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Mike Booth, owner of Massage Athletica, works with client Michael Still in Winnipeg (JOHN WOODS FOR THE GLOBE AND MAIL)
Mike Booth, owner of Massage Athletica, works with client Michael Still in Winnipeg (JOHN WOODS FOR THE GLOBE AND MAIL)

The Challenge

Is startup jumping the expansion gun? Add to ...

Each week, we seek out expert advice to help a small or medium-sized company overcome a key issue.

Business has been busy at Massage Athletica Inc. in Winnipeg, where the five registered massage therapists see more than 150 patients a week.

With revenue at the 10-month-old business growing by 10 per cent to 15 per cent each month, the sports massage therapy clinic’s appointment calendar is often booked to full capacity, especially during its peak hours, from 3 p.m. to 7 p.m.

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“On average, we have been unable to service about two clients per day who are looking for a last-minute appointment,” says Mike Booth, founder and owner of Massage Athletica, a clinic that specializes in sports injuries and conditioning but whose roster of patients also includes non-athletic types. .

Mr. Booth, an elite runner and registered massage therapist himself who is well-known in the Winnipeg area for an unprecedented four wins at the Manitoba Marathon, is now thinking of expanding Massage Athletica to meet the growing demand for his clinic’s services and further increase revenue.

This would mean hiring more massage therapists – probably three to start – and adding more treatment rooms, which Mr. Booth says would require Massage Athletica to either move to a bigger location or open a second clinic.

Even though his business is going strong, Mr. Booth is well aware of the risks of expansion and wonders if now is the right time to make this move. With so many massage clinics in the city, the startup is facing a lot of competition in a relatively small market.

But if an expansion gambit pays off, Massage Athletica could, by Mr. Booth’s calculations, increase revenue by 60 per cent to 100 per cent within a year.

“Ultimately, with more therapists on board, we could expand revenue by as much as 100 per cent,” Mr. Booth says. “But the big question is, is there enough demand in the Winnipeg market to warrant expansion, and if the answer is yes, should we move to a bigger space or open up a satellite clinic?”

The Challenge: Should the company expand now, and is a bigger location or a second clinic the best way to go?

THE EXPERTS WEIGH IN

Jenifer Bartman, founder and principal of Winnipeg-based Jenifer Bartman Business Advisory Services

It’s really critical to do your market research and to not be making assumptions and putting too much weight on what has happened in your business thus far.

Like a lot of entrepreneurs, Mr. Booth is probably very busy working day-to-day in the business and doesn’t have much time to devote to research and analysis. I suggest that he get professional help from someone who can help not only with the research but also with translating market data into a practical business strategy.

If market research shows that expansion makes sense, then Mr. Booth should try to minimize his capital expenses and fixed costs. Consider expanding gradually – maybe with one new therapist, instead of three – and making do with the space he currently has. As soon as you start signing leases, if the market turns on you, then you’re stuck with those big expenses.

Also, it looks like the clinic is busiest during its peak hours but still has periods during the day when it’s not fully booked. Mr. Booth should look into how he can fill in these non-peak hours, maybe by offering services to a market that is available during these times, such as to geriatric patients.

Kenneth Wong, marketing professor at Queen’s University School of Business, Kingston, Ont.

There has to be a big whack of unserviced demand for this expansion to make sense, so he really needs to get a better grasp of what the current and future demand is like for his business. Once you get past that initial surge of success, each incremental customer gets harder and harder to win.

Informally, the easiest thing to do is to look around and see how many athletic leagues are opening up in Winnipeg. He might also want to look at the trends in the age of membership in these leagues. The fact that his clinic is at its busiest from three o’clock onwards suggests that he’s seeing a lot of high school and university students, and also a lot of professionals.

Since massage therapy is not covered by provincial health insurance, then demand for the service will be tied to the state of the economy because it’s a discretionary expenditure. Mr. Booth needs to be more cautious. One clinic instead of two would be the better choice because you have one overhead, one receptionist, one set of ads, one everything. It would be simpler and more economical.

Michelle DeMarchi, owner of PhysioPlus Health Group, Toronto

He’s only been in business for 10 months and hasn’t made it through the summer. Until he’s been through the entire full-year cycle, I recommend that he expand and maximize his current location before thinking about a bigger location or a second clinic. If he can sustain the kind of growth he’s been experiencing through the summer and fall, then at the end of the season he could consider moving or adding another location.

Another thing he should consider is expanding into other types of services and products within his current location. Maybe have a physiotherapist or chiropractor on site – that can really help to generate a lot of internal cross-references between his practitioners. He can also start carrying certain products which would be of interest to his patients, such as protein products or vitamins and supplements.

He should at least be up to 90- to 95-per-cent full all of the time, not just during peak hours. To build up his daytime slots, he might want to try to develop new referral sources, maybe build relationships with more sporting leagues. You don’t want to put all your eggs in one basket, and if the bulk of his referrals are coming from a few key sources, then that’s a bit risky.

THREE THINGS THE COMPANY CAN DO NOW

Analyse the market

Do research to assess current and future demand for the clinic’s services. calling local sporting leagues or, better yet, by hiring a professional.

Expand in his current location

Instead of moving to a bigger site or opening a second clinic, maximize operations at his current location, starting with filling up daytime slots, adding other products and services, and building relationships with sporting leagues.

Make no move before the fall

Complete a full-year cycle before making any significant changes to the business.

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