Your Spa: How to get Start-Up Financing

Any dream spa is likely to start as precisely that: a dream, a vision, the idea of a beautiful environment for clients to enjoy luxury pampering and state-of-the-art treatments. When formulating this dream, you likely have a vivid picture of the lush interiors you’ll create and the menu of services you’ll offer. Well, it’s great to keep dreaming--as long as you combine that dreamy outlook with some rock-solid financial planning!

Maybe you’re lucky enough to have personal capital in the bank to handle your spa’s start-up costs. More likely, you’ll need to seek funding from a bank or other reputable lending institution. Either way, it takes detailed, strategic preparation to turn your dream into a viable reality. Where to start? With these three basics:

Market Research. In the spa business, it’s crucial to start with a savvy and thorough understanding of your market. What clientele will you target? Are the area demographics a good “fit” for your concept? Next, look at the competition: What services do they offer? What do they do well, and what do they do poorly? How will you differentiate yourself--i.e., With additional services? Unique branding? And finally, in order to create realistic financial projections, you must do a price comparison analysis and a compensation analysis in your area. What does your competition charge and what do they pay out?

•    Insider Tip: To get the typical salary/commissions of spa managers, assistant managers, aestheticians, receptionists and others, call beauty training schools in your area: They’re a good unbiased source for current, accurate compensation information for various spa positions.

A Business Plan. This is the nuts-and-bolts of everything your spa will be. A solid business plan includes a detailed breakdown of your facility’s projected location and square footage. How much space will be designated for revenue-producing rooms (treatment rooms), and how much for non-revenue producing areas (offices, locker rooms reception area, and so on). A business plan--which usually runs 20-30 pages--includes the who, what, where and how of your spa. It entails an overview of the spa concept, why it is marketable, and why you’re the best person to make it happen. So include a bio that details your background and experience. What else is essential? A summary of your marketing initiatives, including your plans for an SEO/PPC campaign, website and Social Media strategy. Then, focus on sales: How will you set staff sales targets, handle visual merchandising, and promote e-commerce? As you see, a Business Plan is quite detailed, but is maps out all the particulars needed to secure financing.

•    Insider Tip: Hiring a professional spa consultant to draft your business plan can be a smart, cost-saving option. They can pull together all the facts, while guiding you through industry standard numbers and cost-effective marketing programs. 

Financial Forecast. It’s one of the most important aspects of your business plan, in which you calculate all the pertinent expenditures. A Comprehensive Profit and Loss Statement is a financial projection based on the size, location, and concept of the spa. It relies, in part, on the research conducted to analyze local competition, your anticipated prices, and your intended compensation to staffers. Your Profit & Loss will include the follows documents:

•    Capital Expenditure List includes all the up-front things that must be purchased--equipment, lighting, renovation and more--before your spa opens. Create a proforma invoice for each item so you’ll have very specific cost projections.
•    Payroll Structures, ideally for years One to Four. Map out the salary for each employee, plus the commission structure, health benefits--and the anticipated revenue each staffer will likely generate for your spa.
•    Fixed Costs and Costs of Sales. Fixed costs include rent, payroll, utilities--expenses that are the same each month. Costs of sales are only incurred when a service is performed--such commissions, product expenses, or laundry.
•    Revenue Assumptions. Guesstimate your spa’s likely cash flow, based on the operating hours, revenue per room per day, and utilization rates.
•    Insider Tip: Your financial forecast has to be right the first time, since you likely can’t go back and ask for more money! Again, a consultant can be your most reliable source for help--a valuable partner to launch your spa’s success. 

Advance research, a solid business plan and fact-based financial projections can make the difference between a “pipe dream” and a “destined for success” business in the pipeline!