Scenario No. 1: A new salon owner decides to augment his tanning business with swimwear. Less than a year later, he liquidates his inventory because he is unable to finance and display the wide range of sizes and styles necessary to attract buyers.
Scenario No. 2: A successful urban salon, intent on leveraging its existing clientele, spends thousands of dollars to receive a massage-establishment license. Preferring to have massage staff present rather than on-call for posted massage hours, it becomes difficult to match client schedules with preferred providers. Ultimately, the salon discontinues the service less than 24 months later.
Scenario No. 3: An salon owner brings in light therapy equipment, only to return it unused after realizing the marketing approach is incompatible with existing staff and advertising practices.
The tanning industry is frequently targeted for new technologies and services, such as those mentioned above. The appeal is generally presented as the opportunity to:
- Even out cash flow by having non-seasonal or counter-seasonal services.
- Increase per-client income generated from additional services.
- Increase foot traffic attracted by the new ancillary services.
- Use excess floor space.
Unfortunately, the appeal isn’t always the reality. I am the salon owner mentioned in all three of those scenarios above—since then, I’ve become a major proponent of focused business plans and have become leery of venturing too far from my core business. For me, focusing on tanning is the best approach. But, I have several friends who own successful salons with a wide range of services. So, why is something successful at one salon and inappropriate at another—and better yet, how do you figure that out before you add the service?
The key is to look past the general reasons for why a service should work in this industry; instead, focus on evaluating the specific service in regard to your personal situation. To determine the financial viability of an add-on service for your salon, you’ll need to consider five things: personnel, space, marketing, capital and cash flow.
Personnel. Will the prospective service integrate with existing employee duties and functions? Is the service easy to explain and sell, or is it time-intensive? Is the level of salesmanship needed consistent with your current sales strategies and staff? Also determine the cleaning and maintenance requirements of the new equipment (between uses, as well as on a weekly and monthly basis). Will this require additional staffing? How will this new service affect salon operations during the busiest weeks of your tanning season?
Space. Where will you locate the new service? What alternative uses do you have for that space? What are the code requirements to perform this service, or to remodel for it? Also compare how the anticipated service matches up to the square-foot earning power of another tanning bed in the same space.
Marketing. The new service should provide marketing plans and materials to assist in developing your new service—make sure to review these materials before you make a commitment, so that you understand how they suggest selling the service. Will the sales and marketing recommendations require a new approach for you and your staff? Will new advertising campaigns be needed, or can marketing the new service dovetail with existing marketing strategies? Is your principal client base also the target audience for the new service? If not, map out how you would train your staff, and how you would identify and attract clients.
Capital. How will you finance the addition of this new service? Will it require purchasing equipment, remodeling and/or installation? What are the inventory levels specific to the service, and how will they be financed? Will you still have a prudent financial reserve after the investment?
Cash Flow. Develop your own cash-flow models for the service using your local conditions, conservative income assumptions and an allowance for unexpected expenses. Compare your numbers to the cash-flow analysis provided by the vendor and call out any discrepancies. Be sure that you understand the vendor’s assumptions—how complete is the analysis, especially in regard to the expense side?
From this process, you’ll develop a better understanding of the new service. Assuming you’re comfortable with the above, delve into the nuts and bolts. Read and understand the warranty. For an electrical device, find out if it is UL (or comparably) listed? Find out about the lead time for installation, and whether the vendor will install and test the equipment on-site. Also arrange for promotional materials prior to installation to build excitement. Talk to other salons that provide the service. And, be sure to realize that it takes time to develop any new service—give it enough time to succeed.
Overall, supplementary services can contribute meaningfully to your business success, and a thorough evaluation before committing to the new service will enhance your chance to succeed and thrive with the new venture.
Craig Joyner has been the owner of San Francisco-based Great Tan since 1992. The salon, which was established in 1982, is one of the longest-standing salons in the nation, and has since expanded to three locations. He is a founder of CITTO (California Indoor Tanning Trade Organization) and was its first president. He also is an active member of the Vitamin D Foundation advisory board. Joyner graduated from Oklahoma State University and worked in agricultural commodities trading for 19 years. He is an avid San Francisco Giants fan and ticket holder, and enjoys fishing, hiking and other outdoor activities. He also is an amateur photographer.
