| H istorically, the club industry regarded massage
as little more than an amenity - a break-even service made available to members as a convenience. During the last few years, this notion has changed dramatically as owners have seen, that in order to grow, they need to maximize nonmembership revenue, and simultaneously, have observed the popularity of spa products both locally and nationally.
One of the first issues a club must deal with in this new "for-profit" scenario is to ensure that the compensation it pays is financially realistic. All too often, it isn't. Under the old amenity model, clubs typically paid outside contractors 80% of the massage service revenue, and kept 20% to defray overhead and operating expenses. In order to be financially viable, however, the provider payroll shouldn't exceed 50%, with 40% (ex benefits) being the optimal arrangement.
When switching to the new compensation structure, you may find that outside contractors who are used to the 80% figure will balk at receiving anything less. One of the best ways to hold onto to them is to make them employees, which offers several persuasive inducements:
First, they will be eligible for benefits such as health and dental insurance, workmen's compensation, disability and unemployment protection, and, if you offer one, a 401K plan. They will also be relieved of 50% of the 14% self-employment tax, which the club will assume. Furthermore, having them on the payroll will help guarantee service quality and avoid any IRS conflicts. Second, as employees, they profit significantly from your in-house, spa service training program. Such a program will extend the providers' useful professional life by teaching them to give services other than massage.
While, initially, they may be skeptical, if you take a pencil to paper and explain what such an arrangement is worth in dollars and cents, you may well turn some of your contractors into converts.
Despite your good intentions and best efforts, you may find that you may have to let some old friends go and recruit new staff. Don't be afraid to do so: your spa will not survive it you continue to pay the high commissions that you've paid in the past.
About the Author
Deborah Smith is the founder of Smith, Club & Spa Specialists which designs, develops and consults with leading club and hotel resort properties in North America. She is recognized as an industry leader, and has 20 years top management experience in operations and development with leading properties such as Fisher Island's Spa Internazionale, The Aspen Club, and Wellness & Lifestyle Corporation.
Ms. Smith holds a Masters degree in Business Administration, and her expertise includes market feasibilty studies, business plans, design development, and direct management. An active leader and participant of ISPA (International Spa Association) for the past 8 years, she has served on its Board of Directors and presently is Co-Chair of the Benefits Committee
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