Here’s the good news: the spa business is back. According to 2013 U.S. Spa Industry Study by ISPA, spa revenues improved by 4.7% between 2011 and 2012, moving the needle to $13.4 billion in spa revenues. These statistics reflect that spa visits are up 2.8% and revenue per visit has increased back to pre-recession levels, up by 1.8% between 2011 and 2012. Experts agree that the indicators are trending upward, and that the recovery of the spa industry will continue.

But the bad news is that, even with this optimistic outlook, many spas will still fail. Will yours be one of them? An average of 6.5% spas go out of business every year—more than 5,000 in the past four years alone, according to ISPA. And even when spas stay in business, they may lose money: 12% of the spas which participated in the most recent ISPA survey reported that they did not make a profit last year.

HiResPig2The reasons for the failure of a spa expose vulnerabilities in every aspect of the business. Of course you need to have enough capital, and hire the right people. Of course you need to post your golden rules and your mission statement on the wall of the break-room.Of course you need a location with great access and lots of parking. But there are 5 even more specific, crucial steps where spa-owners make fatal mistakes. Missteps in any one of these 5 strategic areas can crash a promising business to a flatline.

REASON #1: SPAS ORDER THE WRONG MERCHANDISE

We’ve all seen it—and maybe you’ve done it. Week after week, those “intention” candles, or those slippers, or those baby-clothes are gathering dust on the bottom shelves, or in a “bargain basket” (so sad) by the register. It’s a form of denial in spas: merchandise which doesn’t move gets shuffled around the floor in hopes that changing its location will change its fate. If the product is a dud, it won’t matter where you put it, and you’ve lost money.

Bryan Durocher, medical spa consulting guru, success coach and founder of Durocher Enterprises based in Whitefish, MT, offers this simple but austere formula: “Only buy SKUs that you can sell. Be sure that you get 8 to 10 turns, minimum, per year. The classic mistake is to buy it because it’s on sale. Don’t.”

Mismanagement of inventory and incorrect ordering results in too much on the shelf, too much on the back bar, and not enough in the till. Resist buying accessories which distract from your core business. If you want to sell jewelry, don’t open a spa. Durocher offers further advice: “Do not let the reps count your inventory. Count it yourself to understand where you really are with things.”

REASON #2: SPAS ARE TOO GENERIC

Every business-owner faces the challenge of maintaining brand integrity while identifying with the local consumer base. While we may admire Starbucks and McDonalds for their consistency of performance and world-dominance as brand, spas need to create customer experiences which feel intimate, and relevant to the surroundings.

SPAGina Preziosa, a West Palm Beach, FL-based retail and sales consultant, comments, “The Mandarin and the Four Seasons families of hotels are great examples of designing the specific location into the larger corporate model. The feeling is a little different at each location, and spas need to create this feeling of originality and authenticity.”

Preziosa recommends that if you are part of a franchise group, build in 30-40% customization of your spa program, guiding your buying, décor and marketing. Preziosa says that this form of “keeping it real” nets local loyalty and profits: “For instance, where I live and work, Lavender is just not a relevant fragrance. The whole English countryside thing doesn’t make sense here as a theme, since we’re in the tropics. So you have to create a shtick that people relate to.”

REASON #3: SPAS DON’T PLAN AHEAD

Maybe it’s all of the “dream big!” rah-rah entrepreneurial talk these days, but many spas launch before they are ready, meaning before they have planned adequately. While there is always an element of risk-taking in any business, remember that not every leap of faith results in swan-like flight: ill-prepared leaps often end in chipped teeth and closed doors. Avoid magical thinking, and start planning.

appointment iconAlison Howland, President of Spa Success Consultants, Inc. of Palm Beach Gardens, FL encourages owners to be proactive and create a fully realized 5 year road-map, defined by clear financial benchmarks, before launching. “You have to have the discipline and the foresight to take the long view,” says Howland. “People sometimes get swept up in the excitement of a new business idea, but just wanting something badly is not enough. Success does require optimism and belief in yourself, but planning is even more essential.”

The first signs that a business has not planned adequately is the desperate flurry of untried marketing strategies, groupons, coupons and gift certificates which Howland says “can erode the value of service.” Bryan Durocher agrees, adding, “The minute you discount, it’s all over.”

When planning pricing for treatments and services, use the word “from”, and offer a range of dollar figures; a practitioner with years of expertise can rightfully charge a bit more than a fresh recruit. And, when you need to offer clients something sweet, make it a product sample or an add-on service to avoid cutting into the meat of your service.

REASON # 4  — SPAS DON’T HIRE THE RIGHT EXPERTS

Embrace the idea that no one is good at everything, and prepare to hire outside talent during every phase of your business in order to bring high-level expertise to your operation.Creative Thinking Concept

Begin with your finances, and beware of what Bryan Durocher calls “the trolls under the bridge” – the hidden charges on your credit cards. Credit card agreements and transactions get very complex, and this basic aspect of doing business can sink your bottom line. If you don’t know who is doing your business processing or other critical functions, work with someone who specializes in handling this aspect of spa business.

Another area where spas often need to engage professional expertise from the outside is in the areas of marketing and branding communications. Having a Twitter account does not make you an expert in SEO. Likewise, creating digital advertising, in-store merchandising campaigns, e-newsletters, content for customer e-mailings, website copy, blogs and media relations require a highly sophisticated skill set. Your business will suffer if you don’t recognize this.

REASON #5 – SPAS HAVE A FEAR OF RETAIL

According to the most recent ISPA survey, 4% of US spas still do not have a retail area. Gina Preziosa observes that “A relaxing, refined spa culture is not compatible with anything hard-sell. It’s not like a department store, where you’re being grabbed for forced makeovers and sprayed with perfume as you run the gauntlet. So as a result, a lot of spas have a fear of retailing when, in fact, it is the key to success.”

HiRes

This challenge highlights red-flag aspects of other classic spa management problems, particularly lack of planning and lack of expertise. The most successful retail products in a spa relate to treatments the client has just had, and connect with the individual on a deeply experiental—even emotional– level. This is the reason that books, darling earrings and cat-coffee mugs do not sell in spas. When selecting inventory, link what’s on the shelf with what happens in the treatment room. One of the most powerful persuaders: aroma. Science demonstrates that fragrance creates associations in the deepest part of the human brain known as the limbic system, and that these associations are potent drivers for actions and behavior, including product choices.

Not surprisingly, aromatherapy products and essential oils top the list of items sold by massage therapists to their clientele.  In this way, aromatherapy products may be used build bridges between treatment and retail, and allow the scents to initiate interaction between your team-members and customers. This strategy also will allow massage therapists, often shy types who typically spend their day in a semi-darkened room in semi-solitude, to become more social and engage with clients on the floor. Allow easy success: incentivize these team-members to sell one product a day, perhaps an innovative, new aromatherapy diffuser, and reward this accomplishment with a beverage card or other small but useful acknowledgment.

According to the most recent ISPA survey, average spa square footage has increased 60% over the last 10 years. But is a bigger spa always a more profitable spa?  Examine your floor-space mercilessly. Is there a big old sofa and a coffee table stacked with old magazines by the entrance? Out they go: every inch of floor space, which ranges in cost from $75 to $300 per square foot in a spa according to ISPA, has to earn its keep. In the place of furniture which simply takes up space, create tester / sampling area where guests check out an array of products with no pressure to buy. Provide mirrors, cotton swabs and hair bands for use by the customers as they “play” in this area. This spot can become a central hub where team-members may comfortably approach and greet customers, and easily strike up a conversation. Encourage a party vibe! Coach sales people to smile, look busy and happy, and not to stand against the wall, hands folded, like undertakers at a funeral home.

Take a step back and train your eye to continually view your space as if you’re seeing it for the first time. Experts agree that “eye-level is buy-level”, so rack your inventory accordingly. And if you feel the Feng Shui just isn’t clicking, bring in a spa retailing pro. Whether you take an Eastern or Western approach, the floor plan of your spa must function like an old-fashioned pinball machine: the merchandising design, from the front window to the treatment room to the cash register, must seamlessly guide guests through a series of hot spots where a hot product, treatment or promotion is featured. Every touch-point is an opportunity for your team to build loyalty, and to fortify your bottom line—and seizing every touch-point is essential to avoid what’s known these days as “epic fail.”