The wellness industry has experienced explosive growth over the past several years. The global spa market value is expected to climb 12.1% from 2021 to 2028. This presents an ideal opportunity for aspiring entrepreneurs.
Opening your own spa can allow you to help clients relax and rejuvenate while building a profitable business. From lavish day spas to specialized medical spas to eco-friendly operations, various types of spas appeal to different demographics.
This guide will walk you through how to start a spa business. Topics include developing a spa business plan through market research, competitive analysis, registering an EIN, marketing, customer focus, forming a legal business entity, and more.
1. Conduct Spa Market Research
Thorough market research is a critical first step when starting any new business, including a spa. This involves assessing the current state of the spa industry, identifying growing trends that present opportunities, analyzing your target demographics, and determining if there is sufficient demand in your geographic area to support a profitable spa.
The global spa industry has experienced steady growth over the past several years. While the COVID-19 pandemic resulted in a brief decline, recent data indicates the spa industry is rebounding quickly as consumers prioritize self-care and wellness services.
When conducting market research for a potential spa, pay close attention to current consumer trends. For example, there has been a rise in demand for experiences centered around overall well-being rather than individual services. Many spas now take a more holistic approach and offer integrated wellness experiences like yoga, nutrition planning, and coaching.
Analyzing demographics and lifestyle segmentation to determine your target market is crucial. While spa-goers used to be primarily affluent women, today’s consumers represent a broader range of gender, age, and income demographics. Ensure your location and services align with the needs of your chosen target audience.
Finally, carefully evaluate the competitive landscape in your geographic area as a spa business owner. Drive around town and take notes on existing spas, including their sizes, services offered, prices, and visible traffic levels. Search online business directories to compile a list of local competitors and analyze their services. This allows you to identify gaps or potential consumer needs that your spa could fill.
Armed with thorough research on industry growth trends, target demographics, competitors, and regional demand levels, you will have tremendous insight into the viability of a spa in your area. You can use this market analysis to create a rock-solid business plan and make smart decisions as you work to get your spa up and running.
2. Analyze the Competition
Carefully scrutinizing your competition is a vital component of starting any successful spa. This allows you to identify the existing players in your geographic area, understand the baseline services and prices you’ll need to match, and uncover potential gaps you can fill with your spa’s offerings.
For a brick-and-mortar beauty business, start by physically visiting nearby spa locations. Analyze factors like their sizes, marketing strategies, decors, visible customer volume, and parking availability. Request brochures so you can compile a comprehensive list of the treatments they provide along with pricing. Take detailed notes on each competitor so you can spot opportunities not currently being met.
You’ll also want to evaluate the online presence of local spas. Search for each one on Google, Yelp, and other review sites to read customer feedback on their experiences. This provides insight into areas like quality of service, ambiance, or specific treatments that could be improved. Check out competitors’ websites and social media pages to assess aspects like branding, messaging, special deals, and engagement levels.
As you gather intelligence on competing spas, take stock of trends in your area. Are medical spas gaining popularity? Is there a growing demand for mobile spa services that offer at-home treatments? Identify gaps your spa could fill, whether specific services, price points, or target demographics that competitors are not adequately serving.
By thoroughly analyzing the local spa marketplace, you’ll have the foundational information needed to carve out your niche. Revisit your competitive research every few months to promptly adapt your offerings based on new players entering the market or shifts in consumer demand. Remaining agile and keeping a finger on the pulse of nearby spas will be tremendously valuable as you work to differentiate your business.
3. Costs to Start a Spa Business
Launching a spa can be a significant investment, with costs varying widely depending on factors like size, services offered, equipment, and more. Still, developing a detailed budget is crucial for turning your spa dreams into reality.
- Retail rental spaces can vary tremendously based on size, condition, and location but expect to budget approximately $20-40 per square foot annually.
- Purchasing commercial property requires far more capital, often between $200,000-500,000+ for a suitable spa location.
- Buildout and renovations like flooring, lighting, ventilation, plumbing for hydrotherapy tubs, and dressing rooms can tally $100,000 or more.
- Specialized spa equipment is another substantial expense. Specialized tables for massage businesses cost $800-1,500 each.
- Esthetician steamers start around $2,000 while advanced microdermabrasion devices run $4,000-6,000. Other potential equipment based on your menu of services includes wax pots, hydrotherapy tubs, eyelash extension stations, manicure tables, pedicure thrones, and more.
- Expect to spend at minimum $10,000 outfitting your spa.
- You’ll also need a startup budget for basic operational essentials like point-of-sale systems ($1,000+), member management software ($50-200/month), website and branding packages ($500+), linens and towels ($500-2,000+), office supplies, laundering solutions, and high-end retail products for resale.
- Licenses, permits, insurance, and legal fees can cost upwards of $5,000 as well.
- Industry experts recommend budgeting 50-60% of your total planned revenue towards hiring an experienced spa manager ($55,000+ salary), licensed massage therapists and estheticians ($35-95,000+ salary and commission), receptionists ($30,000+ salary), and janitorial staff.
- Ongoing monthly expenses for an operating spa include costs like rent/mortgage, which can tally over $5,000 monthly.
- Payroll also adds up to $25,000+ per month when factoring in multiple staff members.
- You should also plan for potential extra yearly expenses like raises/bonuses for staff (5-15% of salaries) or investing in remodels, new systems, and expanded offerings.
While launching a spa certainly includes major upfront and continual investments, a well-researched budget and business plan help set realistic expectations.
Determine exactly which offerings align with customer demand in your area to maximize revenue potential. Continually monitor expenses and pivot operations as needed. With sound financial planning, your ideal spa can shift from a dream to a reality.
4. Form a Legal Business Entity
When starting a spa business, one of the most important early decisions is choosing your legal structure. The four main options each have pros and cons to weigh in the context of your specific situation and goals.
A sole proprietorship is the easiest and most affordable entity to establish as it simply requires registering your business name and obtaining the necessary licenses. However, the owner is personally responsible for all debts and liabilities. This poses a substantial risk for a spa if a client is ever injured.
Forming a general partnership allows multiple people to share ownership. But similar to sole proprietors, each partner assumes full personal liability for the business. Disputes can also create instability if details like responsibilities, profit distribution, and exit strategies aren’t clearly defined upfront.
Limited Liability Company (LLC)
Many spa entrepreneurs opt to form a limited liability company (LLC). This protects your assets from business debts and judgments. LLC paperwork and maintenance fees are straightforward and affordable. LLCs also allow more flexibility for ownership expansion as your spa takes on partners or investors.
Establishing a corporation limits owner liability but involves more complex regulations, recordkeeping, and double taxation on profits. Unless you plan to eventually go public or raise funding from multiple shareholders, an LLC is typically the best fit for small spa businesses.
5. Register Your Business For Taxes
Once your spa LLC is formally registered, obtaining an Employer Identification Number (EIN) should be one of your first steps. An EIN serves as your business’s tax ID number for federal tax purposes.
While social security numbers can identify sole proprietors, having an EIN is crucial for limited liability companies to open business bank accounts, apply for licenses/permits, hire employees, and file tax returns. The IRS requires most LLCs to have an EIN.
Fortunately, obtaining an EIN is quick and free directly through the IRS website. Simply navigate to the online EIN application and answer a short series of questions including your business legal name, address, and ownership structure.
You’ll need to provide your LLC’s formation date and filing number to confirm your entity’s valid legal status. The online tool then immediately provides your EIN upon submission of the form – no waiting or wondering about application approval.
The streamlined EIN application takes less than 15 minutes from start to finish. You’ll receive confirmation of your EIN via email and mail within a few weeks after applying online. Just be sure to record the EIN and keep this notice for your records along with your LLC operating agreement and registration paperwork.
You’ll also need to take steps to comply with state and local tax requirements before opening your spa’s doors. Visit your Secretary of State website to register for any required sales tax permits and business licenses, and operate legally in your state. Many registration processes can also be completed online through user-friendly web portals.
Handling EIN applications and tax registrations upfront ensures seamless business bank account openings, hiring staff without issue, efficiently filing annual tax returns, and demonstrating credibility with vendors or partners.
6. Setup Your Accounting
Proper accounting practices are essential for spa businesses right from the start. Meticulous recordkeeping and financial management help set accurate treatment prices, track revenues, and expenses, stay tax-compliant, access funding when needed, and pave the way for future growth.
Begin by establishing an organizational system to record all transactions related to your spa. Software like QuickBooks can automate much of the accounting process through integration with bank accounts, credit cards, invoices, payroll, and more. The reporting functionality also provides real-time insight into cash flow and profitability by service or product line.
Hire an Accountant
While software eliminates much manual work, partnering with an accountant is highly advisable, especially in a spa’s first years. A qualified accountant provides essential bookkeeping services like recording entries, reconciling accounts, guiding tax compliance, and identifying eligible deductions. Expect to invest $100-200 monthly for such support.
Get a Business Bank Account and Credit Card
Keeping spa finances organized also requires establishing separate business banking and credit accounts rather than commingling with personal funds. Apply for a federal EIN to open dedicated spa business accounts easily.
7. Obtain Licenses and Permits
Opening a spa comes with a broad web of regulations spanning state and local jurisdictions. Find federal license information through the U.S. Small Business Administration. The SBA also offers a local search tool for state and city requirements.
Most areas mandate spa businesses carry a general business license which runs $50-500+ depending on your location. This demonstrates compliance with regulations and commitment to operating legally. Some counties or cities also require specialized licenses for providing certain spa services.
Along with business licenses, spas must obtain zoning permits affirming your commercial location is properly designated for spa activities. Contact your local zoning office to determine if your chosen venue meets codes or requires additional reviews.
Nail salons specifically face extensive state regulations concerning ventilation systems, janitorial procedures, waste disposal, and banned hazardous chemicals in polishes or acrylic mixtures. States levy hefty fines against nail spas violating environmental or public health directives.
Massage therapists in your spa must hold appropriate state-issued licenses demonstrating they’ve met training hour requirements along with exams for anatomy, ethics, and technique. States often also mandate detailed insurance policies when employing massage therapists.
While the web of licenses and permits seems excessive, proper research helps avoid missteps. Also build relationships with business-savvy CPAs, attorneys, or financial institutions who stay abreast of new and evolving regulations to steer clients correctly from the start.
By demonstrating upfront knowledge of and compliance with all relevant rules, permits, policies, and licenses for operating a spa in your jurisdiction, you reassure customers while seamlessly addressing compliance needs before welcoming your first client. This diligence reduces stress while setting your business up for success.
8. Get Business Insurance
Securing comprehensive business insurance protection is a key task for any new spa owner to alleviate financial risk. Required licenses and business types add layers of scrutiny, yet gaps in coverage still expose thousands in assets and livelihoods. Obtaining prudent policies helps owners rest easier.
The foremost benefit of business insurance is shielding your company’s assets and personal funds used to launch your spa if faced with claims of negligence, employee injuries, natural disasters, or lawsuits from dissatisfied customers.
For example, lack of coverage could cripple your operation if a client has an allergic reaction to a skin product and tries to sue for medical bills. Or a pipe bursting overnight floods your newly remodeled space, forcing months-long closures for repairs without insurance reimbursements. Having strong policies prevents paying massive settlements out-of-pocket.
Common policies like General Liability Insurance also cover legal defense fees if former staffers attempt wrongful termination cases. Umbrella insurance provides added asset protection and enhanced liability maximums. Taking time to tailor coverage by accurately appraising property and supplies value, exposure risks, potential threats, and geographic factors gives peace of mind.
Begin your quote search by checking industry associations like the Associated Skin Care Professionals for suggested brokers familiar with spas. Next gather details needed for accurate rate estimates like your LLC business structure, staff sizes, service menus, and projected annual client and revenue totals.
With this ready, request small business insurance quotes from providers like Travelers, The Hartford, or independents in your area to compare options and pricing. Expect premiums ranging from $500 to $5,000+ annually depending on your coverage needs, policy limits, and risk exposures.
Staying informed on evolving insurance regulations also helps identify new products benefiting spas as laws and client expectations shift. While securing adequate policies demands initial legwork and continual diligence, clients recognize insured spa facilities as better protected to focus on their relaxation without worries.
9. Create an Office Space
Having a dedicated office area allows spa owners and staff to handle essential administrative tasks in an organized, professional environment when not working directly with clients. An office also provides an address for legal documents and a space to store sensitive files securely.
Establishing a home office is an affordable starting point, especially helpful during the early planning and development stages of your spa before securing a separate facility. Expect to spend around $500-2,000 to set up proper workstation equipment and transform a spare room into a functional workspace.
However, meeting with partners or employees at home risks blending business and personal life excessively. As your staff expands, consider utilizing a shared coworking space like WeWork to gain a business mailing address along with standard meeting and private office access. WeWork sells tiered memberships starting around $45/month for lounge access up to $500 monthly for dedicated desks and $1,200+ for private offices.
Smaller independent spa owners may find leasing time in a commercial office setting with meeting rooms conducive for handling managerial obligations while passing all service delivery costs onto the building landlord. Expect leasing office spaces sized from 150-500 square feet to cost approximately $1,000-2,500 monthly based on location, layout, and market rates.
10. Source Your Equipment
Outfitting your spa with the necessary equipment to offer an array of treatments requires a careful selection of quality pieces tailored to your menu of services. When reviewing options, weigh factors like upfront affordability with equipment lifespans, service contracts, and potential resale values.
Buying brand-new specialized equipment from reputable medical esthetics suppliers such as Pedisource ensures receipt of warranties and service packages. However, with professional steamers starting at around $2,000 and microdermabrasion devices hovering from $4,000-$6,000, acquiring an entire spa’s necessities demands major capital most entrepreneurs lack pre-launch.
Purchasing gently used equipment through auction sites like eBay, Craigslist, Letgo, or Facebook Marketplace can net dramatic savings, with steamers and facial beds often available for under $500. Vet sellers thoroughly about original costs, item conditions, maintenance records, defects, or necessary repairs before finalizing transactions. Also, confirm compatibility with standard outlets and water lines if purchasing hydrotherapy tubs.
Renting or leasing essential big-ticket spa equipment also eases initial investments while providing newer models matching current industry standards. Companies often offer 12-60 month leasing and rent-to-own programs with flexible options should needs change. However, monthly fees lasting years often tally more than outright purchasing so compare terms prudently.
New spa owners mixing leased tech like hydrotherapy tubs with used tables and steamers sourced affordably from individuals often strike an ideal balance of quality equipment, budget alignment, and retail price point optimization. This facilitates delivering excellent experiences without sacrificing profits to extreme equipment loans. Just ensure mixing certified techs and second-hand suppliers won’t nullify any warranties.
11. Establish Your Brand Assets
Crafting a strong brand identity helps spas connect with ideal clients while conveying expertise. From logos and taglines to websites and business cards, ensuring brand elements align boosts recognition and trust.
Get a Business Phone Number
An official business phone line exudes professionalism when booking appointments or corresponding with vendors. Services like RingCentral provide toll-free numbers, call routing to any device, voicemail transcription, and text messaging starting at $30/month.
Design a Logo
A polished logo encapsulates your spa’s personality and offerings at a glance. Consider messaging, fonts, and design elements that resonate with your target demographic. Sites like Looka offer DIY logo makers or custom designer services to match any vision and budget.
Print Business Cards
Professionally printed business cards also help make memorable first impressions while networking or corresponding with visitors. Sites like Vistaprint sell affordable card stock with a turnaround of as little as 24 hours.
Get a Domain Name
Your domain name also plays a key brand-building role. Choosing an easy-to-say spa name without odd spellings or hyphens makes recall simpler for patrons and website visitors. Check availability by searching sites like Namecheap before finalizing your preferred spa identity.
Design a Website
While admiring luxe spa surroundings sparks intrigue, an informative website drives conversions by detailing signature services, educating on modalities, showcasing staff expertise, and simplifying online bookings. Leverage user-friendly platforms like Wix to create sites yourself or hire web developers on marketplaces like Fiverr if lacking tech skills.
12. Join Associations and Groups
Tapping into local and national associations provides invaluable connections with industry peers also navigating the world of spa ownership. Comparing notes on proven marketing tactics, vendor relations, staffing insights, and service expansions leads to faster growth.
Joining an international spa association, or a localized association like the Day Spa Association grants access to annual conferences, regulatory advocacy, discounted insurance, point-of-sale systems, and more. Regional groups like the Central Florida Day Spa Association unlock localized support by mixing with area spa owners at regular meetings to discuss community partnership opportunities.
Attend smaller community events by using sites like Meetup to find regional wellness networking mixers, usually free to join. Swapping business cards in person often yields local mentorships that would never blossom remotely.
Social media also opens networking pathways impossible decades ago. For example, the Cosmetic Laser Clinic Med Spa Owners Group, and Spa Owners Business Forum represent organizations with thousands of members. Post questions to receive guidance from spa veterans across the world. Review filed topics for insights into managing seasonal slowdowns, compensation structure ideas, receptionist interview questions, software reviews, and more.
13. How to Market a Spa Business
Implementing an integrated marketing strategy is essential for spas to attract new clients while keeping existing patrons engaged. Thoughtfully promoting your services across digital channels and traditional outlets maximizes visibility within your community.
Recognize that raving fans provide extremely effective and free testimonials to spark referrals. Offer loyal customers incentives like complimentary add-on treatments to motivate sharing positive reviews. Or implement a formal rewards program where points earned for booking sessions and retail purchases unlock free monthly chair massages.
When it comes to digital marketing, consider tactics like:
- Google Ads – Target local searchers by promoting service pages or exclusive seasonal promotions to nearby residents searching for relevant keywords. Expect to budget anywhere from $100-500+ per month based on the competitiveness of keywords, ad position, and conversion goals.
- Facebook/Instagram Ads – Create limited-time discounts for first-time clients and current patrons to book directly through your social media channels. Implement retargeting pixels to display deals to previous website visitors across platforms driving them back to finalize bookings.
- Start a YouTube Channel – Publish regular tutorials teaching at-home facial massages or demonstrating easy DIY body scrubs with pantry staples. Position your spa’s estheticians as trusted experts.
- Email Marketing – Send existing customers birthday discounts and announcements of new treatment options added to retain their business instead of them trying competitors.
- Build an Email List – Offer a free skincare eBook or relaxation playlist to visitors willing to share their email addresses with popup forms on your site. Send informative newsletters with quick wellness tips to nurture leads until they book.
More traditional outlets still effectively bolster branding for some spa models:
- Direct Mail Postcards – Spotlight seasonal services like soothing facials ideal for summer vacations or hydrating hand treatments before winter events. Include one-time promo codes.
- Wellness Fair Booths – Exhibit at large community health events allowing hands-on demos from technicians with mini massages or paraffin dips to capture leads.
- Print Advertisements – Local publications often slim down rates for small spa ads and some sick patients read waiting room magazines welcoming relaxing escapes.
- Flyer Campaigns – Distribute details on student and military discounts to penetrate different markets with tight budgets but high-stress seeking your spa.
Consistency across channels and capitalizing on loyal brand fans drive conversions best long-term by reinforcing your spa as the premier regional provider.
14. Focus on the Customer
Delivering exceptional customer service is paramount for spas to retain a loyal clientele in an increasingly competitive market. How you make patrons feel before, during, and after appointments directly impact your reputation and bottom line.
Consider that over half of all consumers seek online reviews before booking spa services. A few glowing testimonials highlighting your therapists’ attentiveness or serene environment reassure first-timers. In contrast, visible complaints of rushed treatments or incorrect service durations turn visitors away.
Even small gestures like remembering preferred scents for sheet sprayers or quick check-in texts when running behind show you value customers’ time. Explaining each step while clients relax with cucumber eye masks personalizes each session rather than feeling processed through a spa factory.
Similarly, following up post-treatment with discounted retail offers rewarding return visits cements you as their go-to sanctuary for self-care instead of losing them to potentially cheaper corporate competitors.
With skinny profit margins of around 50-60% industrywide, losing several monthly customers to poor word of mouth instantly impacts your bottom line. Yet clients who feel pampered refer friends for everything from pre-vacation body scrubs to wedding party glow-ups.