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Massage Today
April, 2002, Vol. 02, Issue 04

Building a Successful Spa: Step Four -- Budget/Financing

By John Fanuzzi

In the past three issues, I've covered some of the creative aspects of opening a successful day spa. If at this point you know your theme, location, and have a feel for the size of the spa you have envisioned, it's time to get down to some of the more concrete business stuff - such as an evaluation of site demographics; startup cash requirements; cash flows and projections both for startup and for operations; and sales goals with break-even points for each profit center within the business.

Before you go to the bank or to money partners, a business plan should be prepared.

You have to sell your idea. The more homework you do, the better chances of success. The banker surely will want to know:

  1. Do you have good plan with projections, cash requirements, competitive analysis, and selling strengths, weaknesses, opportunities and threats?
  2. Do you have a good track record in business and in paying off loans?
  3. Do you have the passion to carry out your dream?
  4. Do you have any collateral?

Even if you don't need financing, it is still good to go through the planning process, just as if you were going for a loan.

To determine the size of the project and the money required, I recommend building an interactive spreadsheet, one in which you create input boxes that will generate formulas of cash flows for each profit center. The summary of cash flows for each profit center will then flow into a master summary sheet. This gives you a tool for dialing in all of your scenarios and break-even points, and determining the size of the project. It will also become your daily performance sheet after you open your spa; by monitoring the actual numbers, you can see where your strong and weak points are and readjust your cash needs accordingly. This way, you can make adjustments before it's too late.

Here is an example of a startup sheet:

Table of cost breakdown for bodywork rooms. - Copyright – Stock Photo / Register Mark In this scenario, the startup treatments are only five per day, even though there are four rooms with a potential of 32 treatments per day, at the normal eight hours worked per day with one-hour sessions. All of the numbers in the boxes are changeable. All of the other numbers are the result of a formula affected by the numbers in the boxes.

One important thing to know is the break-even number of treatments per day and month. The key numbers will feed into the cash flow sheet, which gives you your cash requirements. Create an entry sheet and a cash flow sheet for each profit center. Some of the profit centers might include front desk and retail, facial room, wet room, fitness, nails, and guest rooms.

The final page (see below) is a summary sheet, into which all the totals from the individual cash flow charts flow into a master cash chart with required startup amounts. Many businesses do not even break even for the first 1 1/2 to 2 years, so that must be figured in when you do your startup numbers.

Chart highlightting bodywork cash flows. - Copyright – Stock Photo / Register Mark It is always good to set goals and post and chart your daily numbers, so your entire team can work together toward a goal. The daily keeping of performance will help you make the proper adjustments to stay on target.

If you've done a good job on your creative planning, this financial planning will bring your ideas down to earth. After you know your cash needs, and after you have a commitment from your banker or investor, you will be ready for some serious design work, which will interface with the budget you have just created.

That brings us to next month's topic - design. In the meantime, have fun!

Only Victory,

John Fanuzzi


Click here for previous articles by John Fanuzzi.

 

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