Expanding Your Business.
If you ask most spa or salon owners to offer a picture of their business’s future it will invariable include some details about growth, expansion, and possibly the ever-popular franchise option. After all, everyone knows that a business that isn’t growing is one that’s dying, right? Growth is expected to produce larger sales and enhance a company’s market presence and image. Growth is a testimonial to a business’s success, and that of its owner(s). Growth is good, isn’t it? Maybe…
I am often consulted for business advice at this critical juncture, where a company feels it’s time to expand and wants to get a little confirmation on the wisdom of the plan. I’m not usually supportive of the idea much to the surprise and consternation of management. They want to know why I’d get in the way of their company’s progress, why I’d dismiss a clear-cut need for building a bigger facility. And I tell them why: because sometimes I just don’t see the need to do it.
Okay, let’s talk fundamentals. If business is an investment (which it always should be regarded as) then investing more money into a company has to make solid investment sense to be a worthwhile thing to do with money. You invest money in order to make more of it. But before filling out those loan papers or signing that check I would strongly suggest taking a hard, sincere look at how the business that’s planned for expansion is performing at the moment. On other words; what are you about to make bigger? Are you going to enlarge a real winner of a spa or salon? Are you expecting bigness to fill a perennial hole in operating revenues? Do you really need to enlarge in order to capture more sales? Is the swelling competition going to crush your little spa? How will growth affect your traditionally loyal customers? Have you worked hard enough on what you have now?
Let’s consider some absolutes about expansion before the fantasy draws us too far down the path of architects, bank managers, and employment ads. First of all expansion is expensive. Yes, it costs real pounds to build out or move your company, and those costs have a nasty way of rising out of control, especially for novices in the world of contractorsand builders with their mysterious construction delays. Expansions running into the many thousands of pounds (is there any other kind?) heap considerable operating costs on small businesses, many of which can barely support themselves in their current financial condition. You are proposing to add sizeable increases in rent, utilities, personnel, supplies, debt repayment, etc. for a supposed gain in sales revenue. But in business there are no guarantees, no assurances that the customers will arrive to fill your expanded space. In fact you can pretty well expect that not all of your increased capacity will be immediately reserved by the new business you’ll need on the appointment schedule. More capacity than customers creates an imbalance in cash flow even for the hardiest of operations. Expansion can spell at least temporary losses for the profitable business taking on additional expenses while waiting for sales to eventually catch up with them. Could your company afford this?
Other costs begin to add up, some of them not as obvious as the ones you get receipts for. These are the revenue impacts that result from the interruption of normal business due to construction activity or relocation. Clients may resent the noise and disarray in the spa, choosing to wait out the expansion or dinging you for a refund when their facial is marred by a whining table saw. Relocations will not be convenient for all clients and some loss invariably results from it. A change in spa ambience, even for the better will alienate some customers who prefer a familiar experience; dilute the formula too much and you may lose the flavor altogether. New personnel will require recruitment training, will make mistakes, and in general not perform at an optimum level for some time. And what about the added time and responsibility of managing a larger staff? All of these factors constitute expenses the expanded business must bear, money that must be recovered at some point in the future to offset the deepening investment it represents. All things considered it may be very difficult to accurately calculate in advance the actual commitment of funds a business expansion will call for. Risk is inherent in any attempt to achieve success in business but every effort should be made to minimise that risk wherever possible. This may include the cancellation or postponement of the company’s physical growth itself.
Perhaps a better (and safer) place to look for bigger business opportunities is within your existing walls. I find untapped income potential almost everywhere in the companies I’m hired to evaluate, wells of money quite accessible without having to create a lot of new expenses to get at it. What might be needed however is a new way of doing business, one with a keen eye focused on tighter efficiency, employee performance accountability, and a more effective leveraging of your spa or salon’s resources. Wasteful operations can never be compensated through sales volume. Those bad business habits will multiply as sales grow and they’ll steadily erode any advantages you would expect from larger revenues. So before making a final decision on expanding your business you may want to consider the following questions to help you make the wisest move (or stand) in your business’s future.
1. Is it the spa that’s too small or the hours of operation?
I tell managers to “expand within” their walls before pushing them out. You’d be surprised to know how many spa and salon owners will step into construction debt in order to maintain their routine hours of operation. It’s crazy. Adding earlier morning hours or later evening appointment slots to the schedule can increase earnings potential fabulously without a substantial increase in expenses. It may be time to open 7 days per week, break days into shifts, and take on a few new technicians. This is a far cheaper alternative to build-outs and infinitely less risky.
2. Can we trim some fat from the appointment schedule?
It’s one of the first places I head when I do my money hunt for business clients. Some companies are remarkably efficient in making the most of their schedules but most get a “C” grade at best. Reluctant managers often allow employees to reign over the books, a hazardous and expensive situation where each individual technician decides how much time he or she needs to perform particular services. Here you’ll find basic facials ranging from 60 to 105 minutes supposedly for the same service and certainly for the same price. Lip or brow waxes may require 30 minutes for some while others perform perfectly competent work in half that time. Terribly wasteful. Worse, the inconsistency poses the danger of unfavorable comparisons among closely associated customers; why did one only get 60 minutes of treatment when her friend received nearly two hours for the same fee? Long service times reduce retail opportunities and it’s often the slowest technician who complains the loudest about not making enough money. Any irony here?
Employees may also have the liberty to line-out large chunks of expensive schedule time to accommodate personal business, alleviate boredom, or whatever. You can’t imagine the money declined by random pencil lines and computer deletes. If you’re allowing this is your company you’re tying your own noose. Better to invest in salon management courses and employee training programs before leasehold improvements.
3. Are we working too cheaply?
Want to know why those Asdas are so BIG? Because they have to sell a lot of goods to make money on their teeny profit margins. The formula for them is: carry everything, sell it cheaper than anyone else, and sell it fast. If this doesn’t fit your concept for a great salon or spa experience then you should be prepared to charge adequately for the services and products you offer. If you are bursting at the seams with customers who have to compete for appointments one attractive and lucrative solution is to simply raise your prices. Why are diamonds expensive? Because diamonds are rare. Colourless little things that look like glass chips yet everyone seems to want. Demand can determine price as much as any other factor. You may lose some business by charging more but you’ll make more money for the work you do and gain new customers at this market level.
4. Can our existing sales be improved without expanding the facilities?
Seriuosly, do you the manager, actually set and monitor service and retail sales standards for your employees? Is the sales performance of team members uneven? Do some resist or refuse to participate in retail sales altogether? Will building a bigger salon correct the problem? All the philosophical excuses in the world will not dismiss the fact that a business exists to make money; fail to make money and you won’t exist. Business owners have an obligation to keep their operations healthy and viable. This can not be accomplished through voluntary employee production efficiency. The slackers will eventually offend and dispirit the go-getters, and all will resent you for the deteriorating morale that results from this situation. It’s just another compelling argument for better employee sales training, and a more effective means of enforcing sales accountability.
5. Am I really ready to take on the added responsibilities of a larger business?
Got some extra time to spare? Is 24/7 just not enough to keep you busy? Let’s put it this way, if you think you’re swamped with work now wait until you have more employees and a larger facility to supervise. Many businesses can’t afford to delegate management duties to salaried employees, especially in the early phases of expansion. The work has to fall to someone and that someone is you. Realising after-the-fact that you’re in over your head will leave you “a pound short and a daylate”, as the adage goes. You don’t want this. And what about the impact your tight schedule will have on the quality of family life, personal relationships, and other commitments outside of your career? How will you balance your time? Romance, patience, and happiness are too often sacrificed on the altar of ambition. You will need to take a hard look at this possibility and come up with a plan to manage it as sound as your business plan itself. Be the change you want to see -expand within your walls.