JAN 2014

DAYSPA is the business resource for spa & wellness professionals! Each issue covers the latest in skin care, spa treatments, wellness services and management strategies.

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Page 87 of 115

PROFIT CENTER Many Happy Returns January can feel like a bit of a letdown after the high energy of the holiday season, and it isn't always easy to get back to business as usual. However, this is an ideal time to carefully consider your financial forecasts and budgets for the coming year. How do you plan to grow sales and profits in 2014? One bright spot on the horizon is that December may have been a banner month for your gift card sales, and the lucky recipients of those gifts will be calling you to schedule appointments, giving a lift to what can be a slow time of year. This gift card redemption period may present the perfect opportunity to focus your efforts on booking clients into services that produce a higher Return on Investment, or ROI, for your business. One of the typical activities of spa management is examining monthly sales reports and identifying highdemand treatments. After you've been operating for a few years, you'll have a pretty good idea of your monthly performance numbers in your various departments. But sales do not necessarily equal profits, especially in the spa industry. Spa services have two main costs associated with their delivery: 1) the cost of the labor, 86 DAYSPA | JANUARY 2014 and 2) the cost of the products used in the service. Then there are the ancillary items, such as linens, the physical space required to deliver the treatment, and the equipment investments required. For example, delivering an individual microdermabrasion service doesn't cost a lot, but acquiring the machine does. In spas, there is often no real science behind the determination of a menu price for a treatment. In restaurants, the rule of thumb is that menu items are priced at five times the cost of the meal's raw ingredients, but few spas use any such equation. The biggest factor in spa service pricing seems to be the "neighborhood effect"—we evaluate our nearby competitors' menus and price ourselves accordingly. If we examined our treatment sales reports through the lens of individual service profitability, however, we might then consider a marketing plan that maximizes sales of higher margin items. THE COST FACTOR Labor costs, the highest single expense in the spa, gets everyone's attention. Spa managers generally © EASY PRODUCTION/GETTY Are you prepared to make your ROIs be all they could be in 2014? A few tweaks might just do the trick. By Lisa Starr

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