Big time expansion...anyone else make a jump like this?

[Kip Dynamite]

I have not been on the board much lately due to being on maternity leave, and now going back to work. I have a thriving practice, and have several therapists and an office manager to run the place for me while I am not there. My intention was not to go back to my workaholic ways after my son was born. However...

My office is a tiny bit more than 800 sq ft. We have 4 treatment rooms, and tiny closet/breakroom, and a tiny reception area, and 1 bathroom. We have maxinmized every single inch of our space. There is nothing else we can do.

The space next door just opened up...It is a beautiful space with everything I have ever wanted in my practice...including a conference room (perfect for Yoga classes, guest speakers and workshops) It has 10 offices, a giant reception area (perfect for retail) 2 bathrooms (1 even has a shower!) and lovely landscaping outside. The only thing we would have to do to the space is paint and carpet. What's the hold up you ask? The space is well over 3500 square feet! Can you say big rent check? I have been crunching numbers for over a week now, and we would have to do about 20 massages/treatments a day to cover the expense. Though it is dead of summer right now (our off season) we are averaging about 13 a day.

My office manager is going to graduate from esthetician school next month, and she is ready to bring a bunch of new services to the menu, and her excitement is coneforum.xxxious with the clients. That would bring in more income for us as well. I could take out a business loan to help cover rent for the first few months while we get the momentum going, but there is still a little bit of anxiety in the back of my head that says "Girl, that's a lot of money!' Once you make a jump this big, you can't really downsize again.

Of course this goes right back to me wanting to semi-retire from doing massage full time to be with my family and pursue my coaching career...how can I cut back while expanding?

My office manager expressed interest in buying in as partner, so I wouldn't be doing this alone. So many pro's, one big, scary con.

Whaddya think?

 

[Amanda]

Very scary con

You are doing 13 a day now and making money.

You will need 20 a day just to cover rent expense, which means you probably need to do 45 a day next summer just to be where you are now.

3,500 square feet is a considerable undertaking. You would be retired from massage -- you would be a fulltime spa/biz manager!

We are about to sign a lease on our first spa facility - only 2,000 ft with 3 treatment rooms. We looked at a 4,500 ft house to convert, but the numbers just did not work on something so large.

 

[Polly <3]

Will they let you take just a portion of the space? And possibly expand in a few years.

If you have a decent landlord, they may be willing to have the tenant that rents the other potion on a 60 out. Our landlord has done this for us. There is a space behind us that he'd eventually like to see as part of our space. So the tenant is on a rent schedule that says the landlord can give him 60 days notice if need be. We've all be renting like this for a number of years and it works fine, as the other tenant is pretty casual about where he wants to be anyway, and we aren't growing leaps and bounds enough to need the space any time soon. However, it's there if we do, and we'de be sure to give more like 6 months notice anyway.

Just another thought to pass along.

 

[........]

Actually the space is 4500 sq ft...my landlord said I could split it up and take 2/3 of it if I wanted it. As of right now I have 5 MT's, two of them are full time. One of them is also an esthetician, but she does not do anything other than Euro facials and an occasional Deep Pore Cleansing when she is not doing massage. We would love to have a nail tech come in to do natural nails, have a full time Acupuncturist, and a breakroom bigger than 4x6 (which also holds our fridge, cabinets and LINENS FOR ALL 5 OF US!) Needless to say, we are tripping all over each other.

We have doubled our profits every year for the past 3 years, however, that trend will not be able to continue due to our space issue. We will not have the space for my office manager to do her treatments...and she is the one that is gung ho to do men's facials, body wraps, waxing, etc. She is very interested in becoming a partner, however not if we stay in the spot we are in...because she knows we could not grow any bigger. Long term she wants to buy the business, and Iwould just work for her part time. This is a ways down the line, as I am not ready to let go of one of my "babies"

There are very few spaces available to rent in my area. I am currently in a very nice professional office complex, with affordable $ per sq Ft. If I move to another location, I will end up having less space for higher $ per sq ft.

Relax&Rejuv...I always look forward to your responses because you are a #'s kinda person. You cut to the chase, and I appreciate that. But I am having a REAL hard time letting the idea of this space go. I am looking forward to you or anyone else to help balance out these thoughts in my head.

 

[britt. (:]

You've obviously crunched the numbers, you have people who are enthusiastic and can generate business. Your numbers clearly qualify you for a loan. Question is, are you personally ambitious enough to want to run a large show like this, even if it means for the next 2-3 years you will be managing the business far more than doing massage?

When you say 20 sessions a day and you will "break even" does that mean break even and everyone (including you) gets a paycheck? Because if you're almost there, even in your slow season, without the additional therapys/luxuries, and somewhat inadequate space, AND you and a trusted potential partner are excited about the possibilities, WHAT is holding you back?

Have you actually looked at your "worst case scenario?" If you pursue this, what is the worst that can happen? What is the potential? What would it take if it doesn't work out and you have to cut your losses? OTOH, if things go according to current projections, (doubling each year,) how long exactly will it take you to absorb the expenses of the move?

Is it possible for you to sub-lease some of the space so that you can cover certain expenses until you need the space? Can you arrange the sub-lease contracts so you can take the rooms back when you need them?

A few of my thoughts. I would eventually like to go the direction you are going, except a little more pain relief oriented. This is really exciting, I hope you keep us posted.

 

[Marykate]

More than #s and paint and carpet

If you are trying to fill 10 treatment rooms with clients, you will probably have to do more than paint and carpet the place - especially if you are trying to create any sense of spa vs. being a treatment center. Carpeting = treatment center, wood/tile = spa.

You don't want to do things half way just because you ran out of money. People will pay for quality service and experience.

Since you want to do more skin care and add nails, sounds like you are trying to be a day spa.

Converting an office to a day spa is a serious investment. Overhead flourescent lights don't cut it. We have yet to see a nice spa that does not have cabinetry and a countertop and sink in each treatment room ($2,000 @, plus the cost of plumbing)

Then there is plumbing for your nail stations. The stations alone are $2,000 +

How is the HVAC? Can the treatment rooms on the sunny side stay cool independent of the others or is everyone on the same system? Are the vents in the center of the ceiling - meaning no matter where you put the table the client will have cold air blasting on them?

Will you buy stationary tables, and if so will the be hydraulic lift or electric? Electric means plugs in the floor (which you might not have) or hideous cords running across the ground.

Retail is great, but now you need cabinetry, shelving, lighting and lobby decor. You also need a wrap area behind check out for bagging purchases and wrapping gifts, your standard office reception desk probably won't work. Is the desk even where you want it to make your entrance inviting and visually appealing?

The other downside to retail is now you need lots of $$. People don't want to see empty shelves, they want to see a good selection and multiple items of each SKU so they don't think you just sell one of each per month. That is why manufacturers have opening order programs. The smallest of which are about $5,000 per brand (folks like Kiehls and Bliss run around $50,000)

Equipment, furnishings and decor for a quality day spa run $50+ per square foot.

Unfortunately, your numbers alone may not qualify you for a bank loan. Your business plan / P&L are not what get you a loan. What they tell the bank is the likelihood you will pay back the loan. What gets you the loan is the collateral you can put up. Your house, your car, your savings, etc.

Banks are conservative. They want their money back, plus a little interest. They want to know if things don't work out, they will still get their money back, which means they will sell your stuff to do so. They can sell your inventory and equipment at a discount. They can't, however, sell any of the leasehold improvements. Plumbing, lighting, flooring, cabinets - these are worthless to them - but essential to you.

Your first step is to visit your bank and find out what it would take for them to lend you $50K, $100K or $200K. Whatever they tell you becomes your budget -- for improvements, inventory, fixtures and 3 months operating expenses while you gear up to the new space.

If you can do what you want to do for that $ amount, then jump on it.

 

[Stephen E]

Both responses are exactly what I was looking for! Now I remember why I love this board!!!!!

As we are right now, we are apprx 50% pain relief, 50% stress relief. It's a long story, but we have a contract with another company that provides us with patients/RX and insurance billing. Sometimes that company goes through tough times and the revenue isn't consistent. We are looking into other ways to bring in extra revenue without counting on them. Hence us moving in the "Day Spa" direction.

There is a huge (25,000 sq ft) Day Spa about 3 miles away. They have done everything TOP NOTCH, and yet they are on their 2nd owner and are still struggling (they've been open a little over 3 years). My brand is high quality services and experience at affordable rates. We will not be in the same category of Bliss, I can assure you! By not having the outlets in the floor and having a cord cover instead, saves the client money. I agree with the cabinets in the facial rooms, and even nail room, I don't feel it is necessary in the massage rooms...and those are the majority of the rooms. As for plumbing for the nails...We would be going with pipeless due to all the bad press with the bacteria that can lurk in those pipes.

I typically build up to improvements as we can afford to do them...meaning I will not bet the farm on top notch everything in an expansion. Carpet and paint first, as we generate income we do upgrades...cabinets and light fixtures.

I agree with what you said about not doing things because we ran out of money, but I also don't want to create diminishing returns...where I start out full hilt, and then if the money doesn't come in fast enough, we have to cut back on quality. The clients we did have are then used to what we are taking away, and then they start dropping off. And the downward spiral begins. Myclients that have been with me over the past 7 years have loved watching the growth...especially the ones that were with me when I was renting space out of a termite ridden closet in a hair salon.

I agree with the lighting. The front foyer is gorgeous! With a tiled entry, wood blinds, cherry and glass front door. Very nice first impression. It already has the Ralph Lauren Suede treatment on the walls in the waiting room, and granit countertop at the check in area. (it was a home builder office prior) Most of the "offices" are 10x 11.5, some bigger.

I love doing massage...it is my "gift", but growing the business is my hobby...I have so much fun making it grow. I love the challenges and new ideas and networking. So being the one to run it would not be a problem, especially since I could do my coaching from there, as well as hold workshops. Don't forget I have a full time office manager who wants to buy in as partner. She ran the office for the 3 months I was on maternity leave. I currently do a lot of work from home (on the computer and phone).

Worst case scenario...failure is not an option ever. Change in plans...sure. But not failure. Worst case - I just can't see how I could let it happen. If I had to walk away...I could if there was no other way.

We have a substantial amount of equity (my husband and I) so securring a line of credit should not be a problem. I am trying not to count my chickens before they hatch. (ha!)

Thanks for giving me some different angles to look at. I have not commited to anything yet, so this gives a bunch more to consider.

You rock!

 

[sianisiani]

...my landlord said I could split it up and take 2/3 of it if I wanted it.

If it were me, and of course, it's not - I'd go this route before taking it all, if I were going to expand. Although you may well have the equity to make this happen, I'd still run a test for a few years, as you can always expand leaps and bounds if the new space takes off (and it probably will).

You may also want to send in a comment or call this fellows radio show. He's got some very good common sense when it comes to business/money issues. http://www.daveramsey.com/radio/home/ So far, I've been impressed. You can listen to live broadcast at: http://www.daveramsey.com/radio/home/index.cfm?strMode=listen

 

[casi]

What happens if I take a smaller portion, and then someone else fills it and stays for a long time? Then I lost my chance for expansion. (most of the tenant in this building have been there for 10 years)

 

[church]

Then you are stuck...

You roll the dice and you take your chances.

All depends on your tolerance for risk.

There are those who do, those who wish they did, and those who regret they did. Only one way to find out which you will be.

 

[WinterNights]

What happens if I take a smaller portion, and then someone else fills it and stays for a long time? Then I lost my chance for expansion. (most of the tenant in this building have been there for 10 years)

That was my feeling. If you're going to make the leap, don't hobble yourself before you even get started. If you can't fill the space right away, and think it might be some time before you do, AND if you really need that unfilled space to be working for you so you can make this happen, you could always sub-lease the rooms at a decent rate to other practitioners.

There's a clinic here that does something like this, they have Acupuncture, nutrition, massage, chiro, bodywraps, etc... but they also sublease a few rooms to other practitioners that they don't necessarily incorporate into their program. There's a Hakomi therapist, some reiki, and a Feldenkrais I think? The wellness center does nothing to promote their business, other than having their cards in the lobby. They handle their own booking, their own supplies, etc. The subs only pay rent for their room and provide their own professional and property insurance.

Is it possible to do something like this? Maybe sub-lease an extra treatment room or 2 or 3, for a guaranteed $x coming in per month. Make it short term like 6/12 months? Make sure they understand in writing that at the end of contract if you need the space they will have an option of coming in to your spa as an IC (at your discretion,) or vacating the lease?

Just another idea or two, but if you're moving to get more space, it doesn't make sense to go through all the headache and financial burden of a move, then clamp your space down into just a little bitty part.

Or another idea, if the subdividable portion has its own entrance, perhaps you could put up a temporary wall, and create a separate space that you will sublease, then when you need the room you will not renew the leases and take down the wall?

 

[msdixie]

I love you guys! Thank you so much for your input. I am feel I have a much more realistic idea in my head (and on paper). I have spoken (is that a word?) with my landlord...he said I can put a door up and sub lease the other side. I have a list of practioners that have contacted me in the past 6-8 months to rent space (we didn't have the room obviously) and I will call them tomorrow to see if they or anyone they know still needs some space. Once I compile all that, finish my business plan and aply for a business loan...I will know where I stand.

I will keep you posted if you are interested...

 

[Elephant Droppings]

I think this is a great opportunity, and looking at what you are looking to add to your practice I don't think you will have a problem.

One thing I am missing, are you adding these 10 rooms to your already existing space? or will you be moving into the 10 and leaving your space behind? And if so, will your landlord let you stay in your space while setting up the other?

 

[Lily]

I will keep you posted if you are interested...

Please do keep us posted. I have been reading with interest!

Thanks!

 

[Kkbetch]

More than #s and paint and carpet

If you are trying to fill 10 treatment rooms with clients, you will probably have to do more than paint and carpet the place - especially if you are trying to create any sense of spa vs. being a treatment center. Carpeting = treatment center, wood/tile = spa.

Maybe it's less regulated in the US, but in Australia, if you are waxing you need sealed floors - no carpet. Anything involving skin penetration, eg accupunture, waxing, electrolysis, pathology labs, are no carpet environments. There may be some similar regulation where you are.

This is obviously pretty over the top and way out of your budget http://www.dermalogica.com/corporate_center/press/pdfs/podsalon.pdf as it says on there fit out was over $300000 for 1700 sq ft and 3 treatment rooms! Do look at http://www.salontoday.com admittedly there is a bias towards hair, but it's not that different. Check WiP Downtown in the Salons of the Year - furniture from IKEA

 

[pollyfashion100]

Pandora...

I would be vacating my current space and moving into the suite next door. Right now my suite # is 909, it would become 910. Also a bonus for clients trying to find us after a move! My landlord is awesome! He lets me do anything I want (so far). He only comes by when there is a problem, he is very supportive of any ideas I've had. He has kept my rent @ the same $ per square fooeforum.xxxe for over 5 years now Can you see why the tenants stay for so long?

As far as the sealed floors... neither of my IC's that have gone to school for skin care have been taught that as regulation. Since regulations are known to vary from state to state, let alone country to country, I would not be surprised to see a difference between your neck of the woods and mine.

Melb,
I am curious why you assume this way over my budget, when I have not yet completed my business plan - therefor I do not completely know my budget. As I previously stated, I am not, nor do I intend to become a 5 star Day Spa. My brand is and will continue to cater to the average joe. My clientelle bases is 45% male, 55% female. We already have a gorgeous Day Spa down the road. And they aren't cutting it. Maybe it's gas prices, who knows. But my profits continue to double each year regardless of the economy (so far. hope I didn't just jinx myself!!!! :wink: ) To me it is a much bigger risk changing my brand to a "posh" spa and stay small, than it is to remain the same and get BIG.

But that's just lil' ol' me. 8)

 

[F. Ken Angry]

(self-serving mini-hijack)

i've been under the impression that carpeting in massage rooms is less potential slip-n-fall liability than tile, or other solid surfaces. (lube on feet, tile floor, slip and bust your butt, get sued, etc.)
are there any insurance issues regarding floor types?


kneadful, you seem to on the right path. if the money works, i'd take the whole space.
my one question is why is your large spa competitor struggling?
bad management? poor choices in spa providers? overpriced?
if you can figure that out, then you've got one step ahead of the game...

 

[Nikki C]

Melb,
I am curious why you assume this way over my budget, when I have not yet completed my business plan - therefor I do not completely know my budget. As I previously stated, I am not, nor do I intend to become a 5 star Day Spa.

That's why I assumed a fit out of over $300000 for about a 3rd of your possible space was way over your budget. Why would you want even contemplate a budget of over $500000 when you don't want to go for 5 star day spa? My assumption was no reflection on how much money you are prepared to spend, but concern of covering rent/not 5 star day spa/business down the road pointed towards you'd hesitate dropping half a million on fit out, and rightly so!

As for sealed floors, that was directed ar R&R's comment, sure regulations vary from place to place, but also regulations vary from city to city, local ordinances, etc In Sydney some areas will allow you to use metal spatulas if you don't double dip them, in other areas of Sydney you have to use disposable spatulas without double dipping (much more expensive) A couple of years ago you could use one metal spatula and double dip as much as you like. In the US you don't have to wear gloves and can double dip, but it is becoming more regulated - there are areas where you cannot double dip and you have to wear gloves. A lot of people choose not to double dip and do wear gloves regardless of the local regulations.

With spills, drips, accidents, with waxing, if you do want to offer waxing, I'd be thinking of a sealed floor anyway - hair removal wax is MUCH harder to remove than paraffin wax, and even that is hard to get out of carpets. A waxing room with a sealed floor can be much smaller than a normal treatment room. A small wax pot for facial waxing is so small it's pretty much a non-issue as far as spill concerns go, catridge systems are also a non-issue, but if any larger hard wax areas are being waxed, that stuff is shocking to clean up It doesn't matter how drip free someone's technique is, accidents happen eventually, particularly when you have a freshly graduated waxer. Waxes come in a million different shades, a lot with sparkly bits in it these days - they don't clean up like a massage oil spill.


There are non-slip sealed floors available.

 

[Muaz L]

What happens if I take a smaller portion, and then someone else fills it and stays for a long time? Then I lost my chance for expansion. (most of the tenant in this building have been there for 10 years)

That's why I suggested talking to the landlord and asking for them to have a 60 or 90 day "out" with the new tenant. This makes it easy for you to let the landlord know you're ready to take on the space and for them to provide notice to the tenant who is there.

Maybe it's not something that they do in FL. But, I would think all leasing is about the same, so, it may be worth asking for. Especially since you've been such a good tenant for so long.

 

[Dr M. Riad]

Ohhhhhhhh...exciting things are happening....I'll keep you posted!!!