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Have We Gone Crazy? How Are You Doing Out There?

Boy these are wild times... 

It's no secret that we've been hit pretty hard as an industry. Since the last quarter of 2007, our clientele has become more frugal and is spending their money cautiously. Way back when, our spa guests were coming to see us every 3 to 4 weeks, now their frequency has slowed to once every 6-7 weeks. Salons have slowed less, but clients are spending less during their visits.

So how has this affected us? Many of us are not around anymore. The stronger and better prepared businesses have survived. I call it Business Darwinism - survival of the fittest. Specifically in smaller markets, spas have closed. When our clientele loses their income, luxuries are the first things to go. That doesn't mean everyone has lost their job. Some of the clientele of these closed spas still want the service and their favorite spa may not be around anymore. Looking at this available clientele as an opportunity does not mean you are ambulance chasing. Those of you who were prepared for this have benefitted by this new clientele of spa refugees. 

Luxurious, escape, pampering, oasis. This is how we've promoted our spas in the past. This needs to be partially re-defined. But the economists are telling us the recession ended in June 2009! Unfortunately this did not translate to our clients to picking up the phone and schedule appointments. We find ourselves in an odd conundrum of providing a luxury service in a market of new austerity. People (our clients) are learning to get by with less and expenses need to be justified. As a business, we have to provide a great value and make sound business decisions.

Healthcare is on everyone's mind. Doctors are looking for non-insurance medical opportunities. Laws in many states regarding whether laser treatments and injectables can be provided in non-physician owned clinics are threatening the future of many med-spas. If doctors acquire med spas, they will need to increase their service level and be aware of the level of hospitality spa clientele has become accustomed to receiving if they are to maintain and increase sales volumes. This creates an exciting opportunity for medi-spa owners as they may need to enter into some sort of MSO (Medical Service Organization) arrangements with physician partners.

Our industry is built on the premise of supporting our clients healthy mind body and spirit. My clients who are more involved with wellness have experience a lesser decline than my clients who are more luxury oriented. Optional medical services have become exactly that - optional. 

We need to become part of our client's health and wellness lifestyle. Stress reduction, weight loss, preventive health care, wellness programs all lend themselves to spa services. Do you have the affiliation where you can promote and provide this type of services to your clientele?

As we look towards re-positioning ourselves in the wellness regimen of our clients, I am getting calls from people who want to build large brand-spankin'-new facilities. My advice? Forget about it. There is ample opportunity to grow in your existing location or acquire a facility that was once a spa that already has all its plumbing and electrical systems in place. To my calculation, the current market rents are high and any facility larger than 2500 square feet will have difficulty doing the sales volume necessary to be profitable and provide an adequate return on investment. Be patient, the commercial real estate bubble has yet to burst. Many of the larger commercial property owners and REITs have balloon payments scheduled for payment in about 15 months. This may prompt a sell-off similar to what we have seen in the residential market. This may cause that “adjustment” we are looking for in market rents that may return additional profitability to the spa and wellness industries. 

What is your plan for growth, acquisition, transition or exit? In our world, it all requires a plan and a budget. As always, the first call is free and we're happy to talk with you. Give us a call.

Call 888.727.5489 or e-mail us at Monte@WellnessCapital.com.