B2B Payments

How Back-Office FinTech Boosts Spas’ Recurring Revenue Opportunity

Every small business (SMB) and entrepreneur wants to boost revenue, and recurring customers are a welcome source of cash inflows. However, for salons and spas, reliance on recurring sales can be critical to business success.

Back-office technology is paramount in supporting an elevated consumer experience, but this industry struggles with additional, industry-specific back-office challenges, as Matt Danna, co-founder and CEO of Boulevard, recently told PYMNTS.

Consider, for a moment, how common it is for a customer to change or cancel an appointment made with a salon or spa. According to Danna, these changes, which often occur last-minute, not only mean sudden lost revenues for these businesses, but jeopardize the ability for a salon or spa to continue working with that customer as a future client.

“Salons and spas have very specific operating procedures that cannot be shoehorned from other horizontal [point-of-sale (POS)] or vertical [Software-as-a-Service (SaaS)] platforms,” Danna explained. He added that the U.S. salon and spa market today captures more than $200 billion in consumer spend, according to the U.S. Bureau of Labor Statistics, meaning “it’s a big enough market to justify an industry-specific platform.”

Investors think so, too, with Index Ventures recently leading a Series A funding round for Boulevard to the tune of $11 million. Backers also included Bonfire Ventures, Ludlow Ventures, BoxGroup and Luma Launch.

Designing an industry-specific platform means integrating features, and addressing industry-specific challenges. In this market, that means last-minute cancellations or no-shows, as well as support for the industry’s reliance on recurring clients.

“The rule of thumb is that they need to make 90 percent of their revenue from their existing clients,” said Danna. “However, they have not been properly equipped with technology that helps convert customers from visitors into valuable, long-term clients. They need something more than just a POS — they need [customer relationship management (CRM)].”

In other words, while supporting the customer experience certainly means adopting high-quality, customer-facing technologies, like a POS, it must also include a back-office strategy, like CRM technology.

Back-Office Challenges

CRM technology enables a salon or spa to analyze customer behavior, like product and service preferences. Aggregating industry-wide customer information can also support businesses’ ability to benchmark their performance against their peers, said Danna.

However, a better customer experience — and a higher chance of a recurring client — involves more than analyzing such trends. Inventory management is another component of supporting the customer experience. After all, it’s one thing to analyze data to understand which products and services generate the most revenue. It’s another to ensure that those products are in stock in anticipation of that demand.

As Danna explained, this market operates with two kinds of inventory: appointment slots and retail products. While product sales can support revenue generation, he noted that this should only make up about 10 percent of cash inflows. The rest stems from maximizing schedule availability — and using technology to minimize gaps in the schedule or no-show clients, using analytics to understand a past customer’s history of no-shows and other metrics.

A Better Provider Experience

Another unique aspect of this market is that many of the technicians and service providers working within an SMB can also be “solopreneurs,” operating as independent businesses, and often using various venues in which to provide their services.

This means that platforms supporting back-office operations must not only be designed for the managers of these venues, but for the service providers in need of scheduling technology to minimize those gaps. Multi-location support is crucial for this market, said Danna, as is customization, allowing professionals to work at different locations.

Just as back-office technology must support a better customer experience, these tools must also enhance the service provider’s experience. They must provide support for salon owners and managers to check out clients on behalf of the 1099 workers who serviced them, yet ensure the funds are deposited directly into that professional’s bank account, while maintaining compliance to employee classification and compensation laws.

Finally, integration across platforms, from the front office to the back, means synchronized and automated data entry and reconciliation between the POS, accounting platforms and ERP systems — for accuracy and transparency in company financials.

As businesses of all verticals and sizes continue to digitize, the connection between consumer-facing operations and the back office becomes clearer. Yet, in the salon and spa market, with businesses so reliant on customer satisfaction for recurring revenue, as well as on independent professionals operating across venues, such connectivity is even more crucial for stronger cash flow.



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