How can I restructure my spa business to alleviate debt?
I own a spa. I have a large amount of debt from an expansion that failed due to personal problems. I scaled down the business to cut overhead, but I still have the debt. I have since divorced and have no other income. My cash flow has been cut by one-third because of the economy. I am looking at debt management. My business is still showing a profit; I have been open since 2001.In dealing with any type of debt, there are three components--interest, fees and time. To alleviate debt, you need to reduce interest, reduce fees or extend the time for repayment.
You will either be able to renegotiate those debt factors or you won't. You may not be able to control that; however, you can control some factors in your business to raise the cash you will need to grow our way out of your situation.
First, you'll need to cut expenses where you can. Second, you'll need to focus on getting additional business from your current and existing customer base.
One way to do this is to create a membership fee per month, or an annual paid membership broken down by month. You may also be able to go back and offer added-value services to your customer
Why this strategy and not one that goes after new customers? Because it is up to 10 times less expensive to sell to your current customer base than to get a new customer. In addition, new customers rarely become fully profitable until the second or third transaction. So you'll need to go back and "win" those old customers back . . . it will be the least expensive way to build back your cash flow.
All the best.