Spa Business Plan
Over the past 20+ years, we have helped over 10,000 entrepreneurs and business owners create business plans to start and grow their spas. On this page, we will first give you some background information with regards to the importance of business planning. We will then go through a spa business plan template step-by-step so you can create your plan today.
What Is a Business Plan?
A business plan provides a snapshot of your day spa as it stands today, and lays out your growth plan for the next five years. It explains your business goals and your strategy for reaching them. It also includes market research to support your plans.
Why You Need a Business Plan
If you’re looking to start a day spa or grow your existing spa you need a business plan. A business plan will help you raise funding, if needed, and plan out the growth of your spa in order to improve your chances of success. Your spa business plan is a living document that should be updated annually as your company grows and changes.
Source of Funding for a Spa Company
With regards to funding, the main sources of funding for a spa are bank loans and angel investors. With regards to bank loans, banks will want to review your business plan and gain confidence that you will be able to repay your loan and interest. To acquire this confidence, the loan officer will not only want to confirm that your financials are reasonable. But they will want to see a professional plan. Such a plan will give them the confidence that you can successfully and professionally operate a spa business.
The second most common form of funding for a spa is angel investors. Angel investors are wealthy individuals who will write you a check. They will either take equity in return for their funding, or, like a bank, they will give you a loan. Venture capitalists will not fund a spa. They might consider funding a chain of spas, but never an individual location. This is because most venture capitalists are looking for millions of dollars in return when they make an investment, and an individual location could never achieve such results.
Spa Business Plan Template
Your spa business plan should include 10 sections as follows:
Your executive summary provides an introduction to your business plan, but it is normally the last section you write because it provides a summary of each key section of your plan.
The goal of your Executive Summary is to quickly engage the reader. Explain to them the type of spa you are operating and the status; for example, are you a startup, do you have a spa with existing customers and revenues that you would like to grow, or are you operating a chain of day spas?
Next, provide an overview of each of the subsequent sections of your plan. For example, give a brief overview of the spa industry. Discuss the type of spa you are operating. Detail your direct competitors. Give an overview of your target audience. Provide a snapshot of your spa’s marketing plan. Identify the key members of your team. And offer an overview of your financial plan.
In your company analysis, you will detail the type of spa you are operating.
For example, you might operate one of the following types:
- Day Spa
- Destination Spa
- Medical Spa
In addition, within each type of spa, you may offer various services such as massages, facials, saunas, as well as hair removal and nail treatments.
In addition to explaining the type of spa you operate, the Company Analysis section of your business plan needs to provide background on your business.
Include answers to questions such as:
- When and why did you start your spa business?
- What milestones have you achieved to date? Milestones could include sales goals you’ve reached, new store openings, etc.
- Your legal structure. Are you incorporated as an S-Corp? An LLC? A sole proprietorship? Explain your legal structure here.
In your industry analysis, you need to provide an overview of the spa business.
While this may seem unnecessary, it serves multiple purposes.
First, researching the spa industry educates you. It helps you understand the market in which you are operating.
Secondly, market research can improve your strategy particularly if your research identifies market trends. For example, if there was a trend towards a new type of hair or nail service, it would be helpful to ensure your plan included offering such services.
The third reason for market research is to prove to readers that you are an expert in your industry. By conducting the spa industry research and presenting it in your plan, you achieve just that.
The following questions should be answered in the industry analysis section of your spa business plan:
- How big is the spa business (in dollars)?
- Is the market declining or increasing?
- Who are the key competitors in the market?
- Who are the key suppliers in the market?
- What trends are affecting the industry?
- What is the industry’s growth forecast over the next 5 – 10 years?
- What is the relevant market size? That is, how big is the potential market for your spa. You can extrapolate such as figure by assessing the size of the market in the entire country and then applying that figure to your local population.
This section of your day spa business plan must detail the target market you serve and/or expect to serve.
The following are examples of customer segments: college students, sports enthusiasts, soccer moms, techies, teens, baby boomers, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of spa you operate. Clearly baby boomers would want a different atmosphere, pricing and product options, and would respond to different marketing promotions than teens.
Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. Because most spas primarily serve customers living in their same city or town, such demographic information is easy to find on government websites.
Psychographic profiles explain the wants and needs of your target market. The more you can understand and define these customer needs, the better you will do in attracting and retaining your customers.
Your competitive analysis should identify your indirect and direct competitors and then focus on the latter.
Direct competitors are other day spas and salons.
Indirect competitors are other options that customers have to purchase from you that aren’t direct competitors. This includes products they can purchase from supermarkets and other retailers both offline and online. You need to mention such competition to show you understand that not everyone in your target market frequents a spa on a regular basis or at all.
With regards to direct competition, you want to detail the other local competitors and spas with which you compete. Most likely, your direct competitors will be spas located close to your location.
For each such competitor, provide an overview of their businesses and document their strengths and weaknesses. Unless you once worked at your competitors’ businesses, it will be impossible to know everything about them. But you should be able to find out key things about them such as:
- What types of customers do they serve?
- What services do they offer?
- What products do they offer?
- What is their pricing (premium, low, etc.)?
- What are they good at?
- What are their weaknesses?
With regards to the last two questions, think about your answers from the customers’ perspective. And don’t be afraid to stand outside your competitors’ locations and ask customers as they leave what they like most and least about them.
The final part of your competitive analysis section is to document your areas of competitive advantage. For example:
- Will you provide superior day spa services?
- Will you provide a superior spa product line?
- Will you provide spa services that your competitors don’t offer?
- Will you make it easier or faster for customers to acquire your products?
- Will you provide better customer service?
- Will you offer better pricing?
Think about ways you will outperform your competition and document them in this section of your plan.
Traditionally, a marketing plan includes the four P’s: Product, Price, Place, and Promotion. For a spa business plan, your marketing plan should include the following:
Product: in the product section you should reiterate the type of spa that you documented in your Company Analysis. Then, detail the specific services you will be offering.
Price: Document the prices you will offer and how they compare to your competitors. Essentially in the product and price sub-sections of your marketing plan, you are presenting the menu items you offer and their prices.
Place: Place refers to the location of your spa. Document your location and mention how the location will impact your success. For example, is your spa located next to a heavily populated office building, or gym, etc. Discuss how your location might provide a steady stream of customers.
Promotions: the final part of your spa marketing plan is the promotions section. Here you will document how you will drive customers to your location(s). The following are some promotional methods you might consider:
- Making your spa’s front store extra appealing to attract customers
- Developing and marketing your website
- Social media marketing (advertising and organic posts)
- Advertising in local papers and magazines
- Reaching out to local bloggers and websites
- Partnerships with local organizations
- Local radio advertising
- Banner ads at local venues
Also think about your spa’s Unique Selling Proposition (USP), which should answer why customers should choose you over other spas. Make sure your USP is reflected in your marketing.
While the earlier sections of your spa business plan explained your goals, your operations plan describes how you will meet them. Your operations plan should have two distinct sections as follows.
Everyday short-term processes include all of the details about the tasks involved in running your spa such as serving customers, procuring supplies, keeping the spa clean, etc.
Long-term goals are the milestones you hope to achieve. These could include the dates when you expect to serve your 1,000th customer, or when you hope to reach $X in sales. It could also be when you expect to hire your Xth employee or launch a new location.
To demonstrate your spa’s ability to succeed as a business, a strong management team is essential. Highlight your key players’ backgrounds, emphasizing those skills and experiences that prove their ability to grow a company.
Ideally you and/or your team members have direct experience in the spa business. If so, highlight this experience and expertise. But also highlight any experience that you think will help your business succeed.
Depending on the services you plan for your spa, you’ll either need trained employees with massage, cosmetology, and other skills, or you will have to be able to train them. Determine what tasks must be done by skilled employees and which can be done by unskilled assistants who are learning the business. You may also need management help, at least consisting of an assistant manager to run things when you can’t be in the spa. In the absence of a manager on duty, your staff must be clear as to who will act as manager in the event that problems arise where important decisions have to be made.
Map out your needs for staff specifically describing when you will bring on personnel before and after your spa’s launch.
Your financial plan should include your 5-year financial statement broken out both monthly or quarterly for the first year and then annually. Your financial statements include your income statement, balance sheet and cash flow statements.
Income Statement: an income statement is more commonly called a Profit and Loss statement or P&L. It shows your revenues and then subtracts your costs to show whether you turned a profit or not.
In developing your income statement, you need to devise assumptions. For example, will you serve 20 customers per day or 50? Will your average price point be $50 or $100? And will sales grow by 2% or 10% per year? As you can imagine, your choice of assumptions will greatly impact the financial forecasts for your business. As much as possible, conduct research to try to root your assumptions in reality.
Balance Sheets: While balance sheets include much information, to simplify them to the key items you need to know about, balance sheets show your assets and liabilities. For instance, if you spend $100,000 on building out your spa, that will not give you immediate profits. Rather it is an asset that will hopefully help you generate profits for years to come. Likewise, if a bank writes you a check for $100.000, you don’t need to pay it back immediately. Rather, that is a liability you will pay back over time.
Cash Flow Statement: Your cash flow statement will help determine how much money you need to start or grow your business, and make sure you never run out of money. What most entrepreneurs and business owners don’t realize is that you can turn a profit but run out of money and go bankrupt. For example, let’s say a company approached you with a massive $100,000 spa contract to provide spa services to their employees. Let’s assume the contract would cost you $50,000 to fulfill. Well, in most cases, you would have to pay that $50,000 now for supplies, employee salaries, etc. But let’s say the company didn’t pay you for 180 days. During that 180-day period, you could run out of money.
In developing your Income Statement and Balance Sheets be sure to include several of the key costs needed in starting or growing a spa:
- Location build-out including design fees, construction, etc. and cost of equipment: The retail location for your spa will probably be leased to you as a bare room. Extensive work may be needed to build out the basic systems like plumbing, lighting, and HVAC, let alone any fancy fixtures or finishes you’d like to install to create an atmosphere for customers. Equipment requirements may include sinks, massage tables, spa styling chairs, pedicure stations, and specialized equipment based on your specific service offerings. The amount you have to spend on your physical facility and the equipment within it is a major portion of the funds you will have to raise, either from your own resources, friends, family, outside investors, or lenders.
- Payroll or salaries paid to staff
- Business insurance
- Licenses and permits
- Legal expenses
- Other expenses
Attach your full financial projections in the appendix of your plan along with any supporting documents that make your plan more compelling. For example, you might include your spa’s design blueprint or location lease.
Summary & Keys to Spa Success
Putting together a business plan for your spa is a worthwhile endeavor. If you follow the template above, by the time you are done, you will truly be an expert. You will really understand the spa business, your competition and your customers. You will have developed a marketing plan and will really understand what it takes to launch and grow a successful spa.
Finally, in addition to completing your business plan, be sure to pay special attention to the following factors that often define success for spa businesses:
- Make sure all of your clients are thrilled with your services
- Keep your spa clean at all times
- Provide excellent communications with current and prospective clients
- Embrace new technology, particularly social media to engage your clients and get them to return to your spa
- Focus on growing revenues, but also on profits, by keeping a close eye on costs
- Hire the right team, train them well and treat them well so their performance is strong and they are loyal to your business
Download Our Spa Business Plan PDF
You can download our spa business plan PDF here. This is a business plan template you can use in PDF format.
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Spa Business Plan FAQs
What Is the Easiest Way to Complete My Spa Business Plan?
Growthink's Ultimate Spa Business Plan Template allows you to quickly and easily complete your Spa Business Plan.
Where Can I Download a Free Spa Business Plan PDF?
You can download our spa business plan PDF template here. This is a business plan template you can use in PDF format.