Day spas serve as a respite from the often overwhelming stress and hectic pace that accompanies modern-day living. From the moment you enter this perfect retreat, you’ll be embraced by the tranquil atmosphere. Trained practitioners will massage aching muscles and revive tired heels by providing treatments designed to nourish, tone, and relax the skin. Meanwhile, skin and nail care specialists will complete the experience by offering services to refresh and rejuvenate you so that you can face tomorrow’s challenges.
This environment clearly has broad appeal. According to the International Spa Association (ISA), there were approximately 136 million spa visits made in the U.S. in 2003 (the most current statistics available), with treatments costing an average of $75. That’s why opening a day spa seemed like a great opportunity for New York City resident Dawn Sanders. So she did just that, and Eyespa was born.
It made sense for Sanders to take the plunge. Harlem had long since enjoyed a renaissance. Businesses, and money, were heading back to the historic neighborhood, and with the fast-paced lifestyle that’s the norm in the Big Apple, a haven from the day’s stresses seemed like a no-brainer. “I actually realized that there wasn’t anything like this at home and I thought that it was time to have something like that in the neighborhood,” she says.
Sanders, a graduate of Yale University with a degree in sociology, negotiated a deal with her landlord in which she’d a pay lower rent initially and ramp up payments gradually over time. “I paid about $1,000 less per month when I first opened,” she recalls. Her attorney also negotiated a “good guy clause” which states that if the business failed and she needed to terminate the lease early, the landlord would not enforce the personal guaranty as long as Sanders vacated the premises and paid all rent up to the date of termination.
The location seemed perfect. There was a lot of foot traffic and many area businesses were thriving. But there were complications. “I didn’t know this at the beginning, but you have to find a space with proper ventilation, especially if you’re opening a day spa,” she says. “Temperature control [is important] because unlike convenience stores where people are in and out, people are going to be in various stages of being disrobed and they’re going to have to have a comfortable environment.” Since the location lacked those amenities, she would have to foot the bill to add them. Construction alone ran $18,000 and she still needed, among other things, equipment, advance rent, and supplies. Sanders estimated that furniture could run her up to $30,000 if she purchased it retail.
These days, Eyespa is generating more than $100,000 a year in business and offering such services as eyebrow threading, nail treatments, massages, waxing, skincare and makeup services, as well as retail beauty and wellness products. Sanders represents one of thousands of entrepreneurs who are cashing in on the needs of overworked, overstressed Americans who take time to pamper themselves with a temporary reprieve. But being in a hot industry is not a guarantee for success. One has to carefully navigate the pitfalls in order to sustain and grow a business in this highly competitive area. In this installment of BLACK ENTERPRISE’S Dream Business series, we’ll look at how to launch a successful day spa.
THE REALITIES OF REJUVENATION
There’s no denying this is a booming industry. There are roughly 12,100 spas throughout the United States that generated an estimated $11.2 billion in revenues in 2003, according to the ISA. Day spas represent the largest segment of this industry, generating about half of those revenues.
With an increasing emphasis on wellness by all Americans — and particularly aging baby boomers — going to the spa has become the norm. “If you think about getting manicures eight years ago in comparison to now, it used to be like a luxury. Now, you get a manicure every Thursday. It’s just something that has become the norm,” says Alexis Ufland, director of Lexi Design, a New York City consulting and design firm.
The trend among African Americans is no different. “I think that the African American market is an expanding market right now. The hair is treated differently, the skin is treated differently; this is just a huge time for growth in this market,” says Ufland. “There’s a huge, huge, demand out there for better skincare products and services that are specific to African American skin type, so, if anything, it’s a great market and a great niche for someone to open a business within.”
However, that industry growth means more competition, and too often entrepreneurs will hang out the shingle before they’re properly educated on the business end. “A lot of people go into the business like, ‘I like facials, so I’ll be able to run a spa,'” says Ufland. “The truth is that it’s a very difficult business to run and you need to be more business savvy than expected.”
WHEN COSTS RUNNETH OVER
Because day spas come in all sizes and offer a wide range of services, startup costs vary greatly. A mid-range to high-end spa with a 2,000 to 3,000-square-foot facility can run up to $200,000. If you throw in four treatment rooms, tack on about $15,000 each for equipment. But cost-conscious entrepreneurs can still manage on a shoestring budget. Often, spa owners will offer a few services, such as manicures and pedicures, purchasing two to four pieces of equipment, and gradually buy more equipment as the business grows.
Prospective spa owners should be careful not to overspend. In this business, every square foot of the location should generate income. Experts suggest not to spend money where you can’t make it back. For example, $4,000 for a mirror is not going to get you back $4,000. Also, don’t spend beyond your means. There will be ongoing expenses such as rent, payroll, and supplies. André West-Harrison, who consults with prospective spa owners for The Preston Method in Boulder Creek, California, explains, “$8,000 for a hydraulic massage/facial bed in a resort spa is nice when you’re not dealing with a budget, but you can get a $2,000 bed that can serve all purposes and then spend double on linens to decorate the bed.”
Sanders learned firsthand how difficult it would be to open her doors. She used her personal savings and approached friends and family for startup capital. All told, she amassed $10,000. Knowing that wasn’t enough, she took out an $18,000 loan from the East Harlem Business Capital Corp., a nonprofit community development and financial organization. With nearly $30,000, she launched her business, figuring it would be enough to get her started. She was wrong.
Because of the lack of funds, Sanders knew she’d have to start small, offering only a few services, and do some serious bargain hunting. So she attended the International Beauty Show (www.ibsnewyork.com), a convention for the spa industry. She met vendors and negotiated to purchase their floor models at cut-rate prices. All told, she purchased two facial beds, a massage bed, and four chairs and estimates she saved more than 50% than had she bought retail. “You have to try to negotiate with the vendors on the selling floor,” Sanders advises. “Some of them have traveled a distance and they want to off-load their samples, so it’s the best place to strike deals.”
As Sanders learned, capital is king when it comes to breaking into the spa biz. However, there are other things potential spa owners should keep in mind:
Focus on customer service. Customers enter day spas to get away from it all and if a spa doesn’t deliver, they will go elsewhere. Although consumers aren’t experts in the day spa business, they are keenly aware that it must have the basic allure: “They know it’s a relaxing place to get away; they want it to smell
good; they want it to sound good, and they want to be greeted by a smiling face,” explains West-Harrison.
Keep it clean. This may sound obvious, but spa sanitation is the prevalent concern among both spa professionals and spa goers. Nail care tools, hair bowls,
waxing pots, linen, flooring, rugs, and carpeting can all be home to germs and bacteria. There’s usually a stack of regulations to ensure you’re in compliance before you open. Each state board of cosmetology will be able to direct spa owners to more information.Have the right décor. Since colors and atmosphere affect a person’s mood, it’s important to use soothing hues and lighting to facilitate relaxation. “We don’t want anything loud,” says Makisha Boothe, who owns Ya Ya Spa L.L.C. in Denver. “So you don’t want colors, lighting, or music that is loud. Everything should be soft and warm.”
Boothe, 29, opened her spa three years ago after learning about the industry while working her way through college. While a student at the University of Colorado at Denver, she worked at several salons, learning the business side and gaining valuable experience. With only $5,000 on credit cards and a business plan, Boothe had an idea to provide a trendy, holistic spa menu with the right ambiance. Soft lighting, hardwood floors, and a cozy fireplace give the establishment a soothing sensation.
With so little seed capital, Boothe quickly ran into a cash flow crunch. “The biggest mistake that I made was not managing my cash flow correctly,” she recalls. Because of this, she was forced to defer the purchase of necessary equipment and supplies until her business was able to generate revenues. It was the only way to keep her doors open.
Now with 10 part-time employees and 2006 revenues of $90,000, Boothe has put together a business model that she hopes will eventually be franchised. “I have a training program in place and an accounting system that can run five different spas across the country. I’m really just waiting for the opportunity to come,” she says.
If this industry continues to grow at its current rate, there will be opportunities for entrepreneurs — provided they remember that the only people taking it easy will be the customers.
Opening A Spa In 10 Steps
- Do your homework. The first thing prospective spa owners should do is complete a basic feasibility study. This means taking a look at the space, the size, and the location, and calculating the cost of updating each room. The Day Spa Association (DSA), an industry trade group, publishes The Day Spa Business Bible, which contains information on layouts, business plans, budgeting, product and equipment selections, licenses, and more. The manual, which costs $299 for non members, is available to order from the Website (www.day spaassociation.com).
- Develop a business plan. Be sure to include a three-year financial forecast, your vision for the next three to five years, and an exit strategy. “A lot of people come into it and they’re just kind of flying by the seat of their pants. Six months into it, they’ve spent so much money that they’re out of money and they don’t know how they’re going to make it through the next six months,” says Ufland.
- Join a trade organization. Other than the DSA, there’s the International Spa Association (www.experienceispa.com), a community of spa professionals, product manufacturers, and service providers. The International Esthetics, Cosmetics & Spa Conference (www.iecsc.com) is held several times a year in Las Vegas; Orlando; Florida; and New York, and brings spa owners together with suppliers.
- Get your paperwork in order. Since most spas also sell cosmetics, a retail business license from the city, county, or state is required. Certain states also require that the business be registered with the Board of Cosmetology. For a list of state boards of cosmetology, visit the ISA Website.
- Have adequate capital. Starting any business is a huge financial endeavor and you should make sure you are financially prepared. Allocate funds for construction, décor, furniture, and equipment. Have emergency funds prepared as well.
- Think carefully about the location. Ideally, you do want a degree of foot traffic, but more important is having a location where residents have disposable incomes. “Spas generally want to attract higher income clientele, so you want to look at areas where the income level is high,” says Boothe.
- Find reliable, licensed personnel. Everyone employed within your facility, particularly estheticians, should have valid licenses and permits from the state massage and/or cosmetology board. Requirements vary from state to state. The Website of each state’s government offers lists of the documents you and your staff will need.
- Calculate spa services. “It’s become a very competitive marketplace. Be cautious and careful in the planning of a day spa. If you’re in any urban area, there is a plethora of day spas,” says Michael Carter Sr. president and CEO of Athena Health Club and Day Spa in Brentwood, Tennessee. Obtain a spa menu from local spas to find out what services they offer and for how much. Set your prices accordingly.
- Learn the industry. It’s important that spa owners keep up with industry trends. Owners should make sure their staff is well-versed in spa etiquette and possesses a basic knowledge of common skin and body ailments. Both the DSA and the ISA provide glossaries and other resource tools.
- Create a marketing plan. Customers aren’t going to flock to your business if they don’t know you exist. While Sanders initially sent out 4,000 fliers announcing her grand opening, there are other methods, including private branding. Also, don’t underestimate the importance of word-of-mouth.
— Additional reporting by Stephanie Young and Tennille M. Robinson