First Quarter Forecast 2012

Mar 26th, 2012

A new ‘transition year’ calls for a back-to-basics business approach.

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There’s no denying that 2011 was a tumultuous year. But as spa owners look ahead, a recent Associated Press article provides some promising insights from experts who foresee 2012 as a “transition year” for the U.S. economy. First, the somber news: “We expect to see a slower recovery in the coming quarters than we initially hoped,” Federal Reserve economist Andy Bauer is quoted as saying.

What does this mean? For starters, a weak labor market, slow real estate sales and concerns over foreign debts will likely continue to stall recovery. However, the federal deficit is expected to stabilize, and we’re also looking at moderate inflation in 2012.

Furthermore, as of press time, the National Retail Federation had forecasted a 2.8% increase in year-over-year retail holiday sales. While that growth isn’t the 5.2% hike we unexpectedly witnessed in 2010, it is slightly higher than the 10-year average increase of 2.6%—all pointing to steady, albeit slow, economic recovery.

In order to climb your way back to success in this transitional state, it’s important to know your business like never before, and that starts with an honest, in-depth analysis of your spa. As Judy Singer, president of spa consulting outfit Health Fitness Dynamics, says, “The instinct these last two years has been to cut, cut, cut.” Have you cut staff? Services? Marketing? Whatever could be spared? “Now,” Singer says, “it’s time to recover by working smarter, not necessarily harder.”

To help you greet 2012 with renewed business acumen, DAYSPA surveyed spa business and management experts across the country to glean the top recommended strategies for working smarter.

Get Back to Fundamentals

Getting back to basics starts with marketing and cost control. This year, “put dollars into people and services,” Singer advises, “but watch your expenses.” To that end, she suggests negotiating with vendors who, like yourself, are bottom line–driven and likely willing to provide additional value, or lower rates, to maintain your loyalty. “You’ll be surprised how many will gladly reduce their prices in order to keep you as a customer,” Singer says.

Peggy Wynne Borgman, the founder of Wynne Business Solutions, urges spa owners to pay closer attention to their sources of new clients. While working with one spa over the past year, Borgman helped the owner to discover that client referrals and word-of-mouth were the strongest forces driving new business to her facility. In fact, an analysis of the spa’s booking software (which electronically catalogs clients’ reasons for visiting) showed that more than 90% of new clients came by way of recommendations from the spa’s existing pool of customers, with only a small percentage wrangled via traditional marketing methods.

“People had said they’d heard about the spa from friends, but also through Facebook mentions, online review searches and more,” Borgman says. “It just showed they were generally aware of the spa through mild exposure, generated from current clients.”

When looking to increase new clients and sales in this challenging economy, some experts advise focusing attention on current guests and their friends and family members. “Referrals are key,” says Dori Soukup, CEO of InSPAration Management, who recently worked with one spa to generate more than a thousand new prospects via a very affordable promotion. “We asked clients to register themselves and a friend for a chance to win a spa day,” she explains. “After one month, the spa had 1,100 qualified new names—and the cost was only a half-day treatment package for two.”

“Team up with nutritionists or lifestyle and stress-management coaches to package your spa services with their consulting services.”

The way you sell your brand to clients also makes a difference. Soukup advises positioning your spa as a “wellness rather than pampering” destination. Show clients that they need spa services for their well-being, not just for luxurious escapes. “Team up with nutritionists, or lifestyle and stress-management coaches to package your spa services with their consulting services,” she suggests. “You don’t even have to work with these partners on site; just promote together and offer a discount incentive.”

And train your therapists to communicate the health benefits of treatments, which should also be reiterated on information sheets guests can take home.

Invest in Your Team

One way to ensure your business moves forward in 2012 is to put time, effort and money into your staff. Show them how to build relationships with clients while also upselling retail and services. Singer notes that effective, ongoing training is “a powerful means of retaining guests, as the spa is demonstrating that the team cares about them, and knows their names, as well as what they want, like and need.”

More than just “smile training,” fostering an environment of outstanding service involves teaching your team to follow up with clients (to make sure they were pleased with their services and offer to schedule future appointments on the spot) and empowering staff to provide discounts and other loyalty rewards.

By making certain that your staff is well—and continually—trained, you’re already inching ahead of competition.

Fostering an environment of outstanding service involves teaching your team to follow up with clients.

“[Ongoing training] is a continuous cycle that benefits the spa in very measurable ways,” Borgman says. “If your spa delivers outstanding service, you get more referrals. So often, training is seen as a discretionary expenditure, but if the amount you have to refund or comp amounts to more than 1% of your sales, it means you need to set aside time and money to work on employee skills and competence.”

Prepare for Growth

“Lack of planning is rampant in this industry,” says Soukup, who has seen many spas fail to effectively budget and forecast. She urges owners to draw up detailed business plans projecting at least one quarter ahead. First, Soukup says, develop a detailed budget, and make sure every department is clear on its targets and forecasts. You should have a month-by-month calendar detailing when promotions will be launched, newsletters sent out, events held and social media messages posted. Include retailing strategies and set selling standards and expectations for staff.

“Last year I worked with one spa owner to develop a growth plan projecting a full year ahead, and she experienced a 45% hike in sales in that year,” Soukup says. “It goes to show that just winging it day by day doesn’t produce results.” If you haven’t prepared a formal first-quarter plan, now’s the time to start on the second quarter’s. As you become more comfortable with the planning process, work two and three quarters ahead.

Also essential this year? Your optimism. The past two years have been, at best, economically frustrating. Your staff follows your lead, sometimes without your even knowing it. If you’re openly pessimistic about the economy, the high cost of doing business and lack of clients, your team will carry that attitude around your spa.

“Stay away from all the doom and gloom in the media, and stay positive.”

To boost morale, Soukup suggests starting rewards programs tied to KPIs (key performance indicators). “They could be for client retention, good guest-experience rates, referral generation, whatever it is you want to track and measure,” she says. “Recognition is the No. 1 motivator. It could be as simple as a certificate and a ‘Thank you. Please keep up the good work.’ “

Signs are slowly pointing toward increased consumer spending and an improved economic climate. And a positive mental attitude can be infectious, motivating your staff and ultimately benefiting your bottom line. Borgman’s advice? “Stay away from all the doom and gloom in the media, and stay positive.”

Steven Austin Stovall is a management consultant, trainer and professor at Wilmington College in Wilmington, Ohio.

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