Does anybody do market research any more?
I hate to be a party pooper--especially with a consulting business that serves appetizers to the party goers. (Spa Startup Workshop, anyone? Take two, they're small.)
But really, people!
Market research is not asking your friends if they'd like for you to open a spa.
Market research is not visiting every resort spa in the hemisphere and deciding that the local market is sorely lacking in 400 square foot treatment rooms with ensuite Swiss showers, heated floors, saltwater aquariums, fireplaces and butler service.
The high end of the spa market is saturated. Yes, there are pockets of opportunity here and there. But saturation is a hard reality. The high net worth individual has an abundance of choices when considering where to spend their spa dollars. And increasingly, they're spreading the love around.
The problem with would-be spa owners is that, all too often, they're hard core spa goers. I know, that sounds like a Good Thing. We wouldn't want to buy wine from a winemaker who wasn't a wine drinker. We wouldn't want to eat an elegant dinner at a restaurant run by someone who only eats fast food.
But the spa goer-turned-spa entrepreneur--sort of like restauranteurs and winemakers--are often inspired by a deeply personal vision. That vision sometimes borders on obsession. These are the clients that start the conversation with the spa consultant by discussing in breathless detail the water feature they're planning for the entryway. (They've even got the Malaysian stone mason they've imported to do the work living in their guest room for three months while it's been constructed.)
If you're extremely lucky, your personal vision will prove compelling to lots of potential customers. If you're not so lucky, you'll blow a couple of million dollars on a spa that you simply can't afford to operate. And because you're such a spa geek, it will be impossible for you to believe that your marketplace just isn't ready for the Organic Tibetan Yak Milk baths, and worse still, doesn't even appreciate the heated, tumbled marble mosaic tile floors. The Philistines!
I know this sounds silly. But the people getting caught in this "if we build it, they will come" trap are not lacking in brains or even business education. There are plenty of MBAs freaking out over their spa's P & L tonight.
So if market saturation is nigh, why aren't more spas going out of business? Surely
we should be witnessing a shakeout. That's what happens in an industry that's saturated.
As usual, the answer is that spas are Special. Because they inspire irrational passion, there is usually someone waiting in the wings to catch a swooning spa. That entrepreneur may be paying pennies on the dollar for the facility, or may simply be walking into a lease--sometimes on a fully equipped spa. So their odds of success are better than the original operator's.
If you're considering the best way to enter the spa market, look for a customer group or market that's not being served. (Note that I say "customer group." You're not a group. It's likely that you are even an anomaly.)
One of my consulting clients literally searched the entire United States for the community with the perfect demographics and psychographics for her startup spa. When she found it, she moved there and opened a spa. She is successful because she listened to the market and she built her venture--and her life--around the needs of her customers. Her motto could easily be, "If we build it, it's because they're already here."
One area of the spa industry in which opportunity still looms large is spa management. Relative to the number of spas out there, there are very few spa managers. Experienced managers are being wooed by everyone from big hospitality organizations to day spas.
This is also a great place to start for an aspiring spa owner. If your principal experience with spa operations is being a spa client, you owe it to yourself to get a reality check. Go behind the curtain and see what's really happening while you're dozing under your Blueberry Antioxidant mask.
Spas always need smart, motivated people to man their front desks. Be frank about your ultimate aspirations; not everyone wants to play Spa University for you. But I know the best way to prevent another new competitor from entering my market is to give them a front row seat to the phenomenon of Spa Saturation!
Monday, September 10, 2007
Tuesday, September 4, 2007
The High Cost of Free Time
In this month’s Wynne Business newsletter, I discussed the impact of paid time off on your revenue production budget. I mentioned the rather shocking discovery that our employees work just 80% of their scheduled hours, through a combination of paid time off and additional unpaid time off. Spa therapists and practitioners enjoy having a flexible schedule that enables them to travel, take classes, or leave the spa “if there’s nothing going on.” For many employees, unpaid time off is an additional benefit of working in the spa setting.
Unpaid time off is often looked at as an entitlement: “I’m not here; you don’t have to pay me, and someone will work this shift—so why can’t I go to Maui for my yoga retreat?”
Many spas have policies dictating how much unpaid time off is allowed. In the “real world” this is standard boilerplate HR/employee manual stuff. In Spa World, it’s the exception. (Employee manual? Please visit the “tools and products” section of our website and we’ll help you make one of your very own!)
At Preston Wynne Spas, unpaid time off is meticulously tracked through the time clock in our Millenium software. All employees have a “bank” of unpaid time off they’re allowed to take within a year. They can put time back into their bank if they cover a shift for another employee.
One hair raising point about the importance of tracking hours worked. If you offer medical benefits, you need a way to demonstrate that covered employees are indeed working the minimum qualifying hours. “Close enough” isn’t. In spas where service providers are paid by the appointment (commission or fee-for-service) managers often allow employees to cut a shift short if they’re not scheduled with a client.
If there is a major medical insurance claim by an employee, the first thing your insurance company will do is audit their timesheets. If the employee has not actually worked the qualifying hours, even if they’re a just a few hours shy, you’ll be stuck with the entire bill for their care. Imagine what would happen to your company if an employee had a catastrophic illness or injury, and you were left holding the bag!
In many spas, extra unpaid time off is permitted for employees who can get their assigned schedule covered by another service provider. In our own spa, a wall in our employee prep area is usually covered with “coverage request” forms, in which service providers solicit co-workers to take over a shift for them. Though these coverage requests must be approved by their supervisor, the standard operating procedure has been to allow employees to take as much time as they’re able to cover.
What’s wrong with this picture? Well, imagine a popular esthetician, Busy Esty, getting “coverage” from her co-worker, Newbie, who as yet has few requests. Busy Esty’s regular request clients aren’t going to accept an appointment with the newcomer. Nor does Busy Esty want to give up her regular clients. So a shift that would have been 100% sold out is now 25% utilized. And worse yet, those regular guests who would have made 10 visits to the spa this year are going to make one less. They’d rather just “wait” for Busy Esty.
Here’s another scenario. The esthetician who is “covering” for Busy Esty is popular too, but she’s coming in on a day she doesn’t usually work. Her clients are accustomed to seeing her on certain days of the week, and at certain times. Even though she is offering them an opportunity to come in and see her, they’re less likely to move to a different day and time than their normal slot. So once again, the shift is undersold when it should be full. It is crucial that anyone “covering” a shift has the ability to generate the revenue for that particular shift.
If your spa is to reach its revenue budget, two things have to happen. As mentioned in our newsletter, you have to set accurate goals for sales production. (We call these Contributions, since “quota” is a dirty word to Spa Folk.) We know that we have to gross the number up to account for the fact that our workers will only complete a portion of their assigned schedule. Depending on how lax or strict you are about unpaid time off, this number can range from 10-30%.
As I mentioned, our employees have been working, on average, 80% of their scheduled time. Imagine, only having 80% of your workforce on hand, but setting their sales contribution as though they were on hand for 100% of their shifts. When you’re in the hands-on Personal Services business, it’s not going to happen. You’re going to miss your goals.
A tremendous challenge for quality spa operators is the shortage of qualified employees. No spa I know has a vast talent pool of massage therapists, estheticians and nail care experts at the ready whenever they need a hand. Instead, well trained staff members are often feeling that they’re stretched a bit thin, and working more shifts than they prefer.
So how can you manage unpaid time off in a way that works for your team and your bottom line? Here are some basic ground rules.
1. Set a limit on unpaid time off. You can’t afford not to. Make sure the amount of time is reasonable for both your company and your team. In our spa, the unpaid time off benefits are as follows:
- After 12 months, 5 unpaid days may be taken per year
- Years 2-5: 10 unpaid days may be taken per year
- Years 6-10: 15 unpaid days may be taken per year
This is based on a full time schedule. Part time employees receive fewer unpaid days off per year—remember, they’re working fewer days to begin with!
Remember that this time is in addition to vacation, sick and holiday pay.
2. Increase the benefit with seniority, but within reason. Those employees should have lots of regular requests.
3. It’s perfectly reasonable to ask that if an employee can’t commit to fulfilling their schedule within the parameters of your time off policies, then they should not obligate themselves to so many days to begin with. By committing to fewer scheduled days and picking up additional shifts to cover co-worker’s days off, they could end up with a similar outcome in terms of the number of total days worked, and the spa can have a more predictable way of generating revenue.
4. Enable employees to “bank” unpaid time off and build up their reserve by covering shifts for co-workers. This puts some control back in their hands.
5. Communicate to employees when they are running low on unpaid time off. Help them strategize about how to use their unpaid time off. If they’re used to an endless supply of unpaid time off, having new limits can be a rude awakening.
6. Say “no” when you have to. An employee who continuously consumes all their time off and still expects more is not committed to the same goals you are. You may think they’re invaluable, but upon closer examination, you may find that their contribution to your success is minimal.
Unpaid time off is a great benefit for workers in our industry. Just make sure that you receive enough bang for your buck—just because you don’t write a check doesn’t mean you’re not paying for it!
Unpaid time off is often looked at as an entitlement: “I’m not here; you don’t have to pay me, and someone will work this shift—so why can’t I go to Maui for my yoga retreat?”
Many spas have policies dictating how much unpaid time off is allowed. In the “real world” this is standard boilerplate HR/employee manual stuff. In Spa World, it’s the exception. (Employee manual? Please visit the “tools and products” section of our website and we’ll help you make one of your very own!)
At Preston Wynne Spas, unpaid time off is meticulously tracked through the time clock in our Millenium software. All employees have a “bank” of unpaid time off they’re allowed to take within a year. They can put time back into their bank if they cover a shift for another employee.
One hair raising point about the importance of tracking hours worked. If you offer medical benefits, you need a way to demonstrate that covered employees are indeed working the minimum qualifying hours. “Close enough” isn’t. In spas where service providers are paid by the appointment (commission or fee-for-service) managers often allow employees to cut a shift short if they’re not scheduled with a client.
If there is a major medical insurance claim by an employee, the first thing your insurance company will do is audit their timesheets. If the employee has not actually worked the qualifying hours, even if they’re a just a few hours shy, you’ll be stuck with the entire bill for their care. Imagine what would happen to your company if an employee had a catastrophic illness or injury, and you were left holding the bag!
In many spas, extra unpaid time off is permitted for employees who can get their assigned schedule covered by another service provider. In our own spa, a wall in our employee prep area is usually covered with “coverage request” forms, in which service providers solicit co-workers to take over a shift for them. Though these coverage requests must be approved by their supervisor, the standard operating procedure has been to allow employees to take as much time as they’re able to cover.
What’s wrong with this picture? Well, imagine a popular esthetician, Busy Esty, getting “coverage” from her co-worker, Newbie, who as yet has few requests. Busy Esty’s regular request clients aren’t going to accept an appointment with the newcomer. Nor does Busy Esty want to give up her regular clients. So a shift that would have been 100% sold out is now 25% utilized. And worse yet, those regular guests who would have made 10 visits to the spa this year are going to make one less. They’d rather just “wait” for Busy Esty.
Here’s another scenario. The esthetician who is “covering” for Busy Esty is popular too, but she’s coming in on a day she doesn’t usually work. Her clients are accustomed to seeing her on certain days of the week, and at certain times. Even though she is offering them an opportunity to come in and see her, they’re less likely to move to a different day and time than their normal slot. So once again, the shift is undersold when it should be full. It is crucial that anyone “covering” a shift has the ability to generate the revenue for that particular shift.
If your spa is to reach its revenue budget, two things have to happen. As mentioned in our newsletter, you have to set accurate goals for sales production. (We call these Contributions, since “quota” is a dirty word to Spa Folk.) We know that we have to gross the number up to account for the fact that our workers will only complete a portion of their assigned schedule. Depending on how lax or strict you are about unpaid time off, this number can range from 10-30%.
As I mentioned, our employees have been working, on average, 80% of their scheduled time. Imagine, only having 80% of your workforce on hand, but setting their sales contribution as though they were on hand for 100% of their shifts. When you’re in the hands-on Personal Services business, it’s not going to happen. You’re going to miss your goals.
A tremendous challenge for quality spa operators is the shortage of qualified employees. No spa I know has a vast talent pool of massage therapists, estheticians and nail care experts at the ready whenever they need a hand. Instead, well trained staff members are often feeling that they’re stretched a bit thin, and working more shifts than they prefer.
So how can you manage unpaid time off in a way that works for your team and your bottom line? Here are some basic ground rules.
1. Set a limit on unpaid time off. You can’t afford not to. Make sure the amount of time is reasonable for both your company and your team. In our spa, the unpaid time off benefits are as follows:
- After 12 months, 5 unpaid days may be taken per year
- Years 2-5: 10 unpaid days may be taken per year
- Years 6-10: 15 unpaid days may be taken per year
This is based on a full time schedule. Part time employees receive fewer unpaid days off per year—remember, they’re working fewer days to begin with!
Remember that this time is in addition to vacation, sick and holiday pay.
2. Increase the benefit with seniority, but within reason. Those employees should have lots of regular requests.
3. It’s perfectly reasonable to ask that if an employee can’t commit to fulfilling their schedule within the parameters of your time off policies, then they should not obligate themselves to so many days to begin with. By committing to fewer scheduled days and picking up additional shifts to cover co-worker’s days off, they could end up with a similar outcome in terms of the number of total days worked, and the spa can have a more predictable way of generating revenue.
4. Enable employees to “bank” unpaid time off and build up their reserve by covering shifts for co-workers. This puts some control back in their hands.
5. Communicate to employees when they are running low on unpaid time off. Help them strategize about how to use their unpaid time off. If they’re used to an endless supply of unpaid time off, having new limits can be a rude awakening.
6. Say “no” when you have to. An employee who continuously consumes all their time off and still expects more is not committed to the same goals you are. You may think they’re invaluable, but upon closer examination, you may find that their contribution to your success is minimal.
Unpaid time off is a great benefit for workers in our industry. Just make sure that you receive enough bang for your buck—just because you don’t write a check doesn’t mean you’re not paying for it!
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