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What has 2021 taught Day Spas, Medical Spas, and small businesses and where do we go from here?

From unprecedented events come unprecedented actions. We began 2021 with a lot of uncertainty, and it wound up being a wild and unpredictable year. None of us had any idea how our spa businesses and medical practices were going to respond, recover, and perform. Now as we move through Quarter Four, I would venture to say that most of us are feeling surprisingly good about the way 2021 has turned out. As we go through the 4th Quarter, I think we’ve got a sense of how our Day Spa and/or Medical Spa business is working Post-COVID, (even though we aren’t done with COVID yet). Truth be told, 2021 has been much better that expected. Better, but vastly different than previous years.

But this year we find ourselves in a constantly changing market, that is presenting very new challenges. Now, as we move through the fourth quarter, it’s time to look forward and start planning. Here is what we know.

  1. There is more demand for our services than there is our ability to sell them. We find ourselves in an economy where demand for our wellness services is greater than our ability to staff our businesses. To provide our services, recruitment and staffing has become extremely competitive. We find ourselves competing with the likes of Amazon and T-Mobile for employees. Both have raised their minimum wage to $20 per hour and are offering signing bonuses. Labor is sparse and we must be more creative in our compensation and recruiting plans. Signing bonuses are becoming more common, and we must be willing to pay more for staff both in base pay and benefits. I wish I could say that the cost of labor for our day spas and medical practices will decrease as more labor becomes available.

  2. Getting our wellness products delivered timely is a “sometime” thing. Our vendors are often low on stock and cannot ship immediately. Often, they cannot tell us when they will have a specific item available. Not to pile on, but now we have issues with the supply chain that are affecting the increase in the cost of our products. Even though we hear that inflation will someday subside and consumer prices will settle down, I do not think that we can anticipate that our prices will decrease when the supply chain eases up. Vendors, landlords, lenders, and device manufacturers are trying to make up for a lost year of 2020. Vendors have their own staffing and supply issues, and they’ve welcomed us back to business by raising prices.

  3. Oh, then there is that labor and staffing thing. If we can find employees, they are more expensive and difficult to find. How could we possibly have predicted the “great resignation”? As state and federal unemployment benefits ended, I assumed (incorrectly) that if jobs were available, our medical and day spa staff would be eager and ready to return to work. I did not anticipate that the question of whether our kids were going to able to return to in-person learning versus staying home and remote learning due to a Covid outbreak would be a major consideration of people not returning to work. On a more somber note, we have lost several hundred thousand lives to this virus. This also has taken a toll on the availability of staff. A positive light is shed when we hear that many of the “newly retired” from other industries have used the pandemic as an opportunity for a career change. In many markets, esthetics and massage schools are filling with many future employees of the Day Spa & Medspa industries.

  4. It’s more expensive to be in business today. It is costing us more to operate our Day Spa, Wellness, and Medical businesses now than it did a year ago. As a financial advisor and virtual CFO, I am working with my clients to manage their profit and cash flow voraciously. We’re pricing our services and products aggressively. We won’t be a low-cost provider because we won’t have any money left. Since our cost of doing business has increased, we’ve had to raise prices. Overall, Direct Costs (professional product, retail product, direct labor, laundry, and PPE) have increased 5 points from 65% to 70% in Day Spas, and from 55% to 60% in Medical Spas since our markets have opened back up. It is especially important that we really understand our job cost. Increasing costs are cutting into our gross profit margins. We cannot be complacent. We’ve got to negotiate terms with our vendors, and longer pay-outs with our leasing companies and lenders.

In this market, we are operating with several premises. Cash is king, and we need to hoard as much as possible. Profitability and Gross Profit Margin must be aggressively maintained. It will be what keeps us operating and growing. Understanding our breakeven in terms of how many services we need to do each day to make money is key. Managing and increasing productivity will help keep labor costs in line.

I’ve never said this aloud, but it’s time to bring out the old cliché. “If you fail to plan, you plan to fail.” This cannot be truer than it is in the market we currently find ourselves in. Now is the time to plan so you have the roadmap needed to navigate 2022. There is a lot of uncertainty out there, but by taking action and setting a plan in place, we will have the targets needed to move intelligently into 2022.

So, yes, we’ve got all this “stuff” affecting us, and it may seem daunting. Let’s not forget, we are smart ambitious Day Spa and Wellness Business owners and we can absolutely navigate our way through this. We have the smarts to understand where we are and plan our way forward. Spring 2022 will mark the one year anniversary that many of us were able to re-open our businesses post-shutdown. That makes us all new businesses all over again.

We wish everybody a Happy New Year! As always, I encourage everyone to “stay in their lane” and focus on doing what they do well and are passionate about. We’re here to help, and your first call is always free.


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