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Buying A Business
6 Questions to Ask Before Buying a Spa Business
Today, the spa industry is poised for continued prosperity. Thanks to society’s long-standing obsession with image and an ongoing wellness trend, the general public is seeking out ways to maintain well-being, both mentally and physically. If you’re wondering whether buying a spa business is right for you, utilize the following Sunbelt Business Brokers’ article to find out.
What to Consider Before Buying a Spa Business:
When it comes to buying spa business, knowledge is power. Ensure you are equipped with all of the facts in order to make a worthwhile investment.
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How Much Revenue Does the Spa Business Generate?
The international non-profit research and education resource, the Global Wellness Institute, states that spa and wellness is now a $3.7 trillion industry. No longer an exclusive activity of the super wealthy, spa services are becoming more affordable and attracting a larger clientele base, ensuring there is money to be made.
When considering buying a spa business, it is important to know how much possible revenue the spa could generate. Look at the surrounding population, keeping in mind that the largest segments of the industry belong to beauty and anti-aging. Successful spa businesses are typically located in heavily populated, easily accessible areas.
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What Is the Local Market Share?
In a highly saturated market of chain locations and independent day spas, business owners must consider how to differentiate their spa business. Take into consideration the local market share of the spa business you are considering purchasing. Is the ratio of spas to customers high? You’ll need to think about how the spa compares to the competition and develop ways to make your spa business stand out, including:
- Focusing on alternative treatments like meditation for mental wellness;
- Capitalizing on the luxury spa experience;
- Providing access to specialty saunas like infrared and “urban sweat lodges;”
- Offering a wide variety of services including skin care, massage therapy, waxing, manicures, and more;
- Creating menus with organic treatments and products; and
- Offering cutting-edge therapies like Floatation and Cryotherapy.
More and more customers are being drawn to local businesses and shops rather than the big box locations. Ensure the spa business you are considering for purchase is known for delivering a memorable experience.
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Why Is the Spa Business for Sale?
One of the most crucial questions to ask the spa business owner is, “Why are you selling your spa?” Common reasons for sale can include retirement, burnout, illness, or new opportunities. If the owner mentions poor performance or financial issues, you may want to reconsider your purchase. It is entirely possible that under new ownership the performance of the spa business may turn around, but if this is the case, you’ll want to play it safe and conduct further research before closing the deal.
Financial Questions to Ask Before Buying a Spa Business:
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Is This a Stock or Asset Sale?
Equipment, supplies, and furnishings add up quickly. During negotiations, determine what the sale is comprised of. Stock sales incorporate all interests, assets, and liabilities of the company while asset sales include only certain assets, with the owner retaining responsibility for liabilities.
Beyond that, is the spa equipment and furnishings included in the sale? A massage table alone can cost upwards of a couple hundred dollars. Buying all new furniture and supplies could add thousands more to an already sizable investment.
Is real estate included in the sale? If you’re happy with the location and want to stay in the existing space, be sure that the lease is transferable.
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How Much Is the Spa Business Worth?
Another important question to ask the spa owner is, “How did you arrive at your asking price?” From revenue to location, there are many value drivers that can impact the asking price of a spa business. Hopefully, the owner conducted a formal business valuation to inform the asking price.
By understanding how the owner reached their number, you will get a better sense of bargaining power. An asking price without a credible valuation behind it is likely to be negotiable.
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What Are the Current Business Expenses?
Are you still trying to get an idea of how much running a spa business will cost? Ask the current owner about their expenses. This can include things like employee compensation, raw materials, utility bills, licenses, and more. Use these details to calculate the average annual cost of maintaining the spa so you can determine your profit margins.
If you’re ready to browse spa businesses for sale, consider working with Sunbelt Business Brokers. With years of experience connecting buyers and sellers, you can depend on our business brokers to help you find your dream spa business. Plus, working with a professional business broker ensures you have an expert guiding you through every step of the business buying process from start to finish. Contact a Sunbelt office near you today to begin your journey to buying a spa business.
