1. Reevaluate Expenses
The coronavirus is forcing small businesses—who notoriously run on limited margins—to further identify areas for trimming expenses. In order to cushion themselves with as much capital as possible, spas should suspend any unnecessary spending while their businesses are closed, and consider re-opening with a limited offering of services so they can dedicate the funds they do have to fulfilling their core lucrative practices. To maintain positive relations with partners whose offerings aren’t currently needed, spa owners should first try to renegotiate the terms of their plans to delay or forgive payments, rather than cut ties altogether.
2. Maximize Available Resources
While some routine payments to vendors may be out of the budget so long as spa operations are on pause, other vendors’ offerings may prove to be valuable proponents of business’ continuity plans. It may not be a reality for brands to invest in new technologies during this time, but they should still contact their current providers to learn about any Coronavirus-specific initiatives they have launched to sustain business remotely, such as telecommunications tools for counseling clients from a distance.
3. Enlist the Small Business Association
The Small Business Association (SBA) is a resource for spas currently navigating difficult financial situations. The organization offers a number of loans—many of which are deferring their initial payments during this time—as well as guidance on how to refinance existing ones. Refinancing can be an attractive option for spas looking to access low-interest capital for keeping their company afloat in the coming months. For those who already have a non-delinquent SBA loan (either 7(a), 504 or a microloan), the SBA will pick up those payments for the next six months. And for those who do not have an SBA micro-loan but would like one, the SBA is also issuing new owns from now until September 27, 2020, at low rates to help businesses to survive this coronavirus turmoil and then thrive in its aftermath.
4. Apply for CARES Loans
As part of the recently passed CARES Act, a program designed to deliver relief funding to citizens and businesses currently facing financial hardships as a result of the pandemic, the SBA is facilitating payroll loans via the Paycheck Protection Program (PPP) and disaster loans via the Economic Injury Disaster Loan Program. Although both programs have exhausted their funding, the federal government is renegotiating their balances, which means business owners should be educated and ready to act if they require additional support. These loans require no personal guarantees, meaning that defaulting on repayments will not impact borrowers’ credit ratings. To qualify for CARES funding, a business needs to have been operating in the U.S. as of February 15, 2020, have fewer than 500 employees, and have suffered substantial economic injury as a result of this declared disaster. Though, for an industry upended by stay-at-home advisories, that may feel like nearly all of them.
So long as businesses are closed, the PPP incentivizes spas to keep workers on payroll by providing them with funds to support those employees despite no new revenue. Up to 25 percent of the amount granted can be also used for facility rent and utilities, and no repayment is required for the first six months. The program mandates that if borrowers (including those who are self-employed or independent contractors) abide by all terms of the loan, such as repayments at a 1 percent interest rate, then the lender will ultimately forgive the amount loaned after two years. The alternate option, EIDLs, do not replace lost sales or revenue, though they can assist with the repair and rebuilding of disaster losses by providing businesses with the funds needed to maintain reasonable working capital that can be used to meet outstanding financial obligations.
5. Prepare for Re-Opening
When spas are eventually allowed to re-open, their owners need to be prepared to handle the inevitable influx of customers. The ability to do this starts with an efficient, organized booking system. Deploying a digital platform is a strong option, as it will allow customers to make appointments in the weeks prior to re-opening and in turn provide spa staff with an up-to-date record around which they can appropriately structure re-opening business hours and staffing. Additionally, spas need to announce to customers and prospects when they will be back in business, as well as what services will be available at that time. The best way for spas to do this is by deploying mass messages via either email or text to reach all customers and prospects in their databases, which can also be done using a dynamic digital platform.
Every year, the tens of thousands of spas in the U.S. collectively serve billions of visits. In order to continue supporting consumers once stay-at-home advisories lift, spa owners need to think critically about how they can use this time to best position themselves for future success. While it may seem impossible now, maintaining capital and employees will be critical for spas to emerge from this crisis on the right foot. Working with partners and applying for relief funding, spas can strengthen—or at least sustain— their operations to weather their current financial hardships.