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How to Improve Spa Profit Margin

By Boulevard . Jan.22.2025

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Increasing revenue and managing costs doesn’t have to be rocket science

In some ways, starting a spa business is the easy part — the challenge is making it profitable. To achieve the average spa profit margin of 10-15%, owners must balance every factor influencing cost and revenue without compromising on service quality. No small feat on the best of days.

Thankfully, there are several reliable strategies for increasing profitability while minimizing your costs. Want to know how to increase spa revenue? Let’s take a closer look at what spa owners should focus on.

How to improve your spa profit margin

Calculating your spa business profit margin is straightforward; increase your revenue while decreasing your expenses and boom, your profit margin will go up. How exactly you should go about doing that depends on everything from the economy to your location to where you are on your business journey. You’ll likely need to mix and match a number of the following strategies to hit that perfect sweet spot that spells success for your spa. Once you find the right balance, you’ll be on your way to a better profit margin and a better business.

Managing monthly expenses

Salaries

Every business is only as good as its team — and that team needs to get paid. Underpaying your staff is a rookie mistake; sure, it’ll help you keep your expenses down, but it puts you at serious risk of turnover and loss of revenue. 

When you lose an employee, you’re not just losing skilled professionals with valuable institutional knowledge. You’re also potentially losing clients who’ve come to rely on them for their treatments. What’s more, every lost team member incurs the additional costs of hiring a replacement, training them, and onboarding them. It’s in your best interests to keep your team invested in staying at your spa.

Your staff don’t stop being investments after they’re hired. By finding ways to reward and show appreciation for valuable team members, you’ll have a stronger team and drive better returns. The exact strategy may vary, but bonuses, benefits, and yes, raises, are good places to start.

Another idea is offering tiered commissions for higher-priced services. It incentivizes your providers to sign off and perform more services from the menu, rather than simply packing their schedules with the same massages and facials. They get a bigger payout, your spa gets more revenue, and your clients are exposed to treatments they’ll love and request again. Everyone wins!

Marketing

Clients are the lifeblood of your business, so marketing is a must for any spa. Your marketing budget probably won’t have room for expensive campaigns across every advertising channel. To manage costs, you need to get smart about how you reach customers.

First, determine which marketing efforts should be your top priority. In most cases, the answer isn’t new clients, but existing ones. Customer acquisition costs (CAC) is an ongoing expense for your business, but you’ve already spent that money on existing clients. Marketing to current clients therefore generally has a better return on investment (ROI) than trying to attract brand new ones. 

When a new client is paying their bill, ask them if they want to book another appointment. If a regular hasn’t visited in a while, an email may encourage them to come back. Use your marketing software to target clients who haven’t visited in a while, or even just to wish them happy birthday. Use the data you already have about them to create personalized messages that treat them like individuals, not numbers, and you’ll see results. 

You can’t neglect new clients entirely, of course. When marketing to new clients, figure out exactly where your target audience spends their time — whether in real-life or on social media. Then you can produce marketing content tailored for each channel, using targeting tools to put a laser focus on those most likely to respond.

Insurance

Insurance coverage is an expensive, but vital safety net for any business owner. While it’s not an expense you can avoid, that doesn’t mean you should just buy the first plan you come across.

Think about what kind of coverage you need:

  • Commercial property plans cover repair and replacement costs associated with business interruptions, such as when a flood or natural disaster occurs.

  • General liability protects your business against third-party claims, such as when a client slips and falls in your parking lot.

  • Professional liability applies to claims relating to your license or professional reputation, specifically malpractice.

  • Product insurance provides coverage for claims associated with supplies and equipment, such as burns or allergic reactions.

These insurance plans are essential for most spas, but specialized or all-inclusive plans — such as those bundling cybersecurity — may not be necessary for all. If you know what coverage you need before meeting with providers, you’re more likely to get a fair deal.

Utilities

Electricity and water are mandatory monthly expenses for a spa business, but there are still things you can do to reduce those bills. Energy-saving lightbulbs, dimmer switches, and windows that permit natural lighting can all reduce long-term costs. If you use heating or air conditioning systems, setting an optimal temperature instead of hot or cold extremes keeps it from overworking throughout the day.

Also, don’t forget about automated lighting and temperature systems. These can help you manage energy waste outside of regular business hours so you’re only paying while serving a client. Energy-saving appliances, both in treatment rooms and the staff dispensary, can also have a surprisingly big impact on your energy usage, so look for them whenever it’s time to add or replace existing equipment. 

Boosting spa revenue

Upsell services

Raising your prices is an obvious way to increase revenue, and it’s smart to revisit your menu from time to time to make sure you’re charging appropriate rates. But don’t overlook the power of upselling services during appointments. With an upsell, you’re increasing the amount of money earned per appointment, exceeding your projected estimates. Meanwhile, clients are getting more value from each appointment and are more likely to be satisfied.

Schedule your discounts

Discounts and promotions get clients in the door — and a quick bump of cash in the bank — but there are downsides to frequent price slashing. If you do discounts or deals too often, clients will often wait to book until the markdown, which plays havoc with your profit margins over the course of a year. One effective solution is considering when a discount occurs. If you schedule promotional prices during off-peak hours, you can still earn the premium revenue of busy hours while filling gaps in your schedule. Everybody wins.

Watch key performance indicators

If you first learn that monthly performance is plummeting from the end-of-month report, it’s too late to do anything to fix it. Instead, keep track of KPIs daily and compare benchmarks to projected revenue on your schedule. If you’re on track to meet or exceed your goals, great! But if there’s a problem, you can spot it early and take action. Spa marketing software can be a valuable tool on this front, especially if it generates automated reports and notifies you when certain events occur.

Maintaining a high spa profit margin isn’t easy, but it’s within your power. With the right strategies, it’s possible to reduce costs, boost revenue, and have peace of mind about day-to-day operations.

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