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A new wave of mergers creates opportunities for spas to stay afloat in a turbulent economy.
When Kathie Cody started thinking about retiring after 13 years as owner of Three Visions Day Spa in Ocean City, Maryland, she called her friend and former employer Sandy James, owner of Creative Day Spa, to share her plans. James had another idea for Cody.
“I suggested we merge our two businesses,” James says. “That way, her staff could keep their jobs, clients’ gift certificates could still be redeemed and inventory could be transferred.” Cody agreed, and thus began the comprehensive process of transitioning Three Visions’ team to Creative’s space, installing three additional phone lines to better accommodate two client bases, forwarding the link from Three Visions’ website to Creative’s, and informing clients and staff about the upcoming change.
Faced with shrinking profit margins during the recession, several business owners have gone the route of Cody and James, tapping their networks to pool resources with another facility. “Anything you can do to keep from just closing your doors and leaving clients and employees in the lurch is a good idea,” says Felicia Brown, founder and owner of Marketing Resource Spalutions! “I’ve had to help a number of spa owners navigate mergers in recent years. It can consolidate the expenses of both businesses, utilize underused equipment and treatment rooms, and provide a larger base of clients. But mergers require a lot of communication and logistical foresight.”
Got the urge to merge? Read on for insights from spa pros on how to effect the most peaceful staff and clientele transitions—with lucrative results.
Seeds of Synthesis
Often, a merge is primarily used as a way for two owners to provide clients with more services than either could manage solo. At the start of 2011, Mercedez Hollister, owner of Mercedez Salon & Day Spa in Las Cruces, New Mexico, joined forces with another local spa owner, Joan Al-Shamali of Oasis Bodyworx & Co. Both women had decided it was time their individual operations provide more menu options.
“Before, I had hair and nail services, with some massage provided by Joan, who would come into the spa on scheduled days,” says Hollister. “Now that we’re under one roof”—inside the Hotel Encanto de Las Cruces—“we can offer all the services our clients want in one place. The merge just made sense.” As for proprietary rights, Hollister and Al-Shamali are co-owners and split everything down the middle.
Brian Richards had owned Sublime Salon in Tacoma, Washington, for several years when his friend Joe Hardwick pitched him the idea, back in 2010, of partnering with his spa and barbershop, located just three blocks away, inside the highly trafficked Courtyard by Marriott Hotel. “At first I was resistant,” Richards says. “I’d spent a lot of money building out my salon, but after a couple of months of discussing how we could double our revenues and share overhead, I agreed.” The merged operation became Club Biella Day Spa|Sublime Salon|Joe’s Barber Shop. “Joe acts as a silent partner and I run the facility on a day-to-day basis,” Richards says.
Brown urges converging spa owners to imagine every possible issue that could arise, determine a policy to address each, and then share this information with the entire team. “It’s vital to think about the answer to every question and problem your clients and staff could have,” she says. “This goes for everything from ‘When do we get paid?’ and ‘How do I check my schedule?’ to ‘What if my clients don’t like this space?’, and ‘Will my gift certificates be good at the new location?’”
Two Staffs, One Space
The news that their place of employment is about to close or move may come as somewhat of a shock to your staff. “Keep everyone in the loop as much as possible and be sure they understand why this change is good for them and their clients,” Brown advises.
In the case of Three Visions Day Spa’s closing, the offer to transfer to Creative hit like a bombshell. “We were right in the middle of remodeling the space to reflect a Caribbean theme,” James says. “And to make matters worse, there was construction going on outside, so it looked like a demolition zone. The new team was initially scared, and couldn’t see our vision. But I convinced them that it would be beautiful once it was complete. They trusted me and now everyone’s doing great.”
In fact, Creative’s existing team took to their new co-workers like family. And the additional workforce solved one of James’ longtime staffing issues. “We’re in a beach town that’s very transient,” she says, “so we’re constantly hiring more staff and extending hours during busy seasons. I didn’t have to worry about making room; the employees that came over received guaranteed employment, and I matched their salaries.”
Hollister says she was initially worried about space issues when merging with Oasis, but because the operation stayed in her original hotel location—where expansion was doable—she and Al-Shamali added a massage area right away, which allowed them to fully accommodate the new team.
Richards and Hardwick found that their merge helped to fill a spatial void: beforehand, eight hair stations in the hotel facility were being used by only three stylists. But the transition didn’t go so smoothly for all staff members. “Ultimately we came together and blended well, but bringing 12 new people into an existing facility is always going to create some anxiety,” Richards says. “Once I assessed people’s personalities and identified those who didn’t want to work as a team, we ended up letting go of a couple of people from Club Biella management because they couldn’t see our vision.”
To avoid such circumstances, Brown advises involving your entire staff in the merging process. “Brainstorm possible solutions to common issues together,” she says. “Help them get excited about it, but of course take measures to assure staff—and clients—that while transitional issues may arise, you’re committed to facilitating a smooth process, and to doing whatever you can to make everyone comfortable with the changes.”
As for newly conjoined management? “Go to a marriage counselor,” Brown jokes. “Seriously though, working with an impartial third party such as a business coach or mediator can help you uncover potential partnership issues before they arise. Be sure to talk up front about work styles, expectations, goals and other key issues. These conversations may be more important than anything else you do together.”
There’s no way to truly know whether or not clients will follow their trusted technicians to the ends of the earth, but it helps to merge with a business that isn’t located too far from your original spa. Creative is only 14 blocks from Three Visions’ former location, and because the latter retained so many of its clients, business increased by 40% almost instantly following the merger. “We’re now the only full-service day spa in Ocean City,” James says. “We already had a menu listing more than 100 treatments, but after the merge we added a few more so that transitioning clients wouldn’t miss their old services.”
Similar success was seen at Mercedez after merging with Oasis. “Oasis’ clients seem to love the new space in the hotel, as it’s so easy to get to,” Hollister says. “Our existing clients also benefited since so many new services were available. Right away, we offered specials on mini-massages to attract new and transitioning guests. Our business has increased by about 40%.”
The sharing of clients and overhead costs resulted in a more than 50% revenue hike during Club Biella’s first year. And former Sublime clients appreciate the new location’s convenience. “Parking was always an issue in downtown Tacoma, but being located in the Marriott gives guests ample, stress-free parking,” Richards says.
Brown recommends informing clients of an upcoming move or merger—via email blasts, newsletters, in-store signage and phone calls—30 days in advance. “This really depends on each individual situation,” she says, “but you don’t want to give people too much time to panic or too little time that they feel caught unawares.”
Before you embark on a merger, be sure to engage in some serious self-reflection. “If you aren’t a partnership kind of person, consider selling instead,” Brown says. “Bringing two independently acting and thinking business owners together, plus all their kids—i.e., staff members—and thinking it’ll all be smooth sailing is just not realistic. Be sure you’re merging with a business whose culture and clientele are similar enough to yours that you can blend well.”
James, who’s successfully merged spas thrice now—her latest venture with Three Visions being the biggest—recommends it to anyone who has the opportunity and creativity to make it happen.
“I think it’s another great reason to stay friends with the people you work with,” she says. “You never know what those relationships might lead to in the future.”
Liz Barrett is a freelance journalist based in Oxford, Mississippi.