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Posted by Gillian Kenyon, Dec 2 2007 11:52AM

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Can Rent a room schemes help your business grow

Gillian Kenyon
Dec 2 2007 1:30PM
Like many of todays therapy practitioners, I retired from a successful career and completely retrained to become a therapist.

My background was in provision of business, marketing and consultancy services both as an employee, then as a manager, then director and for over 50% of my career, as owner/director of a small but prestigeous consultancy company. My observations of the business world of the therapist shocked me to say the least. Not much was covered in any of the therapy courses and my fellow student practitioners were clearly lost when it came to many areas of starting out on their own. One of the biggest dilemmas was the how and where to deliver services to the clients - particularly at the start when you have no client income.

My colleagues and I got together to share business knowledge and ideas. Our first was looking at our 'service' and unique selling proposition (what makes people use our services). It meant adresssing the question of how and where to deliver our services. As a group we weighed up whether to go mobile, rent a room, set up a retail outlet or work from a home location.

Fortunately, my financial circumstances allowed me to choose any option without needing to take additional mortgages, loans or to rent. Indeed, being a landlord of several properties anyway, I already had premises I could utilise if that option looked favourable. For other members in the group, it meant looking at whether they could get enough clients to cover their costs. For at least the first 12 -24 months, they needed to have enough funds to live on whilst generating a client base.

The costs and potential risks to personal safety meant mobile wasn't for many of us. We concluded you need to be a workaholic because market mobile rates are so very low and it is perceived as a 'low value' service by many clients. By the time travel time is taken into account the rate per hour would leave a therapist working to close to midnight every evening to make a go of it. Once enough clients had been built up, the return per client wouldn't be enough to simply share the client work with other practitioners. There isn't enough money from each treatment to be able to share the remuneration with someone else and both earn at a decent level.

The capital investment in owning a retail oultet was not a problem to me, but getting motgages and loans seemed out of reach for most of our group. Despite this, the benefits would be many. In the worst case scenario, if it didn't make a thriving business, we wouldn't need to care, knowing that to sell the property on in a year or two, there would still be enough value increase in the property to realise more returns on the money than putting it in the bank. That would be both profit and return on capital employed. It just needs self-financing or low rates of interest on any loan/mortgage and taper relief rules and capital gains rules to not move against the property owner's interests.

Like a significant number of business people, we could set up the premises as a 'rent a room' outlet where other self-employed practitioners contribute significantly to the fixed overheads, ie rent, rates, etc, leaving me to use the place as and when we wished. The fixed costs would be covered and so we would be able to discount heavily to undercharge all the competition in the area. We would have been able to afford to charge very low prices, set at the margin of variable cost for our services, knowing the renting therapists would be paying the fixed costs out of their rent payments to us.

The retail outlet would even be able to attract clients who could not afford to take the services of practitioners in the area - ie it could discount for DSS, pensioners, students, those on long term sickness etc etc. It would be 'giving' to the community and practitioners who rented rooms with me would be queuing up to rent space because we had so very many clients on the books.

Unfortunately, we considered that this wouldn't help us in the long term. It would be damaging to the practitioners in the area (particularly those paying rent in the shop) as it would drive down rates so no-one would be able to realise decent rates of remuneration. The very thing that brought in loads more clients would also be driving prices down in the area - it is know as cut throat pricing and is usually employed at the end of a mature market lifespan. Practitioners would be working hard all the time, with loads of clients, but they would be earning very little because the prices and discounts would have to be competitive with our own highly discounted prices. I don't consider this good business practice - particularly in the rising star phase of a growing market - such as complementary therapies. It also seems to convey a sense of desperation to get clients.

We also discussed the consideration that many practitioners use rent a room to estalish a client base and then leave to continue either working from home or mobile. Where client loyalty had been established those clients would then be lost to the retail outlet as they would follow the practitioners. As client numbers on the books fell, so too would be the number of practitioners who wanted to rent the rooms. A negative spiral could begin.

To prevent this and to ensure rent a room worked, we would need to set out to generate clientelle for our renting practitioners. It would have to pay enough for them to be able both to pay rent AND ensure they earned enough money from their working hours that they wanted to stay at the premises and not leave.

This is why so many Salons, Spas and Clinics have such plush interior decor and lovely surroundings and spend so much money on advertising and marketing. It is also why they only give special offers and discounts at times of low client utilisation and demand. The rest of the time, they charge at the higher end of market pricing. They don't boast to have more clients than anyone else. They are more concerned with ensuring both clients and practitioners expectations are met so they can attract the best and keep them.

As a renting practitioner then, we were thus led to ask if, instead of opening our own retail outlet, could rent a room schemes help grow our business ?.
The answer was definitely yes - with some provisos.

1 - Make sure you are not renting somewhere and taking your client base there unless the prices you can charge are set high enough to cover the fixed and variable costs PLUS have enough money left over to generate enough to cover what you want to earn per week after you have paid tax and expenses.

2 - Don't get involved in rent a room schemes that lock you in to doing all your own marketing. The premises owner is getting significant benefit from you being there. Ensure that they are doing regular promotion and advertising - and that does NOT mean discounting prices so you earn less! Agree the advertising plan in advance of each period of rental to which you commit and make sure there is a suitable claw back clause if it doesn't happen.

3 - Finally, agree a rental based on 'revenue generated' where the rent is one level if you find the client and a higher amount if they have introduced the client to you.

For those of our group who had sufficient room at home, not having to commit to the expenses of renting a room seemed the best option.

As for me - I concluded that I had travelled the roads and highways of the world far too much already. I didn't want to be tied to travelling and waiting for clients at a retail oultlet and I didn't want to work mobile. I have had a very fortunate, if hard working, life and consider myself blessed to be able to make this choice.

I simply fancied being able to work from my spacious home, out in the rural plains of Cheshire with its on-site offices and loft studio and to be able to give my clients a truly stress free treatment from my refreshed and happy self.

As a club of independetn practioners working from a whole host of different venues, when we have too many clients as a result of our marketing activities, we pass them to other member practitioners of The H Club. We are all independent therapists, some of whom rent rooms, some of whom are mobile, some of whom have their own studio rooms at home. But, we firmly believe that success is all about co-operating together to promote our profession.

Member practitioners of The H Club do not go about discounting and under-cutting each other to get the most clients. We have a club recommended retail price but each practitioner is free to charge what they feel they are worth. We respect and value each other in this.

If anyone needs to know more about what we do and how we work, we can be contacted by e-mail at: TheHClub@Hotmail.com

Maria Arpino
Oct 10 2011 6:44PM
As a therapist, who owns her own clinic, I have found it quite difficult to find a complementary therapist to rent my available therapy room. I have advertised in the papers but the only responses I get are from therapists who have just qualified and have no client base at all. I have offered schemes whereby the therapist only pays on an adhoc basis when they see a client, and no payment if a client cancels or they do not get bookings. However I have found that this sets up a situation whereby little or no effort on the part of the therapist is put into trying to get new clients; and I am left with the responsibility of advertising through my website, my leaflet production and other methods of advertising. This leaves me with putting all the money and effort in to promoting the therapists business almost entirely on my own. How does one get around this happening? I have always supported the therapists, given them the benefit of my experience, tried to advise them whilst leaving them to make their own decisions, and given periods of time free of charge to help them grow their business. I have suggested team work, and effort with collaboration in joint advertising or leaflet drops, outside of my advertising efforts, but to no avail.

So how do I find a therapist who is willing to put effort into promoting and building a client base for themselves, who wants to work more than 4 hours a week and who understands that team work draws in more clients.

I would be grateful for your advice.

thank you

Francesca

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