URL: http://www.entrepreneur.com/magazine/entrepreneur/2003/december/65518.html

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.

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.

Also early in the planning process, you'll have to decide exactly which services to offer. Treatments typically offered in day spas include massages; facials and makeup application; electrolysis; spa manicures and pedicures; body treatments like exfoliation, wraps and packs; aromatherapy; and hair services like cutting, styling and coloring. Hydrotherapies include hydromassage, mineral and seaweed baths, dry and moist heat, and shower massage. Many spas also offer healing therapies such as Reiki (a form of "energy healing") and acupressure, which must be performed by a licensed practitioner, depending on which state you're in. Services are usually combined in complementary spa packages that guests enjoy for four to eight hours, but à la carte services and pricing should also be available, both for clients who wish to mix and match their treatments, and for clients who would like to try something new.

The range of services you plan to offer will have a major bearing on the kind of facility you choose. Because spa equipment (like massage tables) tends to be large, you'll need enough room to spread out and create a relaxing atmosphere. Your best options are a free-standing building, a storefront property or a strip mall store. Mall locations usually aren't optimal since people go to malls to shop, not to enjoy a salt glow treatment, and the rent is often very high.

To attract an upper-end clientele, you'll need a well-appointed facility in a good neighborhood. It should be located near other retail businesses for good visibility, and it must have sufficient parking. Don't underestimate the importance of parking. Spa services are not necessities, not even for baby boomers bent on preserving their youth. So if it's difficult to visit your spa for any reason, they won't come-or they'll go somewhere else.

Day spas require a lot of equipment to emulate the level of service found in resort spas. These capital expenditures will drive your start-up costs up fast, so you're likely to need financial backing to get the show on the road. If you find that your grand plans exceed what the bank will offer you and what your personal savings can float, control costs by buying quality used equipment or scaling back the number of services you offer.

The equipment typically needed for a day spa includes massage tables, manicure and pedicure stations, and reclining facial chairs. Hydrotherapy equipment may include a Scotch hose, a hydrotherapy tub, a sauna, a Swiss shower, a Vichy shower, a Jacuzzi/whirlpool tub and a steam cabinet. Be prepared for sticker shock: High-quality spa equipment can run from $4,000 to $25,000 per item or even higher. So be sure to buy wisely. It's easy to get caught up in equipping your spa with the best of everything-then never using it.

"We spent $5,000 on a pedicure bed that we're using to do $8 eyebrow waxes," says Daryl Jenkins, 38. "Think about how many services you'll have to do to pay for the [item] before you buy it." His company, HairXtreme Salon and Spa in Chester, Virginia, projects 2004 sales of $625,000.

Staff Savvy

Once you have all this cool stuff in place, you'll need qualified people to use it properly. Cosmetology schools are the best places to find personnel trained to handle the equipment and products found in a day spa. Gullo has a foolproof method for mining the best and brightest: His staff teaches classes at the local cosmetology school. "That way, up-and-coming students know who we are and what we offer," he says.

Many states require personal-care workers (including spa owners themselves) to have at least a cosmetology license; others require practitioners to have a certain number of hours of specialized training and additional licensing. Check with your state board of cosmetology to find out about the requirements.

The staffers you'll need are: aestheticians, who do massages, facials, waxing and specialty services like hydro-therapy; massage therapists, whose services provide stress relief and relaxation; electrologists, who remove excess body hair; and manicurists, who provide manicure and pedicure services. Other professionals you may need on your team include a makeup artist, a hairstylist and a spa manager, as well as staff for the reception desk. Debbie Elliott, 49, of Debbie Elliott Salon and Day Spa in Portland, Maine, suggests cross-training employees to handle more than one job, as well as hiring unlicensed assistants to handle tasks like escorting guests, changing treatment wraps and mixing treatments. "That saves the licensed people for the actual services, which improves our productivity and helps make the spa profitable," she says. She expects her spa to bring in sales of $1.3 million in 2004.

When hiring, she recommends looking for friendly and polite people. Says Elliott, "Personality is more important than skill, because you can teach people what to do, but you can't give them a new personality."

Spreading the Word

Advertising is also crucial for a successful start-up. Because it's likely that some people in your market may never have considered visiting a spa or are unfamiliar with the services you offer, it's up to you to tell them about the spa's many benefits. Besides a Yellow Pages line ad, you may find a well-placed series of ads in the local newspaper or publication targeting upscale readers is an effective way to introduce the public to your services.

Once you hook your customers, make sure you provide the best level of service possible. Word-of-mouth advertising is crucial in this business and can mean the difference between many years of tidy profits or ignominious defeat. Meanwhile, a savvy way to cash in on good word-of-mouth is by instituting a referral program, which rewards clients for referring new customers. "Every start-up should have a referral program," says Gullo. "It's a soft expense that can lead to a lot of new business."

Elliott swears by gift certificates as a great source of new business, which added $180,000 to her bottom line in 2002."More often than not," she says, "clients first come to us because of a gift certificate."

Learning Curve

As a spa owner, you need to keep up on trends, both in the spa industry and in business in general. To keep abreast of what's new, consider joining a professional trade association like The Day Spa Association (201-865-2065) or the International SPA Association (888-651-4772). You'll also find tons of information online that can help you do business better, faster and smarter.

Gullo also recommends getting a general business education at a traditional college. "Industry-specific education is valuable, but you need to know sound business principles, too," he says. "You need to have an understanding of what makes business work to make your business thrive."

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Eileen Figure Sandlin is an award-winning freelance writer and author who writes on business topics.