out to you in the future to entice you to come in for your birthday or anniversary. This simple action adds additional revenue to their income without additional advertising spending.

A VIP Club also just makes customers feel better about the business which often increases loyalty and makes them want to come back more often.

You can use a customer database to find other ways to keep in touch with customers such as creating a monthly specials specifically tied to your previous customer's purchases.

If you have the customers telephone number and have the ability to text them, then you have yet another way that you can encourage them to come back to your business, perhaps with a coupon.

Another thing that you can do with a customer database is determine which of your customers are your cream-of-the-crop. Your cream-of-the-crop customers are the ones that have the ability to give you even more sales and are the ones most likely to respond to your deals pitches and coupons.

By focusing on your cream customers, you can spend time talking with them, give them surveys, or figure out other ways to analyze their behavior. With this information you are now armed with perfect data for advertising and marketing that will target, appeal to, and find even more versions of your perfect customers.

Imagine your life if your business was made up of close to 100% awesome customers. Do you think that your business would struggle even in a recession? Do you think it would be easy to sell this business in the future for multiples much higher than average?

This is the power of having a customer database and understanding exactly how it is supposed to be used.

There are plenty of solutions available for a small business owners to be able to capture customer information and also reach out to them. However it is up to the business owner to deem this activity important enough to put it high on the to do list and put it into action.

Technology today is very powerful, and now allows us to make each customer feel as if we are thinking about them on a weekly basis. If you can figure out a way to make your customers feel more special you are well on your way to having a crazy successful business that will grow based on word-of-mouth.

One of the best things that you can do when customers come into your establishment is to have a system that sends a text to them and captures their information in your database.

By doing this, your business can become a much more familiar brand to your customer and you will get to know the customers far better than you have in the past. And by knowing the customer better, you can serve them better.

One way to expand your knowledge of your customer and most efficiently build your relationship with them is to practice the ASK Method.

The ASK Method is a way of surveying custoemrs that is designed to draw out their most emotion driven wants and needs. The ASK Method was created by Ryan Leveque who used the method to start successful venture after successful venture.  

He credits his success to being able to draw out the language that his best, most rabid customers used to describe what they wanted from their interactions with the business. Then, armed with that information he was able to create ads that attracted people just like his most enthusiastic, engaged customers, even though they had never been a customer previously.

Knowing exactly what they were needing and being able to talk their language through his ads was similar to a fragrant flower drawing honey bees in.  

When you can connect with people like this through your marketing, you cannot help but grow your business larger and faster than you ever thought before.

Once again, the key is to be able to mine for the gold in their deepest needs and desires, then communicate it back to them.  You can only do this if you keep and track your customers and take action to dig deeply through the information they provide you to find the gold.

It's a fact.

Only one in three businesses survive their first five years of existence.

This is during normal and prosperous times. The numbers are probably significantly worse when the economy is in a recession or a once-in-a-lifetime event like our current pandemic presents itself.

In good times and bad however success or failure of a business can be traced to some key components. If you, as a small business owner, are aware of these mistakes and prevent them, you increase the likelihood of your business surviving.

Here, in no particular order, is a list of items that contribute to business failures that we should guard against.

*Not Deeply Understanding Your Market

It is your job as a business owner to constantly update your knowledge with respect to the people that you serve. You need to be on top of any changes in preferences.

You should always plan to take surveys of, or at least talk to, your customers. By constantly trying to learn more about your customers wants and needs you do a few things.

First, you'll provide services or products that meet their demands right now.
Next, you'll create marketing and advertising that will easily attract other customers that are just like your best customers.

Finally, you'll be able to reach out to existing customers and keep them coming back more often. On to the next reason businesses fail.

*Not Knowing Your Numbers

It is important to be able to see your business at a high level and understand how it is progressing simply by looking at financial reports.

Proper financial reporting is necessary to ensure that you can generate a profit, pay your bills, save money, and keep your business on track to meet your financial goals.

There is plenty of software available to help you do accounting, bookkeeping, and budgeting. But if you do not understand how they work it is very likely that the numbers that come out of these products won't help you.

So you either need to buckle down and really start to understand the numbers, or you need to pay someone to do it for you. Either way, understanding the numbers will set you apart from most small-business owners.

When I talk about understanding the numbers, I do not mean just knowing how much revenue your business generated and how much money was spent.

You also need to understand the secret places that you are able to generate money from or that you are losing money on without realizing it.

You also need to understand how you can save money on taxes and use your business to create hidden wealth. Once again hiring an expert in this area will probably pay for itself.

A book that I highly recommend for anyone who wants to do it themselves or hire a person who really understands how to create a successful business is called “Profit First”.

Go through this book a couple of times so that you really understand what the author is trying to say. Then try to find an accountant or bookkeeper who either understands this methodology or is willing to learn it with you.

Having a professional who understands the Profit First method is a great way to keep you on track with your financial situation in your business.

Your Marketing Is Not A Money Making System

Marketing and sales go hand-in-hand. However many small business owners believe that having a Yellow Pages listing or a Facebook fan page is all that is needed to say they are “doing” marketing.

Others say that all they need is word of mouth advertising and referrals from existing customers in order to have the business they want.

I have a good hunch that if this is your thought process about marketing, then what you really have is a job and not a business. Sure, it's a job that you control, but it is still a job.

Someone in your organization needs to be responsible for sales. However, in order to grow sales and grow your business to the point where it does not need 100% of your input, it must have a marketing system that generates new prospects for your sales team to turn into new customers predictably and consistently.

If you know your current best customers intimately then you already know everything you need to get more copies of that customer for your business to serve.

However you do it, whether by advertising on Google, Facebook, or by investing in search engine optimization for your current website, to grow a real businesss quickly you must invest in marketing.

The best form of marketing that is working today is paid advertising online. The reason this is the best method is because it allows you to test your message very quickly, track what you test, and target the perfect prospect. This is more control than business owners have ever had in history.

Tying these things together will allow you to find your perfect customer floating out there on the internet and put your perfect message in front of them.

Also, if something is off in your message or your market does not respond to it, you will know very quickly and be able to pivot and experiment with new and different messaging without wasting a crap ton of money.

*Altitude Is A Function Of Attitude

If you read more than one article on this site you will probably find that nearly all of them contain a small section on mindset.

The reason is if you do not have strong control of your mindset it is very likely that your business will fail.

There are businesses that have a great product and plenty of people that want to purchase the product, who operate in a market with plenty of funding available to them that still go on to fail.

Then there are other businesses that get started in a depression or recession where there is almost no hope of receiving outside funding, where their customers are in a state of fear regarding spending money, who go on to become some of the largest businesses in America.

The one thing you can always point to when you talk about the second business is that the owners had a vision, discipline, and complete mastery of their emotions even when faced with incredible odds of failure.

One of the best things that you can do each morning is to wake up and immediately start to tune your mental attitude. Most of us wake up in a neutral state and then let whatever activities hit us in the face affect our attitude.

By the end of the day we might say “Oh today was a good day” or “Oh today was a bad day”. But we do not realize that we let outside forces determine the kind of day we had, and it probably affected the way we made decisions too.

Yikes!

However, if you control your attitude and force it to be positive, grateful, and accepting more and more throughout the day, regardless of what happens, then every day ends up being a positive day. And positive days stack up to become a positive week, month, year, decade, and so on.

In this way you control your business destiny one day at a time and are able to accomplish whatever you want to do regardless of the economy.

I was recently visiting a friend of mine who owns his own coffee shop business with his wife. Sure, it is not a spa like mine, but it is a business nonetheless and businesses are typically similar at the most basic levels.

Money in should be greater than money out.

Whoever can do this most efficiently gets to stay in business and continue playing the game.

However, my friend was telling me that he and his wife are feeling a little bit overwhelmed, like they are not succeeding as well as they would like in their business. Now these are two highly educated people coming from successful careers who are following their passions. So far so good!

So I asked them exactly what they thought the problem was. He said that he felt like they were very busy and performing lots of activity, but he wasn't sure that it was going to ensure the success of the business long-term.

They complained about the fact that they need to perform tons of small activities in addition to serving their customers including making sure bills are paid, making sure there's enough supplies on hand, and trying to keep everything neat and tidy.

Everyone feels good when your chosen activity brings in money. But it is hard to live with a nagging feeling that you are not running things as well as you can.

I understand exactly how they felt.

I used to feel that way myself and occasionally still do. But, I recommend that they pick up the book The E-myth Revisited by Michael Gerber. This book helped me categorize all of the activities that need to be performed in my own business with the next step being to create roles for those activities.

The good thing about creating roles and putting activities underneath those roles is that you're able to gain a high-level perspective about the work that needs to be done and assess which activities produce the most value for the company.

For example would you expect the CEO of a small corporation to be the same person that stocks the shelves, cleans the bathrooms, or serves the customer?

No, but if you are in a one or two person shop, all of these roles need to be filled and you’re going to do it if you want to stay in business.

However, what happens in most businesses that are run by smart, intelligent people who are very skilled in their craft but perhaps still learning how to create a business, is that they tend to maximize spending time doing things that are necessary but low value. It is a near certainty that they will then put the high-value activities such as marketing, organizational design, and research, on the back burner.

It's not that they do not think these things are important, it's just that they don’t seem to be important right now. And so the natural result is that these items are never completed because no time is allocated or planned for the activity. They keep getting pushed off until ‘later’.

Over time, what happens is that eventually the business owner starts to get very tired in their business. Tired of the day-to-day activity that is, let’s face it, quite low value.

What they begin to realize is that they have created a job and not a vehicle that has the ability to carry them into their retirement with ease.

So the solution sounds easy but is actually quite difficult to implement.

They need to take a little time each week and sit down in a quiet place and think about what they want their business to be like. Then they must determine what they want their life to be like with respect to the business.

Someone once said that thinking is one of the hardest activities in the world.

People would rather do things out of habit, get their ideas from other people, or go into a state of avoidance, rather than actually use their mind to come up with a novel, original, and new idea that works for them, and only them.

So yes, I recommend that anyone who is starting the adventure of running a business to pick up and understand the methodology presented in the E-myth Revisited book. But it is still up to each individual to do the heavy lifting to visualize, plan, and think through what each of the roles in the business should be doing, and how each of those activities should be valued.

Write down clear goals for each of the roles in the business and set a date to evaluate the performance against those goals. Place these goals in a visible location where you and your business partner can constantly review them.

Begin to think about ways in which your business can begin to hire people to perform some of the lowest value yet essential activities. As you do this you will see that you have more time to do the most value-added activities if you focus on them. And, once again, the highest value activities are planning your business, and gaining new customers.

Your ability to build a business that does not rely on you to be there 100% of the time depends on your ability to successfully plan the business, and automate the creation of new customers as well as the retention of current customers.

Time To Take Out The Competition!

Skin care spas are really expensive to open and run properly. That's a fact of life.

When we invest in creating a really awesome space to care for our customers we  either tie-up our own capital or are left with substantial loans to pay off.

Skin care spa operations have to create enough revenue to overcome a ton of obstacles, including:
 
*covering direct operating costs such as rent;
*paying our staff;
*making debt and interest payments;
*marketing;
*and yes, producing a real profit.

And all this must happen before we can think about buying new equipment to replace the stuff that will be wearing out assuming we have a decent number of customers.

When you look at it this way, you begin to see just how expensive this business model is.

If you love what you are doing, charge a healthy price, and your customers love what they get so much that they pay for it over and over, running a spa can be very lucrative. This profitability is one of the main reasons new competitors continue to enter the industry.

However, there are now new types of competition starting to appear, that try to take advantage of the consumer demand while avoiding shelling out all that dough for capital expenses.

If you search for "have a spa day," you will likely see articles featuring how to do a spa day like this: "Take a break-- top 15 ways for Mom to have a spa day."

It looks like it could be an article promoting day spas, but when you dive in, you will notice that only one of the locations they are blathering on about are a real spa. The rest might be a weird group of alternatives to an actual spa.  It will likely be a list of spaces that someone made up by extending the definition of "spa".

There might be hotels providing wellness retreats that also bring in expertly made cuisine, a place listing speakers on inspiring topics, or venues offering relaxing activities like hiking, cooking lessons, or lectures on increasing your wellness.

Others might be doing boot camp day spa activities with fitness instructors and mobile therapists who give sports massage.  To the average consumer, this combined with Groupon like pricing can make it an appealing list of options.

The common denominator of each of these ideas is that they all have a low-cost asset base that is not a fixed, recurring cost.

These businesses are asking 'how can we develop a 'spa' experience without needing to invest huge amounts of money needed to develop a proper spa and without permanently utilizing spa staff?'.

So, as strange as this may seem to us experts, the average customer out there will literally see this as just as good an alternative to what we provide.

What do you need to do in your local area to combat this competition trying to take future customers away from you?

We need to effectively communicate the value of what we provide. Always work hard to express the beauty and serenity that customers get when they're in a proper spa treatment environment when we are doing our marketing.

There's no need to diminish competitive alternatives that appear on the scene. But you should stress the value inherent in visiting your establishment, getting to know your business, and how having a long-term relationship will improve the outcomes of each and every visit.

If you have cash and already have previous experience running a business the short answer is: "buy" it.  However, most of us do not have the cash sitting around to just go out and buy a profitable business so we have to come up with a little more creativity to help us determine how to proceed.

Below, I give you 10 ideas that will tell you if buying an already profitable, running skin care spa might be a better option for you.

1) Every banker knows that the 5 year success rate for existing businesses is much higher than that of a brand-new start-up. Go, ahead. Ask your accountant. I'll wait... What this statement really means is that if you could spend the same amount of money starting a business as you would buying an existing business, one of these paths will probably result in failure and the other in a win. Why? Because of the next point...

2) The real secret behind all successful businesses is having an established and engaged customer list. If you are starting a business, being able to communicate with a known group of previous customers can provide the business with immediate cash flow. This alone is a major factor on the path to success.

3) It is a lot easier to find a funding source to help you finance an existing business. But it is almost impossible to find funding to start a new one.  Bankers, venture capitalists, and even mom are quite aware of the dangers of a new businesses. They completely and fully understand the risks at a gut level. Your spa is simply much more likely to get a loan when the business already has cash flow. Period.

4) Often, people who want to sell their businesses will help the next owner by financing the sale at very practical terms. They often do this for tax reasons. Most sellers would prefer to postpone gains over a longer period of time versus taking it all at once just to give it away to Uncle Sam. Also, if a seller agrees to finance some of the sales price of the business, it is because they absolutely believe that the business will succeed.

5) The other side of the coin is that sales estimates for a startup spa are nothing more than an informed (or not-so-informed?) hunch. Estimates for existing businesses for sale rely on verifiable historic data.  Which would you bet your life savings on?

6) A hidden fact: New businesses tend to cost far more to start than their owners anticipate. Most start-up spa owners find that they could have purchased an existing company that came with customers and cash flow for the same amount they eventually shelled out for their business.

7) A side note to the previous point is that it may be possible to spend less money thorugh a down payment to buy an existing spa than if you started your own. A working business has the ability to begin paying for itself right away. If a spa has a decent track record, people will bet on it. A brand new start-up is not finance friendly. It is impossible to estimate the amount of cash needed to get a brand-new business to a positive cash flow. People are wary of money pits.

8) Established web traffic is a good sign also. The more authority and traffic a website has, the more valuable the business tends to be. Brand-new sites have no guarantee of success. Google will still need to discover and value it. An authority website is a huge asset, and no brand-new business will have this starting out.

9) Many businesses for sale are actually under-priced. You can sometimes find a business for sale that costs less than the cost of going out and buying the assets individually. If you bought it all new, you'd probably pay more and still have no list of previous customers!

10) An existing book of customers is key to the survival of any business. In the current economic environment you have to ask yourself how hard is it to get new customers? Right now I'd say it's pretty darn hard!

So with all those points in mind you'll have to make your own decision about which way to go.

For some, the answer, due to whatever reason, will be to bootstrap and start your own business from the ground floor. The logical question would then be: What is the best way to finance a new start-up?  

My response: with cash from your savings.

No savings? You are not alone. So what other methods are there?

The financing option that is best for you depends completely on your idea, market, and money situation. Your personal financial resources are the most important factor (i.e. your credit score).

Below are a few of the most typical ways to fund a brand-new spa.

All methods of financing have good and bad points and most may not fit your current situation, but they are listed for your information anyway.

Whatever method you pick, go explore the idea fully and do not enter any commitment blindly. Always speak to your tax or other professional because we are not giving you advice here. Just letting you know what the options are!

Ways to Finance Your Start Up Spa!
*Raid Your Savings and Investments

The initial source you need to consider is your own savings and investments.

Self-financing your business does not leave you in debt to others if the business fails. If the ship sinks, it is only your cash that goes down with the ship.

If you're not willing to risk your own savings, you should not take chances with anyone else's.

*Raid Your Friends and Family

After raiding their own cookie jar, business owners often start eyeing the pocketbooks of their loved ones.

If you have a large, wealthy family this might work.  But: NEVER take a business loan from anybody you will be eating with on Thanksgiving.

Nothing causes more family fights than loans that will never be paid back.

Your family members may offer you money, and often they don't start out treating it seriously, at least not in the legal sense, with paperwork and all. But, don't kid yourself. They will expect it back at some point. Remember, when a family member invests in your business they are really buying you and trusting you.

Imagine sitting down with your family and friends for your next holiday meal.  Your uncle casually asks "How's that beauty spa idea working out for you?"  How would you feel informing your parents, friends, and family that you've "pooped the money bed" with their funds? "Yep mom, unfortunately we've shed your life savings right down the toilet, danged economy!---Now could you pass the pumpkin pie guys? I'm famished!"

*Raid Your Credit Cards

I know someone who financed their spa on plastic and a dream. This could have backfired, sure. Their business could have failed and left them with serious debt that would have taken until the year 2099 to pay off. But...

...It worked out. So there's that option. If you choose to fund your company on plastic just remember that you will be paying through the nose. Not "The Godfather" high interest rates, but high. And unless you succeed big, you will be paying for many years to come.

*Raid The Home Mortgage

Bank loans are rather difficult to get if you do not have security or a record of previous success.

That is why entrepreneurs borrow from their homes to finance their spa if they can't get a loan.

This makes more sense than building a business on a deck of credit cards but the financial threats are still very serious.

You have to pay this money back whether your shop does well or not unless your family members are the outdoorsy type.

Still, it is a good source of relatively cheap money to get you started. Also the  interest might be tax deductible (contact your accountant to make certain).

*Raid The Angels

An angel investor is a wealthy person who invests in new businesses for a share of the pie.

Angels are often the first financiers in a business who offer the basic capital to start and run it. Some angels may cut you a check and leave you alone to run your company.  Others consider their investment an invitation to "help you" run it and make decisions.

If you do accept angel money make sure the terms are clear on both sides. Angel cash includes strings. Strings you may not want.

Make sure you know whether those strings are acceptable to you before getting in the money bed.

*Get Raided by Venture Capitalists

VC are to angel investors what great white sharks are to minnows. Venture capitalists have powerful jaws that can chew you up and spit you out if they feel like it.

Their money does not come with strings. However, it does feature handcuffs, leather, and a great deal of legal paperwork. VCs take the upper hand in any businesses they invest in and do not apologize for being bullies. That is the cost to get access to their substantial cash.

If your spa reaches the level that VC money comes a knockin, don't leap at the first lure they drag past your eyes.

If one shark likes your concept, others will also. Pitch to as many VC firms as possible then try to find the least shady offer before you accept the check.

The Bottom Line

No matter how you finance your company, be smart with the cash. Don't buy 15 LCD screens and 8 top-of-the-line tables if you are just starting out.

Have a clear path drawn out that tells you how the cash will be used, and more important, how it will be repaid.

Last point: the more you can figure out how to run your business without borrowing money, the more successful your business will be in the end.