Article by Robert Medhurst BNat, DRM
There are many articles written on the processes you can employ to build your massage business, but what are the things to look out for to avoid failure? This is what the author of ‘The Business of Healing’, Rob Medhurst offer four reasons….
Overextending yourself on set-up costs
If you’re one of the rare and precious individuals who’ve set yourself up in commercial premises, thank you. You’ve bitten the bullet and decided to give this massage business everything you’ve got. We need more of you. There’s a good chance that you’ll do well but have you bitten off more than you can chew? With a rental bond, insurance, stamp duty, phone connection, signage, advertising, Yellow Pages, business cards, brochures, towels, massage table, furniture etc to pay for or pay off, if you’ve borrowed the money to get things underway, are you managing to cope? People who get themselves into this situation often give up and go back to what they were doing before, which is a great loss, both to them and the community that could have benefited from their skills. What should they have done? Planned things out and taken one small step at a time. Students contemplating practice need to carefully research exactly what it’s going to cost them to set up a successful massage practice. Rather than going straight into rented premises it may be more useful at the outset to work part-time from home so that you can still feed yourself and your loved ones while the business builds up and then, once you’ve got a reasonable client base on the books, investigate the transition to full-time practice in commercial premises. If it’s too late to do that, you obviously need to do one or both of two things- get more cash or get more clients. For the latter, see the next paragraph. More cash, unless you can liquidate some of your assets, can legally only be acquired through borrowing it or taking on a partner. You can read more on both of these options in the book mentioned below but in brief, the cheapest way of getting long term finance is by extending the amount of a home loan if you have one, or, in the short term, negotiating an overdraft with your bank. Taking on a partner can be slightly more tricky and this again is elaborated on in the book mentioned below, but either option will be made easier if you produce a business plan that clearly explains what you need, why you need it and how easy it will be for the business to repay the loan or enrich the investing partner. Formulating things into a business plan will also help you to clarify your goals and ensure that they’re achievable.
Not enough clients
Not enough clients obviously means not enough income and a lack of this is the most common reason for a business to fail. But how many clients is enough? We can look at this using “break-even” calculations. Say for example that your weekly business costs total $500. If the average client brings $50 into the clinic you’ll need 10 clients ($500 divided by $50) to keep your door open. If you’d actually like to make some money out of your practice, say $1000 per week gross, you’ll need to see 30 clients per week ($500 + $1000 divided by $50). The magic word here is marketing. Unless you have some form of effective marketing strategy in place it’s going to be difficult to keep your appointment book full. The Yellow Pages and referrals from existing clients are the two most useful sources of new clients. However, these will normally only take on some level of significance after you’re been in practice for a while and even then, may not be bringing in the number of clients you need. Marketing is all about letting the community you work in know who you are, what you’ve got that they need, and motivating them to ask you for it. Successful marketing has a few essential elements.
- Research – you need to find out what the community’s needs are and the best way to reach them with advertising.
- Competitive advantage – you need to know what you have, that no-one else has, that will meet the needs of the community.
- Advertising – you need to be able to:
- Communicate your competitive advantage to the community in a way that will attract their attention.
- Identify their needs.
- Offer a tangible solution to those needs that they’ll understand.
- Have some means of stimulating them to contact you.
Clients don’t come back
If a client you’ve treated doesn’t return to the clinic, in most cases it’ll be because you’ve done a good job and the original problem you treated hasn’t returned, so no further treatment was required. However, if the client has a recurrence of the problem and they fail to come back to you for treatment, there may be a problem. If this situation occurs often enough you’ll mostly be seeing new clients and while these are necessary for growth, it’s the regular clients who’ll enable you to stay in business. There could be a large number of reasons why clients don’t become regular clients. The best way to find out what’s going on here is to conduct an external audit of your business. The critical point here is to ensure that this audit is done from the view of those outside the business looking in, not those inside the business looking out. You may think your business is healthy and functioning properly but your view of it may be slightly biased and may well be different to the view taken by clients and potential clients. One method often employed by those conducting external audits is to ask past clients, current clients, suppliers and anyone else dealing with your business one simple question- how can the clinic improve its current operation? It helps to have someone other than you ask this question and the responses to it should be anonymous. After you’ve allowed enough time for this process to occur, collect the responses and group them into categories relating to each separate issue that’s raised. For example, you may have 75 responses and 50 of these relate to perception that your clinic is untidy, 10 may relate to difficulties in parking near your clinic, 8 may relate to the way you communicate with people and 7 may relate to your pricing. If you prioritise these into those causing the most concern to those causing the least concern and dealing with these in that order of priority, and through your marketing let the community and specifically past clients know that these issues have been addressed, you should find that the situation improves. As a final point here it’s useful to bear in mind that businesses that do the little extra things for clients that they don’t need to do are the ones that prosper.
Poor financial management
Along with a lack of clients and subsequent income, this is one of the main reasons for business failure. The kinds of things that can trip you up here are:
- Failure to allow for regular expenses such as tax, rent etc. If you know when regular expenses are due, bank the money for these into a separate account used solely for expenses so that you have this available when the expense is due. It may be that you need to bank half of the income from every treatment to achieve this.
- Failure to allow for unexpected expenses such as equipment repairs or replacement. You should also maintain a slush fund that allows you the flexibility to cover any unforeseen expenses.
- Failure to charge appropriate prices for your services. The appropriate price in one that the market will bear, isn’t too far from the community average for your type of services and isn’t prohibitive for those on low incomes. Don’t be squeamish about raising your prices if your costs increase, as they will naturally do.
- Failure to maintain enough funds to allow you to stay afloat while the business builds up to a break-even point. For most businesses it’ll take anywhere from 3 to 12 months before the business breaks even, i.e. can fund its own existence. This is before you start to draw a wage from it. You should have enough funds behind you or regular income coming in from other sources while the business builds up to the point where it can support you.
- Failure to monitor your finances generally but particularly rising expense levels and falling profit levels. Profit is obviously what’s left after you subtract expenses from income. Many practitioners who find their cash flow is occasionally a little tight, might not be aware that during these times they’re actually paying to treat their clients rather than the other way around. This is because their expense levels have risen above their income levels. Unless you’re hit with some form of extraordinary expense, monitoring income and expenses on a weekly and monthly basis will enable you to see this problem coming before it strikes. Being forewarned of the trend, you should be able to do things such as boost your marketing activities to attract more clients into the clinic to avoid the problem.
Robert Medhurst is a South Australian naturopath, homeopath, former lecturer in therapeutic massage who has been a teaching business management to non-medical healthcare therapists since 1994. He is the author of the book, The Business of Healing.