Just because you’re making money in your business doesn’t mean it’s profitable. You could actually be losing money if your expenses are higher than your revenue. Here are a few tips to ensure you’re running a sustainable spa business.
There are two pieces to the “profit” calculus – generating more revenue and/or lowering expenses.
It’s important to make sure you have both dialed in so your business is both profitable and sustainable.
1. Avoid the Shiny Object Syndrome
Has this happened to you or someone you know?
You attend a trade show or expo, get really excited about all the cool new equipment, and walked out saying, “Oh my gosh, did I just spend $20,000 on a hydrafacial?”
Just like dropping $1,200 on handbags or clothing, this is an “impulse buy” if you haven’t taken the time to think about how the purchase can benefit your business and generate a positive ROI.
Many estheticians and spa owners I talk to have fallen victim to the shiny object syndrome.
We’re often tempted to think that the latest and greatest equipment will be the magic bullet to solve our business woes.
Often times, it’s not.
Pick someone you trust (e.g., your business manager) to hold you accountable so you aren’t blowing your budget on business-related purchases that you don’t really need.
Then have this person help you consider the following:
- Will this new purchase allow you to add a service that your ideal clients want?
- Will they be willing to buy this service from you at the price point you want to charge?
You also want to take the time to do some legwork upfront by researching about your target market so you can be sure that this new investment is the right fit for your business.Hold yourself accountable to your purchases both in your life and business. Click To Tweet
2. Manage Your Finances For Long-Term Gain
Making a profit is great but if you don’t handle the money well, your business won’t be sustainable.
Here are a couple of things to keep in mind about your finances:
Reduce and Pay Off Your Debt
I don’t carry any debt in my business and I pay off my bills every month. I can’t tell you how much less stressful it is when you don’t have debts hanging over your head.
Debts or loans come with interest, which is an expense that doesn’t contribute to the growth of your business.
If you have a loan and you’re paying interest on it, it’s a liability. Prioritize paying it off as part of your financial plan.
Pay Yourself and Your Business First
By this, I don’t mean cutting yourself a paycheck. I mean setting aside a portion of your revenue to invest in yourself and your business.
At the end of every workweek, tally up your total sales in the last seven days and put 5% of that into a separate savings account.
I find 5% to be a good number to start with. If you can afford more, go ahead and do so. If you can only do 3% for now, that’s fine too.
When you put aside 5% every week, it will build up. Before you know it, you’ll have enough money to make a major purchase or expand your business without putting undue stress on your day-to-day finances.Start out saving in small ways... the big pay-offs will come later as a result. Click To Tweet
The same goes for paying yourself.
As an entrepreneur, we don’t have an employer to set up a 401(k) for us. We have to be disciplined about taking care of our own future.
That means putting aside part of your income into an IRA, money market, or other retirement savings accounts.
You can set this up automatically so you don’t even have to wonder whether you should save the money or to treat yourself to a shopping trip.
It’s ok to start small – setting aside just 5% of your income and letting it grow can make a huge difference in the long run.
3. Be Savvy With Product Ordering
How you handle your product ordering could make a big impact on your cash flow and profits. Here are a few things to keep in mind:
Be Smart with Sourcing
If a product from one supplier is too expensive, it can eat into your profit margin.
Do some research and see if you can source the materials from other vendors without compromising quality.
For example, maybe you can purchase spa supplies fro a cheaper source to cut down on that expense.
Maintain the Right Level Inventory
Retail is a great way to leverage your time and add an additional source of income to your business.
However, you need to have just the right amount of products on hand to avoid losses.
Carrying too much inventory can be a huge liability if you are not selling enough per month. I spoke with one esthetician who had roughly $7,000.00 worth of skincare on her shelves, yet only sold about $750.00 in retail per month.
At the same time, you don’t want to run out of inventory and miss the opportunity to make a sale.
Analyze your sales volume and find the balance so you have enough products on your shelves without overstocking.
For example, it’s a red flag if you have, say, $10k worth of products sitting on the shelf and you’re only selling $2k worth per month.
As a rule of thumb, I find having a 2-month supply of the top sellers on hand tends to work well for small businesses.
Reinvest In Your Best Sellers First
When you generate revenues from retail, make sure to reinvest the profit into the top-selling products so you can make more sales.
I know it could be tempting to spend the money on new items but your bestsellers are the tickets to higher profits.
Yet that doesn’t mean you shouldn’t experiment. Set aside a moderate amount each month to test out new products and see if your clients like them. If they do, you might have uncovered another bestseller!Sell what sells well. Period. Click To Tweet
Do you want to learn the nuances of running a profitable spa business?
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