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Surviving the Economic Crisis

Cathy Christensen January 2009 issue of Skin Inc. magazine
silhouettes pulling dollar sign back from edge of cliff

The beginning of a new year should be a time to wipe the slate clean and start anew. However, the 2009 U.S. economy can’t help but be saddled with the baggage of a weathered and worn 2008, a year that brought a new president, a recession, and a new focus on the impacts and woes of small businesses nationwide.

The vast majority of the 14,615 spas1 that make up the spa industry in the United States are owned by entrepreneurs, making it a vibrant segment of the U.S. small business community. Although this entrepreneurship is what makes the profession so unique and personal, it is also what is causing the industry to fall victim to the turmoil caused by the recent economic downturn and credit crunch.

According to the U.S. Small Business Administration’s Office of Advocacy, a small business is an independent business that employs fewer than 500 employees, and small businesses represent 99.7% of all employer firms in the country.2 (See Facts About Small Business.) Because of this enormous reach, small businesses may also be the ones hurt most during the recession. In fact, approximately 25,000 of the 157,000 jobs cut in October 2008 were from small businesses.3

There are two places a spa can be right now: on steady ground or in trouble. If your spa is in trouble, it is important to ask for help from experts in the industry to look at your numbers and find out why your business is being upset, says Lenny LaCour, partner, LH Connects in Glenview, Illinois, and spa industry expert. “It’s hard to do it yourself because you are so attached to your business. You need to set up a business plan, start from where you are and work yourself out of it,” he says. If you are on steady ground, stay the course and improve how you manage your spa by looking at things such as waste, marketing, client retention and customer service.

The spa industry

Although it is a widespread belief that things will get worse before they get better—especially for day spas—some spa owners, such as Monica Morrell-Dean, owner of Spa Morrell in Chattanooga, Tennessee, have yet to experience any hardship because of the current economic climate. “We are seeing a steady stream of clients this year, even more so in the third and fourth quarters, which is meeting or beating last year’s numbers,” she says. The five-year-old, 1,850-square-foot Spa Morrell employs 10 team members. “Our industry is recession-proof sometimes—women will always buy lipstick,” says Morrell, although she admits things might scale back a bit more than they currently have. “Those clients that come four or five times a year might come two or three times instead, and buy more retail products.”

Destination spas such as Cal-a-Vie, The Spa Havens, a 200-acre private health spa in Vista, California, that was recently named No. 1 Destination Spa in North America in Travel + Leisure’s World’s Best honors, may not feel the crunch at all. “We are a luxury destination spa, so our guests are in the upper economic strata, and I think people are cautious, but our type of environment is seen by guests as a necessity for de-stressing, relaxation and recreation,” says Debbie Zie, general manager of the property.

Many medical spas are not necessarily experiencing a huge lack of clients either, although they are seeing profits showing up in different areas than usual. Robin Bernens, RN, of Belladerm MedSpa in Maple Grove, Minnesota, admits that business is down a little, but she says it has affected the facility’s esthetic business more than its injectable business. “The injectable business is still growing—maybe the clients are trying to put off plastic surgery for a while,” she theorizes.

LaCour reinforces the idea that the bad times are far from over, saying, “Until the U.S. banking system stabilizes itself, which will probably be in two to three years, we have to ride the wave, which is the heaviest wave I’ve ever seen come on this country.” However, LaCour doesn’t think survival is impossible; it will, however, require a keen business sense and a thorough knowledge of your spa’s own history and trends to make it through. “If you look at your history as far as what has maintained your business to this point, it is easier to stabilize yourself,” he explains. In order to do that, spas need to go into survival mode … without appearing that way to clients.

Managing your business

Now may be a scary time to be a small business owner, but don’t panic because your survival often is based on how educated you are about your own business, says LaCour. “See where low and peak times occur during the week, month and year,” he says. “Know the profitability of each of your treatments. Look at what it’s costing you to do your laundry—maybe there’s a different way for it to be done. Examine your payroll—what are the benefits you are offering your employees? Sometimes it’s a team effort to get out of it.” This team effort is something that is in full force at Tamara Spa + Wellness in Farmington Hills, Michigan.

“Little by little, my team realizes that either we’re going to work together or it’s not going to work,” explains Tamara Friedman, owner, who has required staff members to pitch in with the laundry, help with cleaning and make other sacrifices. But because of her efforts, she has yet to impose any layoffs, unlike other businesses in her area. “When the country starts sneezing, Detroit has a cold immediately because the automotive industry affects everyone in this area. Four or five businesses around me have closed up after 15–20 years in business. It’s so scary,” she says.

But Friedman isn’t giving up. Instead, she is taking this time to provide more personalized attention to clients and cut out the excesses. “It’s time to recoup everything and start thinking and improving. My employees have more responsibility now. I told them that if they can’t change, we can’t be in business. You cannot run a business now like you did before,” she says. To keep hers on track, Friedman is analyzing her entire spa, minimizing expenses and looking more closely at the budget. She’s also refocusing on her customers. “First, clients get an intense consultation. We can offer more personalized attention to old and new clients because we have more time,” she explains.

And Michigan isn’t the only state in the union feeling the stress of the economy. The 10,000-square-foot Changes Salon and Spa in Walnut Creek, California, is making modifications in anticipation of a situation that promises to continue well into the new year. “Fortunately, we are running just a little above last year, but we are getting hardest hit in the spa right now, mostly in massage,” says Bonnie Waters, founder of the 24-year-old business that currently has 65 employees. “We’re not seeing many prebookings in esthetic rooms, especially for facials.”

Waters hasn’t survived in business for 24 years without knowing a thing or two about tightening her belt. “We all need to plan to hang tight for the next 9–12 months. We will batten down the hatches and focus on what we’ve been focusing on all these years, and create a value-added experience for clients,” she says. Changes just went through an expansion at the end of 2007 and beginning of 2008 that added to its amenity space. “It was nonrevenue-producing space, but we needed to do it for ourselves, so I don’t regret it, but of course the economy slowed down after we committed to spending that money,” explains Waters.

The business is currently retooling its budget and may have to scale down support staff. “In order to offer the experience we want for our clients, it takes a fair amount of support staff, but we will be looking to link those up accordingly. Based on our volume, we are putting set budgets on how much we want to spend on front desk and support staff,” explains Waters.

She also is trying to minimize waste for both environmental and cost reasons. On the salon side of Changes, there is a large glass container in the back where stylists are asked to dump unused color in order to show how much waste is taking place. Waters and her team are still trying to figure out a fun and energizing way to bring this idea to the spa side of the business.

Also, similar to Tamara Spa + Wellness, Changes is spending more time making the client experience something to remember. “We’re in an affluent area and we’ve always been busy. We’ve trained our staff to realize and appreciate clients, but a percentage of our team is a little complacent. At a recent State of the Company address, we told them to consider what they’ve been doing throughout the years in regard to client relations as training, and now it’s the real thing. Step up and make sure you’re doing it every time. I think our team gets it and, as a result, that’s why we’re still climbing a little bit in today’s economy—we aren’t taking it for granted,” Waters says.

Marketing maintenance

It is common knowledge that the worst thing a business can do when experiencing tough times is to cut the marketing budget … but some spas do it anyway. “If you’re going to cut something, that’s not a good place to start,” says Bernens. “You’ve got to keep your name out there in order for it to be recognized.” So instead of cutting your marketing entirely, consider refining it. “Don’t try and do anything like discounting to beat out the competition, because once you discount, it’s hard to come back from that,” advises LaCour. “The competitive edge is taking what has worked for you already and seeing what you can do to give added value to your services, such as the old gift-with-purchase. For example, if you’re doing a microdermabrasion series, add on a glycolic peel.”

Open houses are a great way to offer promotional services to new and existing clients, too. “We just had an open house that was huge success,” says Bernens. “It takes place once a year and clients come to get a discount on that night.” Friedman believes it’s important to organize a lot of activities around your spa. “People are looking for specials. We are planning a couple of open houses, offering free makeup applications for the holidays and hosting a Botox* party,” she says.

As important as the programs themselves is getting the word out, and Web-based resources, because of their low price, speed and ease-of-use, are quickly becoming the spa’s favored form of marketing during the economic downturn. According to Morrell-Dean, “I’ve been doing a lot more Internet marketing than radio and newspaper advertising, and I can’t imagine advertising any other way.” In fact, Spa Morrell does approximately 90% of its advertising through the Internet, using Constant Contact for e-mail blasts, SpaFinder, Merchant’s Circle and search engine optimization. “That’s been the best advertising for us thus far,” says Morrell-Dean.

The speed available by e-mail blast marketing is proving priceless because spas are doing more last-minute marketing than ever before. “We are sending e-mail campaigns to fill unbooked times, and we’re being specific about the availability—this technician, this time, this day,” says Waters. “That’s proving to be pretty beneficial.”

In order for marketing and advertising to have its desired effect, it is important to make sure it benefits clients as well as your business. A good way of doing this is understanding that clients are experiencing the stresses that come with a bad economy just as much, if not more, than you are. Because of this, it is crucial to consider the language you are using when conveying your message.

“We are using more empathetic verbiage in our marketing pieces,” says Bernens, and Morrell-Dean has found that a simple change from percentages to prices has made a difference, as well. “Typically, I’ll say I have 15% off and instead, I’m currently showing dollar amounts. I think people are more responsive to that. It eases the pain, allowing them to go to the spa and get pampered,” she says. In the end, the understanding that clients need a visit to the spa more than ever in these stressful times is what will lead to your business’ survival.

Clients are key

As always, clients and their satisfaction are the lifeblood of your spa’s business—economic downturn or not—and it is important to remember this moving forward. “Be frugal without your clients knowing you are,” advises LaCour. “You need to let them know that the spa industry benefits their health during these difficult times. If you make it a sanctuary they want to come back to, you’ll have a stable business.” LaCour believes that enticing new clients right now is a difficult task, but if you take care of your current clients, he notes, referrals will help add new names to your database.

In fact, taking care of current clients is the main focus of many spas looking to survive the economic crisis. “Treasure your old clients. Don’t assume because they are old clients that you don’t have to pamper them anymore,” says Friedman. “My clients have supported me for years, so now I’m going to support them. They’ve been clients when times are good, so I’m going to give discounts, special prices … you have to have the right approach. I need to show kindness to clients who have always sustained my business.” This case-by-case approach is exactly what clients expect from a small business and will endear your most loyal clients to you even more.

Consider enhancing the stress-relieving and wellness offerings available at your spa. “We’re going to add a nutritionist, acupuncturist and offer colonics. My clients are all stressed out and want wellness services as much as beauty treatments, so we are concentrating on this,” says Friedman. Cal-a-Vie is also recognizing the importance of wellness programs during this intense time. “We’ll be focusing more on inviting outside speakers who discuss wellness topics. I have a psychologist who is talking about weight loss and stress reduction, our own dietician is addressing how hormone and stress-related factors affect weight, and we will be discussing sleep therapy because people are having more difficulty getting a good night’s sleep,” says Zie.

Many spas are also adjusting their menus in order to account for how the economy is affecting their clients’ pocketbooks. Fusion Med Spa in Lake Worth, Florida, recently introduced its Beauty Basics Menu, which offers the parts of the procedures that address client concerns and removes the extras. Changes is also offering something similar with its mini services. “The way we position it, the services are less time, but they have the same quality technical service, high-quality products and offer access to amenities. We are trying to help people who are feeling the crunch more than others to enjoy their services without as much fluff,” explains Waters. All of the services at Changes include a foot soak that is being eliminated for the shorter massage, pedicure and express peel.

Even industry legend Lydia Sarfati is getting in on the act, introducing The Facial Bar Concept, which features shorter, express treatments to allow clients to experience more of the services offered at a spa. Clients sit upright and are draped with a cape, similar to a hair service, and receive a quick conditioning or deep pore cleansing facial treatment in 30 minutes.

Survival of the fittest

There is no minimizing the affect your attitude as a spa leader has on your team and your spa’s success. “Do not talk about the gloomy stuff and the problems—be very optimistic. If the owner has worries, the employees have worries. You need to be very positive; it will all pass,” says Friedman.

Both Morrell-Dean and Friedman see this as a time of survival of the fittest in the spa industry. “Times like this are necessary. It is times like this that the spas that just went into business to make money … you aren’t going to see them anymore,” says Friedman.

There is no sugar-coating it—2009 promises to be a challenging year for small businesses. But by actively educating yourself about your business, exceeding your clients’ needs and expectations, and maintaining a positive attitude, your spa will survive to see a brighter day.





(All accessed Nov 10, 2008)



Facts About Small Business

Small businesses:

Represent 99.7% of all employer firms.

Employ about half of all private sector employees.

Pay nearly 45% of total U.S. private payroll.

Have generated 60–80% of new jobs annually during the past decade.

Are 52% home-based and 2% franchises.

  • In 2007, there were 27.2 million businesses in the United States.
  • Two-thirds of new employer establishments survive at least two years, 44% survive at least four years and 31% survive at least seven years.
  • Commercial banks and other depository institutions are the largest lenders of debt capital to small businesses.

—From the U.S. Small Business Administration’s Office of Advocacy

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