Cutting Corners
Save money without sacrificing quality
By Monica Schuloff Smith
Originally published in Skin Deep, May/June 2009. Copyright 2009. Associated Skin Care Professionals. All right reserved.
It is really unlike the spa industry to feel stressed, but these days, every business owner is feeling the down economy and has recession survival on the mind. With the media repeating the "R" word with every report, some in the industry have taken bold measures to shore up their finances to make it to the other side, even if it means cutting corners.
"If the economic events of the last year do not wake us up, then what will?" asks Dr. Marguerite Barnett, owner of Mandala Med-Spa and Yoga Shala in Sarasota, Florida.
While the spa industry is generally less reactive to the economy than most industries, predictions are that approximately 5-7 percent of all U.S. spas will not make it through 2009.1
"It's no secret, times are tough right now," says Lisa Starr, senior business consultant at Wynne Business, a spa consulting firm. "Discretionary dollars are hard to come by. But we can't forget the reason we exist is as a respite from the everyday for our clients."
Where Not to Cut
According to Bruce Schoenberg, owner of Oasis Day Spa in New York City, it's a big mistake to do anything to detract from customer service or from your valued clients, no matter what the economic climate is.
"During hard economic times, guests and customers expect every business to cut some corners," says William Arango, executive director of The Spa at Doral Resort & Spa in Miami, Florida. "What guests don't forgive is cutting corners on service."
If quality is compromised when corners are cut, a spa will lose clients, Barnett says. "Guests will realize they are being cheated and will not appreciate that, no matter how good a reason you think you have for it."
According to Liz Galloway, owner of Lotus Effects Spa Advisory Group in Salt Lake City, Utah, the economy will come back, because "it always does." She warns, however, if you've compromised your quality, or pricing, or both, you'll have a hard time getting back to prerecession business volume and pricing.
"Focus on your loyal clients and give them the best experience you can, even upgrading their service when possible," Galloway says. "The hard cost of an upgrade is minimal and will earn you the loyalty of your clientele when the market returns."
Arango says there are two things you should never cut corners on: "Never reduce the quality of the treatments and make sure you have plenty of staff answering the phones to ensure you don't miss calls."
Reducing Waste
"The term cutting corners often has a negative connotation, but when expressed as an effort to eliminate wasted effort and increase efficiency, it can be a very positive thing," says Paul Schmidt, a spa development consultant based in Pocatello, Idaho.
Galloway agrees but notes business owners must thoroughly review what needs to be cut out or they run the risk of hurting themselves in the long run.
She cites some common factors many business owners simply don't understand, like profit-and-loss statements, and inventory and budget tracking. This leaves a business wide open to employee theft, extra charges, missed tax advantages, overpaid expenses, shrinkage, and the ability to recognize number trends.
Schoenberg, who owns three spas and was confident enough to open a new one in November 2008, evaluates his loss generators every day. He still feels there's really no need to cut corners, rather, he's made it his mission to button down costs. One way he does this is with a dispensary, so no product or supplies are wasted.
Starr insists skin care and spa businesses should make decisions with the long view in mind rather than just cutting corners for the short term. Some things implemented now can simply be the new way for the future.
"This is a great time to join the green movement to make some changes in your business that can be permanent and effective," Starr says. Some examples she suggests are "converting to compact-fluorescent light bulbs, turning off lights and equipment that are not being used, or employing single-serving tea and coffee machines."
The Spa at Doral recently launched a green campaign to reduce waste and the amount of linen used in treatments and locker rooms, which will help the environment as well as reduce costs.
"Guests noticed that we are more aware of the amount of linen we use, but they understand it is for a good cause, too, which created a positive response," Arango says.
Operations
Barnett had to make the difficult decision recently to cut corners when her front-desk employee quit. Because her business is located in a seasonal location where summers can be extremely slow, she decided, rather than replace her, the therapists currently on staff would help cover the front desk. "That way, I wouldn't have to lay anyone off," she says. "Sure enough, by running specials, we had the best July ever, and I was able to ultimately hire a front-desk employee."
Along the same lines, Schmidt suggests looking for areas where multitasking can help reduce labor costs without compromising the guest experience.
From Arango's point of view, 50-60 percent or more of the cost in a spa comes from the labor needed to run the facility. He suggests service providers be scheduled for no more than four hours each day and asked to stay for the rest of the day if business picks up.
"Mandate that managers work only four days a week if they are on salary and schedule support staff to be on call during days business might be slow," he says. Schmidt agrees and adds it will take a certain amount of tact to minimize negative feelings that may arise as paychecks get smaller.
Galloway warns, however, that reducing staff hours may affect service quality. Instead, she suggests all owners, small and large, take a business accounting course. "The relief from feeling confident in reviewing your financials will be worth it," she says.
Financials
Feeling secure in your financials is important if you're going to make it through this recession. As such, Schoenberg recommends you ask for as many deals as you can from your vendors and suppliers. Renegotiate 30-day terms to 60 or 90 days, he says.
"If you don't ask, you don't get," Schoenberg says. He admits his strategy is to break even for 2009. "If you're breaking even now, you're a winner."
Galloway also recommends owners realize the importance of investing in business or spa software to track financials, aid in online marketing, handle client management and contact, and stay organized. In addition, one of the most important things to spend money on is an effective website. "There are both economical and high-end items in software and websites, but there are good options at both ends of the spectrum," she says. (Associated Skin Care Professionals offers its members a free website by clicking on Marketing on the Members home page.)
Services
"Evaluate your services and promote services that don't cost much or use much product, which will give you higher profits," Arango says. "Reduce the amount of towels used on body treatments and facials to reduce cost and become a more environmentally friendly spa."
At Oasis Day Spa, Schoenberg has gone to a lighter-weight towel. "It takes less time and energy to launder, but lasts just as long. We may be sacrificing a little on plushness, but we're saving in other areas," he says.
For Barnett, having organic ingredients is important to her spa's overall feel and theme, so she doesn't skimp on her product line.
Cutting costs the right way, Galloway concludes, needs to be applied and analyzed regularly, daily, not just in your yearly profit-and-loss statements. Cutting costs regularly and intelligently makes for better business.
1 Thomas Heath, "Value Added: A Trip To The Spa," Washington Post. 2008. Available at http://voices.washingtonpost.com/washbizblog/ 2008/12/value_added_a_trip_to_the_spa.html (accessed winter 2008).
Monica Schuloff Smith is a Miami-based freelance writer, editor, and industry consultant, and is the former editor in chief of Les Nouvelles Esthtiques & Spa. She has authored hundreds of articles related to the skin care and spa industries. Smith is serving her second governor-appointed term as a member of the Florida Board of Cosmetology. She can be reached at aldsmith@bellsouth.net.
It is really unlike the spa industry to feel stressed, but these days, every business owner is feeling the down economy and has recession survival on the mind. With the media repeating the "R" word with every report, some in the industry have taken bold measures to shore up their finances to make it to the other side, even if it means cutting corners.
"If the economic events of the last year do not wake us up, then what will?" asks Dr. Marguerite Barnett, owner of Mandala Med-Spa and Yoga Shala in Sarasota, Florida.
While the spa industry is generally less reactive to the economy than most industries, predictions are that approximately 5-7 percent of all U.S. spas will not make it through 2009.1
"It's no secret, times are tough right now," says Lisa Starr, senior business consultant at Wynne Business, a spa consulting firm. "Discretionary dollars are hard to come by. But we can't forget the reason we exist is as a respite from the everyday for our clients."
Where Not to Cut
According to Bruce Schoenberg, owner of Oasis Day Spa in New York City, it's a big mistake to do anything to detract from customer service or from your valued clients, no matter what the economic climate is.
"During hard economic times, guests and customers expect every business to cut some corners," says William Arango, executive director of The Spa at Doral Resort & Spa in Miami, Florida. "What guests don't forgive is cutting corners on service."
If quality is compromised when corners are cut, a spa will lose clients, Barnett says. "Guests will realize they are being cheated and will not appreciate that, no matter how good a reason you think you have for it."
According to Liz Galloway, owner of Lotus Effects Spa Advisory Group in Salt Lake City, Utah, the economy will come back, because "it always does." She warns, however, if you've compromised your quality, or pricing, or both, you'll have a hard time getting back to prerecession business volume and pricing.
"Focus on your loyal clients and give them the best experience you can, even upgrading their service when possible," Galloway says. "The hard cost of an upgrade is minimal and will earn you the loyalty of your clientele when the market returns."
Arango says there are two things you should never cut corners on: "Never reduce the quality of the treatments and make sure you have plenty of staff answering the phones to ensure you don't miss calls."
Reducing Waste
"The term cutting corners often has a negative connotation, but when expressed as an effort to eliminate wasted effort and increase efficiency, it can be a very positive thing," says Paul Schmidt, a spa development consultant based in Pocatello, Idaho.
Galloway agrees but notes business owners must thoroughly review what needs to be cut out or they run the risk of hurting themselves in the long run.
She cites some common factors many business owners simply don't understand, like profit-and-loss statements, and inventory and budget tracking. This leaves a business wide open to employee theft, extra charges, missed tax advantages, overpaid expenses, shrinkage, and the ability to recognize number trends.
Schoenberg, who owns three spas and was confident enough to open a new one in November 2008, evaluates his loss generators every day. He still feels there's really no need to cut corners, rather, he's made it his mission to button down costs. One way he does this is with a dispensary, so no product or supplies are wasted.
Starr insists skin care and spa businesses should make decisions with the long view in mind rather than just cutting corners for the short term. Some things implemented now can simply be the new way for the future.
"This is a great time to join the green movement to make some changes in your business that can be permanent and effective," Starr says. Some examples she suggests are "converting to compact-fluorescent light bulbs, turning off lights and equipment that are not being used, or employing single-serving tea and coffee machines."
The Spa at Doral recently launched a green campaign to reduce waste and the amount of linen used in treatments and locker rooms, which will help the environment as well as reduce costs.
"Guests noticed that we are more aware of the amount of linen we use, but they understand it is for a good cause, too, which created a positive response," Arango says.
Operations
Barnett had to make the difficult decision recently to cut corners when her front-desk employee quit. Because her business is located in a seasonal location where summers can be extremely slow, she decided, rather than replace her, the therapists currently on staff would help cover the front desk. "That way, I wouldn't have to lay anyone off," she says. "Sure enough, by running specials, we had the best July ever, and I was able to ultimately hire a front-desk employee."
Along the same lines, Schmidt suggests looking for areas where multitasking can help reduce labor costs without compromising the guest experience.
From Arango's point of view, 50-60 percent or more of the cost in a spa comes from the labor needed to run the facility. He suggests service providers be scheduled for no more than four hours each day and asked to stay for the rest of the day if business picks up.
"Mandate that managers work only four days a week if they are on salary and schedule support staff to be on call during days business might be slow," he says. Schmidt agrees and adds it will take a certain amount of tact to minimize negative feelings that may arise as paychecks get smaller.
Galloway warns, however, that reducing staff hours may affect service quality. Instead, she suggests all owners, small and large, take a business accounting course. "The relief from feeling confident in reviewing your financials will be worth it," she says.
Financials
Feeling secure in your financials is important if you're going to make it through this recession. As such, Schoenberg recommends you ask for as many deals as you can from your vendors and suppliers. Renegotiate 30-day terms to 60 or 90 days, he says.
"If you don't ask, you don't get," Schoenberg says. He admits his strategy is to break even for 2009. "If you're breaking even now, you're a winner."
Galloway also recommends owners realize the importance of investing in business or spa software to track financials, aid in online marketing, handle client management and contact, and stay organized. In addition, one of the most important things to spend money on is an effective website. "There are both economical and high-end items in software and websites, but there are good options at both ends of the spectrum," she says. (Associated Skin Care Professionals offers its members a free website by clicking on Marketing on the Members home page.)
Services
"Evaluate your services and promote services that don't cost much or use much product, which will give you higher profits," Arango says. "Reduce the amount of towels used on body treatments and facials to reduce cost and become a more environmentally friendly spa."
At Oasis Day Spa, Schoenberg has gone to a lighter-weight towel. "It takes less time and energy to launder, but lasts just as long. We may be sacrificing a little on plushness, but we're saving in other areas," he says.
For Barnett, having organic ingredients is important to her spa's overall feel and theme, so she doesn't skimp on her product line.
Cutting costs the right way, Galloway concludes, needs to be applied and analyzed regularly, daily, not just in your yearly profit-and-loss statements. Cutting costs regularly and intelligently makes for better business.
1 Thomas Heath, "Value Added: A Trip To The Spa," Washington Post. 2008. Available at http://voices.washingtonpost.com/washbizblog/ 2008/12/value_added_a_trip_to_the_spa.html (accessed winter 2008).
Monica Schuloff Smith is a Miami-based freelance writer, editor, and industry consultant, and is the former editor in chief of Les Nouvelles Esthtiques & Spa. She has authored hundreds of articles related to the skin care and spa industries. Smith is serving her second governor-appointed term as a member of the Florida Board of Cosmetology. She can be reached at aldsmith@bellsouth.net.
