Great Escape

All wound up about what kind of business to start? Then take a hint from the millions of Americans looking to break away from the daily grind--head to a day spa.

With all the attention focused these days on holistic remedies, organic produce and botanical beauty products, it's no surprise that interest in spa treatments is on the rise. Everyone from harried executives to soccer moms-and baby boomers in particular-is eager to try anything that keeps them looking younger and feeling better. That makes this the perfect time to take the plunge into one of the hottest personal-service businesses around: the day spa.

Day spas offer the same beauty and wellness services as pricier destination spas and resorts but don't require the same time commitment. According to the ISPA 2002 Spa Industry Study from the International SPA Association (ISPA), there were nearly 156 million spa visits in the United States in 2001, 68 percent of which were made to day spas. Revenues for the U.S. spa industry were nearly $11 billion in 2001, up from $5 billion two years earlier. Yet this spending occurred at fewer than 10,000 spa locations nationwide-75 percent of which are day spas-meaning the market is open for new spa owners.

Spa Basics

There are two kinds of day spas. Standard day spas offer body treatments and lifestyle services. Medical spas offer traditional spa services as well as services that must be provided by a licensed medical practitioner, such as acupuncture or microdermabrasion. Although conventional wisdom holds that true day spas must offer hydrotherapies like Scotch hose treatments or underwater massage, many day spas do well with "dry" services alone.

"Not all clients are comfortable with water therapy," says Hannelore R. Leavy, founder and executive director of The Day Spa Association in Union City, New Jersey. "Americans are shy about taking off their clothes and standing naked in front of a stranger who will perform unfamiliar therapies on them. It's better to open your spa without water therapy, especially if your funds are limited. But you can put it into your business plan so you're ready to expand when and if your clients are ready for it."

Dennis Gullo, 47, used an easy formula for determining which services to offer in his spa. "I started with [commonly known] services, like massages," he says. "I didn't want to spend energy trying to sell services no one's heard of." The formula's worked: The spa portion of Gullo's Moments Salon & Day Spa in Mount Laurel, New Jersey, generated 44 percent of the business' total sales of $1.8 million in 2003.

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Laying the Groundwork

Finding out what your prospective clients are ready for is an important part of the planning for your new venture. Case in point: ISPA's 2001 Day Spa Usage Survey indicates that two of the top five reasons people don't visit a day spa are that they think spas are too costly, and they feel they're not the "spa type." So study the demographics of your target market to see whether, say, the residents of a farming community in the heart of Nebraska are the type who will be interested in pedicures. The fact is, you're more likely to attract clientele if the market area is populated with white-collar professionals under age 45 who have college degrees, according to the survey.

"You also have to educate people about your services so they don't think of them as a luxury," Gullo says. "People feel guilty about pampering themselves, so instead, we position ourselves as providers of healthy living services."

Armed with demographic analysis, you can write your business plan. This plan serves as a road map for charting your course and as an invaluable tool for showing a banker how savvy you are about the realities of running a business. Your plan should include a description of your business and the services you'll offer; market strategies (developed with the demographic info you've collected); an analysis of your competition; an operations and management plan; financial information, including assets and startup capital needs; an income/expense forecast and repayment plan; and a personnel management plan.

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This article was originally published in the December 2003 print edition of Entrepreneur with the headline: Great Escape.

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