Long Run Costs and Economies of Scale

I would create a Spa Salon. It would be the best to start with a small business and as it grows turn it into a medium business by suggesting more services.

The following services could be offered from the very beginning:

·         Hair styling

·         Massages

·         Manicure and pedicure

·         Facials and skin treatment

·         Body treatments

·         Make up application

Two or three specialist will be required to offer the above range of services. Some spa salons operate with only couple employees but I think that specialization will increase professionalism and customer satisfaction.

When business becomes profitable it will be possible to offer more services like day spas, and operated with hotels several days spa programs. We can also suggest such services as weight loss and health supplements. The perfect size of business for this industry is medium – 10-12 employees (may be it is considered small). Smaller business is able to maintain closer relationships with its customers and provide more emotional satisfaction, which is critical for this type of business.

Spa salons usually target the local market. Demographically: young men between 17 and 28; and women between 15 and 55. Ideally Spa salon should be located in downtown to offer services to busy professionals.

Some costs the business will face are:

Long run costs: equipment and instruments, technology.

Short-run costs: working materials like creams, lotions, make up.

Fixed costs: rent, salaries, certificates, taxes.

The following article gives some idea to possible strengths and weaknesses of the business.

http://startingaspabusiness.com/

Strengths:

·         relatively small cost of starting the business

·         entry to industry is easy

·         high demand for services

·         industry is developing rapidly with new technology and new products

Weaknesses:

This business is highly dependent on quality of services provided. The article uses the term “happiness factor” which means complete and full customer satisfaction. The “word of mouth” sometimes means more than well done advertising program. People employed in the business will be the main factor of success. The best way to solve this problem is to create and maintain close relationships with highly trained professionals in the industry and offer them competitive salaries and working conditions in your business.