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Is It a Bad Idea to Start a Wellness Spa with Debt?

Dear Dangerously in Love with Your Finances,

I am a licensed massage therapist who recently purchased a wellness spa providing chiropractic, massage, and acupuncture services. I borrowed money from a bank to pay for the purchase.

Was it a bad idea for me to start a business with debt?

~ Feeling a little confused about debt.

Dear Feeling a Little Confused,

Well, congratulations on your purchase! We can’t change what has already been done, but it is normal to borrow money to buy a business.

Debt is not bad! What is bad is when you use debt to cover operational needs and expenses.

Think about things like the interest rates on the loans, your wellness spa’s general financial health, and your ability to make money. It’s important to have a clear budget, business plan, and plan for paying back the loan.

Keeping in mind that while running a wellness spa can be rewarding, navigating financial management can pose significant challenges. One common issue many health and wellness practitioners encounter is the temptation to use debt to cover everyday expenses. This is an attractive option in the short term, especially during times of economic uncertainty.

However, this strategy can lead to significant financial risks, threatening the stability of your wellness spa in the long run. Not using debt wisely can:

1. Disrupt Cash Flow

Using debt to finance everyday expenses can majorly impact your wellness spa’s cash flow. Repaying debt means that some of your revenue will need to be used to service this liability, reducing the capital available for your primary business functions. In the context of your wellness spa, this may result in reduced funding for crucial aspects like staff development, marketing initiatives, or other sectors necessary for the growth and success of your spa.

When your cash flow is compromised, it can disrupt your business’s balance and affect your spa’s smooth operation.

2. Hinder Business Growth

Relying heavily on debt for daily business expenses can significantly hinder the growth of your wellness spa. The responsibility to fulfill debt repayments can divert vital resources, considerably limiting the funds allocated to strategic growth initiatives. Such strategic growth initiatives may include equipment upgrades, new services, or staff training. Financial constraints can restrict your ability to explore, improve, or expand your spa, impacting its market competitiveness. Similarly, it could hinder your ability to adapt to changing market dynamics or client demands.

3. Enhance Financial Stress

Managing debt can be overwhelming, particularly when your wellness spa encounters economic downturns or other obstacles. Managing debt payments and operational costs can significantly impact your mental well-being and ability to focus on business growth.

To lower these financial risks, you need to carefully look at your wellness spa’s finances, look into other ways to get money, make a long-term financial plan and monitor cash flow.

Your wellness spa can be more resilient and ready for growth by finding new ways to make money, cutting costs that aren’t necessary, and keeping a healthy balance between debt and income.

If you need help with creating an in-depth cash flow to incorporate your debt payments, please do not hesitate to reach out.

As always, stay dangerously in love with your finances!

– Lozelle Mathai

Your Health, Wellness, & Fitness Accountant