How to get your business—and yourself—into financial shape for the year.


As a spa professional, you may be good at soothing aching muscles, rejuvenating tired skin and bringing clients’ energy levels back into harmony, but do you apply that same level of expertise to balancing your own expenses? In this challenging economy, some businesses are finding it hard to stay above water as the bills pile up, rent and utility costs surge, and incomes slump.

“The biggest reason for debt accumulation is biting off more than we can chew,” says Ori Pagovich, managing partner at Gotham Financial Services in New York. “We tend to justify our decisions with rationalizations that get us in trouble or at least in debt. We make purchases of equipment or products that we should hold off on. We try growing the business too quickly and think that we need to keep up with our competition.”

The main reason spa owners get into money trouble is because they simply aren’t producing enough. “People have an income-revenue problem first and foremost; don’t be misled that debt is a problem,” says Grant Cardone, star of National Geographic Channel’s The Turnaround King and CEO of Cardone Enterprises in Los Angeles. “With enough revenue, debt is never a problem and can even be a very smart thing.” But if you’re struggling to make ends meet, it’s time to approach your money in a different way. Now is a great time to develop sound business strategies for 2012.

Do the Math

If you’re not a numbers person or if your spending habits are a little unpredictable, creating a budget might seem overwhelming. But the key to beginning any budgeting process is to set goals—and if you’re in a relationship or have a family, to do so with your partner and family members, too.

“Businesspeople need to maintain a business budget and a personal budget,” says Kevin Gallegos, vice president of Freedom Debt Relief in San Mateo, California. “For many spa and salon owners, the two intertwine.”

Establishing—and re-establishing—a business budget always begins with dividing expenses into two categories: fixed (such as rent or mortgage) and variable (such as supplies and some utilities). While it’s challenging to lower your fixed expenses, it is possible.

“In today’s environment, everyone is courting your business and is willing to price themselves to be more competitive,” Pagovich says. “Whether it’s your suppliers, phone company or someone else, you can always shop around to lower your overhead.” Variable expenses are much easier to reduce since they’re important but not always essential. “Here is where you can be creative and cut back a little to save a lot,” Pagovich says.

“In today’s environment, everyone is courting your business and is willing to price themselves to be more competitive. Whether it’s your suppliers, phone company or someone else, you can always shop around to lower your overhead.”

After you break down your expenses, assign a reasonable amount to spend on each item. “Your first draft should throw caution to the wind so you can see what you think your expenses are in an ideal world,” Pagovich says. “Then you can compare those expenses to your total earnings. If there is an imbalance, let the cutting begin.”

You might go through several budget drafts before you settle on a comfortable set of numbers. But never create a budget where your expenses are greater than your income on the belief that you expect to have a good year and that things will balance out. “That approach,” Pagovich says, “will get you in trouble.”

Pay Down Debt

No matter how far you’re in over your head, ensure that your budget includes a systematic method for paying off debt. Here are some steps.

Decide which approach to use Opt to follow either the avalanche or snowball method (see “Avalanche vs. Snowball,” page 95), and modify your budget accordingly. It may require some strict discipline, belt-tightening and revision of goals, but it’s essential for slashing balances from credit cards, loans and other debts.

Determine how much to pay Find a fixed monthly amount you can pay toward your debt until all debts have been paid off. “This amount should total more than the combined minimum payments on all of your cards,” Gallegos says.

Call creditors and ask for temporary-hardship status “Some creditors may work out payment plans if you have had a true temporary hardship,” Gallegos says. “For instance, if you had a medical emergency and could not work for a period, but now are back to normal, and you’ve previously paid your bills, they might give you a break.” Negotiation is key.

“Some of the biggest companies in the world have tremendous amounts of debt. The solution is more sales, more cross-selling, more revenue without more debt.”

Consolidate debt on your own or with a service “If you have many accounts with crippling interest rates, you might get some relief by consolidating your debts,” Gallegos says. “But be forewarned: If you don’t change your lifestyle, you risk going into even greater debt!” If you are convinced you can change your habits, consider combining debts to have one interest rate and one payment on which to focus your efforts. “A debt-consolidation service can turn many bills into one bill payment,” Gallegos says. “But some services have high fees and many rely on loans secured by personal property, like a home or car. If you can’t make the payments, you risk losing those valuable items. Your credit score will also probably be damaged.”

Consider credit advocacy help “Individuals who have very serious debt and who are struggling to make required minimum payments may consider debt settlement,” Gallegos says. “Advocates work on a consumer’s behalf to lower the principal balances they owe. You might be able to pay less than your total balance but it can be a long process that hurts your credit score. It is best suited for people who would otherwise need to consider credit counseling or bankruptcy.”

Seek credit counseling “Credit counseling agencies set up consumers with a debt-management plan that reduces their monthly payment,” Gallegos says. “They can do this because they have prearranged agreements with credit card companies to lower interest rates on existing debt to a creditor-issued ‘concession rate.’ People will still pay the full amount of debt, and their credit score will be hurt.”

How to Stick to Your Budget

For many, setting up the budget isn’t the difficult part—it’s sticking to it. To make the process go smoothly, implement these simple organization systems.

Track spending by keeping receipts and a spending log. “Most people are surprised to find how much they spend each day on small items,” Gallegos says. “Writing it down—just like writing down everything you eat when watching your weight—opens your eyes to spending patterns and helps you avoid getting into debt.”

Deposit cash and checks as you receive them. Otherwise, it’s very easy to lose (or spend willy-nilly) loose bills or let a check lie around too long and expire.

Open all mail, including every bill, as soon as it arrives. “Many people avoid opening bills to defer ‘bad news,’” Gallegos says. “This only makes the situation worse and can create the potential for delays (and interest/fee charges) in payment.”

Pay each bill immediately or use a bill-paying filing system. “That ‘system’ may be a folder that resides in a certain place on your desk or in an online calendar,” Gallegos says. “Choose what works best for you and then use it religiously.”

5 Consider switching to cash for as many purchases as possible. “Studies show that people spend an average of 15% less when using cash versus credit cards,” Gallegos says. “And it helps eliminate the possibility of credit card debt.”

Income Boosters

Profit is the be-all, end-all of most successful spas. So if debt is eating away at your profit, it’s time to boost what you’re bringing in.

“Some of the biggest companies in the world have tremendous amounts of debt,” Cardone says. “The solution is more sales, more cross-selling, more revenue without more debt.”

Your first priority, Cardone says, is revenue production. “People who have money go to spas because they are spending money on extras that they may not necessarily need. And that’s good news for spa owners—as you’re already dealing with people who have disposable incomes. Now, you need to capitalize on every opportunity. Remember the ‘second sale’ is always the easiest.” That second sale refers to any additional service or product that you suggest to your clients.

In addition to creating a budget, Cardone says, spa professionals must think of step-by-step strategies to generate more income. He lists three methods spa owners and managers should focus on:

• Pay closer attention to clients.
• Create an unmatched experience: Serve energizing beverages during services; attempt to rebook immediately at the end of the service; offer each client’s accompanying friend or family member a mini-service (a free hand treatment or neck rub) as a sample; create a club card of buy-10-get-one-free to encourage repeat business, etc.
• Encourage follow-ups: Be sure to thank each client with a personal, handwritten letter or phone call.

“One needs to increase revenue,” Cardone says. “Any business that makes decisions based on the bottom line and ignores the top line will cease to have a bottom line.”

Make a Change

When digging your business (and yourself) out of debt, don’t dwell on the negatives. “Get your attention off of your past failures,” Cardone recommends. “And shift your attention to future solutions, which is the creation of future revenue.”

In other words: Strive to do better. Start thinking like a savvy entrepreneur and enrich yourself with educational materials that better your business. “The average CEO/owner of a company reads 55 books per year,” Cardone says. “The average worker doesn’t finish one book. The difference in the income between the two is 10 times. You can draw your own conclusions on the importance of reading.” (See “The Last Word,” page 96, for suggestions.)

A broken budget may make you feel like you’re Alice at the bottom of a very deep rabbit hole. But don’t fret; with effort, you can climb your way back up to ground level. “People get into debt all the time, unfortunately… but many get themselves out,” Gallegos says. “It takes time, patience and persistence, but with hard work and new habits, you can change your life and attain financial freedom.”

Ilona French, an industry professional for more than 17 years, recently launched a beauty column at

Avalanche vs. Snowball

Ready to pay off debt? Kevin Gallegos, VP of Freedom Debt Relief, explains two strategies that may help in your planning.

Are you better off as an Avalanche or a Snowball strategist? With the avalanche strategy, you start by making minimum payments on your debts, but paying the minimum plus any extra you can afford on debts that carry the highest interest rate. Repeat this process every month until that debt has been paid off. Then, while you’re still paying the same monthly total, move on to paying off the debt with the second-highest interest rate. Keep following this strategy until you’ve paid off all of your debts.

The snowball approach involves paying off your smallest debt amount first and working your way up. You’ll pay the minimum on all your debts, but then you’ll apply any remaining funds from your overall allocated amount toward the debt with the smallest balance. After you pay off that debt, continue the same strategy as before: Pay the minimum on all your debts, but pay your remaining money to knock out your second-smallest debt faster. Working on debt elimination this way offers the most immediate satisfaction.

“The snowball method can be more costly than the avalanche method because you might pay more interest over the long run,” Gallegos says. “But many people find that the success of paying down small debts motivates them to stick to the plan of paying down all debts.”

If you’re not extremely disciplined, Gallegos suggests the snowball over the avalanche method, as it will likely increase your chances of success. “However, if you enjoy knowing you’re beating the banks out of extra interest—and you know you’ll stick with the plan—it could be more rewarding to go with the avalanche method,” Gallegos says.

The Last Word

As a New York Times–bestselling author, Grant Cardone encourages spa professionals to quit reading about saving and instead read about earning. Here are his top book picks (including a couple titles of his own) for further review.

Crush It!: Why Now is the Time to Cash in on Your Passion
by Gary Vaynerchuk

Made to Stick: Why Some Ideas Survive and Others Die
by Chip & Dan Heath

If You’re Not First, You’re Last: Sales Strategies to Dominate Your Market and Beat Your Competition
by Grant Cardone

Sell to Survive: Why Your Life Depends on Selling!
by Grant Cardone

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