If you ask most spa or salon owners to offer a picture of their business's future, it will invariably 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...
Before filling out those loan papers or signing that check, I strongly suggest taking a hard look at how the business that's planned for expansion is performing at the moment. In other words; What are you about to make bigger? Do you really need to enlarge in order to capture more sales?
Let's consider some absolutes about expansion before the fantasy draws us too far down the path of architects, bank officers, and employment ads. First of all, expansion is expensive. Yep, it costs real dollars 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 contractors with their mysterious construction delays. Expansions running into the many thousands of dollars (is there any other kind?) heap considerable operating costs on small businesses, many of which can barely support themselves in their current financial condition.
If You Build It, Will They Come?
You are proposing to add sizeable increases in rent, utilities, personnel, supplies, debt repayment, etc. for a supposed gain in sales revenue. 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.
Can You Really Afford It?
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.
Impact To Your Current Clientele
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 Staffing Requirements
New personnel will require 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 minimize 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 our spa or salon's resources.