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1. What is the purpose of a budget?
Provide a forecast of revenues and expenditures, that is, construct a model of how the business might perform financially assuming certain strategies, events and plans are carried out. Enable the actual financial operation of the business to be measured against the forecast (i.e. measure how well you do) by the P&L. Establish the cost constraint for a project, program, or operation (i.e. how much money you can spend).
2. For whom is it prepared?
Owner– owners do not always understand spas and the way they work. What they do understand are budgets, statistics and the language of finance. The budget is your connection with the owners or investors to let them know what your vision is for the spa and to get means to achieve your vision. If you are able to perform within your budget, you gain respect and are often rewarded monetarily.
Superiors such as the General Manager – is the same as with the owners, although the understanding of spa operations might be greater, there is still a knowledge gap and if you can communicate with a GM with data instead of feelings, you will make great progress.
Spa manager – the budget is a great tool for you as a spa manager to know what your goal is, what you have to spend to reach the goal and it is further a way to communicate your vision and obtain means to invest in that vision. Your budget will guide you in your decisions and strategies, such as for example your marketing plan where you know how much you need to sell and how much you have to spend on marketing and then you can from that do a plan that falls within the budget.
Staff – although therapists might not be that interested in figures, everyone is interested in understanding goals, how to achieve them and celebrate when you reach them. Just as you need to communicate with your superiors in their language, you need to find a way to communicate with the therapists in a financial language that makes sense to them. You can break down goals in a way that it has meaning to each person working in the spa and for them to know on a daily basis what they, themselves, need to achieve to reach that goal.
Outside interest – you will get questions on what your turnover is, profit, staffing budget etc. and it is your duty to know the answers, being responsible for the spa.
3. Name 4 different budget types.
a. Capital, sales, marketing, project
b. Internal, sales, retail, marketing, project
c. External, project, marketing, revenue
4. Explain briefly the following terms: Amortization, Depreciation, ROI, Accounts Payable, Accounts Receivable, and Balance Sheet.
Amortization: The act of decreasing or reducing something, payment of an obligation in a series of instalments or transfers.
Depreciation: An expense that reduces the value of an asset as a result of wear and tear, age, or obsolescence.
ROI: Return On Investment
ACCOUNTS PAYABLE: Money owed to suppliers.
ACCOUNTS RECEIVABLE: Money owed by customers
BALANCE SHEET: Also called the statement of financial condition, it is a summary of the assets, liabilities, and owners’ equity.
5. What is cost of sales?
Normally products used in treatments, but there are different methods for different companies and some, for example, also put laundry and guest supplies here as well.
6. What is included in operation expenses?
Telephone, travel, guest supplies, electricity, cleaning supplies, marketing costs etc.
7. What does KPI stand for?
a. Key Performance Indicators
b. Key People Initiatives
c. Key Personal items
8. Please, name at least 4 important KPIs.
Any of the following: Capture ratio, Spa guest/Hotel guest ratio, Spa revenue per occupied room, Treatment room occupancy, Mystery Shopper, Guest statistics, Therapist occupancy, Retail sales.
9. Please provide the % range for different treatment types in a hotel spa.
a. Massage: 60-80%
b. Facials: 5-20%
c. Manicure/Pedicure: 5-15%
d. Body Treatments: 5-30%
e. Others/Beauty: 1-10%
10. Under which % when performed should treatments be taken out of the menu? a. 1%, b. 2%, c. 5%, d. 8%.
11. What is Capture Ratio?
a. The ratio of retail sales to treatment sales
b. The ratio spa guests to hotel guests
c. The ratio male to female guests
12. What are the Capture Ratio benchmarks for a resort hotel spa?
a. Great – more than 30%
b. Good more than 20%
c. OK – 10-20%
d. Not OK – below 10%
13. Please explain the following terms: a. Spa Revenue per Occupied room, b. Treatment room Occupancy, and c. Therapist Occupancy.
a. Spa Revenue per Occupied room: spa revenue per occupied hotel room
b. Treatment room Occupancy: it is a description of the actual treatment hours per day as a percentage of the total number of treatment hours available.
c. Therapist Occupancy: Treatment hours per day / Hours scheduled per day
14. Name 5 reasons for inventory shrinkage.
1. Employee theft – 56%
2. Shop lifting – 21%
3. Back door receiving – 10%
4. Pricing and accounting – 9%
5. Product damage – 4%
15. What does revenue management aim for?
Selling the right product to the right customer at the right time for the right price.