Financial Management
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Applied Economics
After a timespan now approaching three years when the world economy has experienced disruptions from Covid, many in the spa industry say the current year feels like the right time to recalibrate. As businesses adjust, a couple of emerging economic realities—product supply and pricing inflation—are frequent discussion topics among spa leaders.
Whether the rate of generalized price increases in the past year is following a natural economic trend or is a byproduct of the pandemic, “the return of inflation was one of the biggest stories of 2022,” as Coryanne Hicks writes for Forbes. “American consumers were coping with price increases the likes of which they hadn’t seen since bell bottoms were all the rage. So it’s only natural for people to be nervous about what’s in store on the inflation front in 2023.” That may be especially true in the spa world and other industries reliant on both professional service offerings and retail sales.
Are you ready for MoCRA?
The U.S. FDA’s implementation of the Modernization of Cosmetics Regulation Act (MoCRA) passed by Congress on December 29, 2022, affects all businesses manufacturing and selling cosmetic products, including those in the spa and wellness industries. While MoCRA should not change the day-to-day activities of most spa and wellness providers, it is important that the products your company sells comply with MoCRA to avoid potential FDA interference and penalties. Since these compliance activities can be costly, MoCRA likely will affect your company’s bottom line.
Compensation in the Spa Industry
Kristine Huffman for Pulse: There are potentially four parts of provider compensation: the base; a commission or a kick for a booked appointment; the tip or portion of a service charge; and then incentives on top of that. What did you find when you started researching all of this as you were looking at setting your policies for next year?
Suzanne Holbrook: As we start to really drill down, first you’ve got to understand what the law is by state, and even by city, to make sure you’re following legal guide[1]lines and meeting the market demands. But I’ve always recommended putting in place an hourly base, plus a commission, plus a portion of an automatic service charge. Let’s say, if we have a 22 percent service charge, generally 18 percent goes to the provider, two percent is pooled and goes to the support staff, and then two to four percent goes to the house.
Executive/Management Focus: Spa Employee Wages
Three leaders in the fields of personnel management and employment policies offer the following insights that will be of special interest to spa leaders. With their knowledge of employee compensation and their experience guiding businesses through the complexities of hiring and workforce development, these professionals share valuable perspectives and provide practical advice and strategies on key employment topics.
- Candra Bryant leads Hanna Resource Group, an HR focused consulting firm dedicated to creating thriving workplaces. With a rich background in corporate HR leadership and consulting, Bryant excels in crafting employment policies that align with applicable regulations, best practices and organizational culture.
- l Alison Harrigan is a senior client partner and leads travel, hospitality and leisure practice for global organizational consulting firm Korn Ferry. Harrigan’s career background includes experience with franchised businesses, hospitality, real estate and wellness.
- Julie Keller-Callaghan is a co-founder of Well Defined and managing director of recruiting for Hutchinson Consulting: An Arch Amenities Group Company. A longtime influencer and advocate in the wellness world, Keller Callaghan serves as a consultant and content strategist for numerous wellness brands.
Financial Management for Spas
This text is intended to provide spa beginners and veterans alike with a better understanding of financial management.
Financial Management for Spas
This text is intended to provide spa beginners and veterans alike with a better understanding of financial management.
Financial Rejuvenation: Mastering the Income Statement
Just as various spa treatments work together to rejuvenate each guest’s body and mind, the elements of the income statement converge to determine the financial health of the spa— assessing its profitability, investment potential and creditworthiness.
An income statement is like a mirror reflecting the success of your spa’s operations over a specific period. It captures the revenues generated, the costs associated with delivering services and the expenses incurred to run the business, ultimately revealing whether the spa is operating at a profit or a loss. This vital financial document, often referred to as the “profit and loss statement,” offers insight into the overall performance of your business over a specific period, guiding you toward a more prosperous and balanced future.
Financial Serenity: Mastering the Balance Sheet
Understanding your spa’s balance sheet is akin to conducting a comprehensive wellness assessment. This financial statement offers a clear snapshot of your spa’s assets, liabilities and owner’s equity, providing insight into the resources at your disposal and the financial obligations you must meet. By regularly reviewing your balance sheet, you can ensure your business remains in peak financial condition, ready to thrive in a competitive market.
Financial Tranquility: Mastering the Statement of Equity
Maintaining a strong equity position brings peace of mind to business shareholders. Understanding and managing equity helps spa owners make strategic decisions that not only enhance their financial stability but also empower them to invest in new treatments, expand their offerings and continue providing outstanding care.
Insights to spa revenue management for industry professionals
Kristine Huffman for Pulse: Many of us aren’t familiar with the duties of a revenue manager. Tell us a little about that job.
ADAM HAYASHI: When I started in the hospitality industry in the ‘90s, I had no idea what revenue management was. It was still in its infancy, and the airlines were really picking it up. In 2001, I got my first job as a revenue manager at a hotel property. Even back at that point, it was rare to have a property-specific revenue manager focused on the yield and the optimization at each hotel. Fast forward: Now, most brands are prioritizing it. With revenue management strategy, we measure demand through data and trend analysis, and take opportunities to yield our pricing to attract the right guests at the right time, at the right price, through the right channel.
In terms of the discipline itself and how it differs from other departments, it is part of the commercial structure, focused on building the top line revenue and aligned with sales, marketing, digital and e-commerce. And that differs from the function of someone who is a finance director or controller who’s more focused on managing expenses and the accounting side of things.
Pulse: Often day spas and boutique hotels don’t have somebody focused exclusively on revenue management and the primary focus becomes expense management. What would you say to an owner of a smaller boutique property or a day spa to help support the idea that this is a necessary role? How would they get it started?
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