Clean Spa Concept Milk + Honey Surpasses $19M In Revenue And Readies For National Expansion
Spas don’t have be fancy-schmancy to be big business.
Milk + Honey surpassed $19 million in revenue last year based on a simple premise: healthy spa services provided in a healthy work environment. Now, backed by Keller Capital and Tim Ferriss, the company is poised to expand within its home state of Texas and beyond starting with an upcoming Los Angeles location.
“We’re really just a day spa, nothing trendy. You aren’t going to get any chocolate body wraps on Valentine’s Day,” says Milk + Honey founder Alissa Bayer. “We focus on excellent customer service, a beautiful, calm atmosphere and really talented, friendly people. There’s no secret sauce. We are just doing a lot of things really well, and we are constantly improving.”
Milk + Honey has steadily evolved its spa format. Bayer cobbled together $400,000 from bank debt, personal savings and funds from friends and family members to pay for its 2,500-square-foot first Austin spa in 2006. Today, it’s searching for locations in upscale shopping districts that average roughly 7,000 square feet and cost $3 million to $4.5 million to complete.
“We like to be where people are going to the spa, to lunch and doing some shopping. A lot of retail shopping centers are really struggling because everyone is moving online, so we are getting great deals lately, not so much on rent, but from landlords contributing to construction costs,” says Bayer. “We drive so much foot traffic to whatever area we are located in because we are busy and appointment-driven.”
Currently, Milk + Honey operates four Austin locations – a small salon unit at Arboretum Market is upgrading to a nearby 10,275-square foot spa and salon destination soon – and a Houston outpost. A Fort Worth location is slated to open in March, and Dallas and LA branches are expected to follow. Other cities across the country such as Denver and Atlanta are being evaluated for Milk + Honey spas as well.
“We focus on excellent customer service, a beautiful, calm atmosphere and really talented, friendly people. There’s no secret sauce. We are just doing a lot of things really well, and we are constantly improving.”
As it spreads, Bayer is keen on keeping Milk + Honey’s culture strong. The company’s aestheticians are employees, not independent contractors, and it offers health benefits, a 401(k) plan and two weeks of paid time off. It tries hard to identify genuine and competent people to fill roles, and doesn’t mind taking a while to hire them. Managers receive extensive training on the Milk + Honey philosophy.
“The heart and soul of Milk + Honey is that it’s not just a business that’s profitable, but that our employees, clients and vendors are better off for interacting with Milk + Honey,” says Bayer. “We want to do good, cause no harm and be a positive force in the community.”
To finance its impending locations, Milk + Honey sold a minority stake last year to a group of investors, including Keller Capital and Ferriss. Fearful of giving up control, Bayer reluctantly pursued outside investment to fortify Milk + Honey. In retrospect, she isn’t sure she should have waited so long. Bayer says, “If I had taken on investment earlier, I could have still been involved, but would have had more help to set up the infrastructure to grow the business.”
Bayer’s husband Shon, who joined Milk + Honey nearly nine years ago, officially became CEO of the company in 2018. Bayer’s position places her in charge of Milk + Honey’s products, which she relishes for giving her an opportunity to unleash her creativity, and spa location selection. She realizes she can’t have her hands in all parts of a swelling Milk + Honey.
“As a mother of three young kids and a busy business owner, I have figured out that, for my own sanity, anything I can delegate, I will delegate, and I’m not apologetic about that,” says Bayer, emphasizing the challenges of balancing motherhood and entrepreneurship shouldn’t be underestimated. “It took me many years to get pregnant, and having twins and another child has put a damper on my energy and mental bandwidth.”
Milk + Honey introduced products eight years into its existence. Bayer would have rather launched products quicker, but it wasn’t an overnight process to perfect a line that differed from the standard private-label fare most spas churn out. She says, “From the beginning, we were dedicated to hyper clean ingredients. We have the most stringent requirements for the products we are developing and having manufactured for us.”
“As a mother of three young kids and a busy business owner, I have figured out that, for my own sanity, anything I can delegate, I will delegate, and I’m not apologetic about that.”
Milk + Honey’s product range began with around 25 body-care stockkeeping units. The assortment has since increased to 50 SKUs and will get a boost in the next few months from the addition of skincare products priced under $100 each. Natural deodorant has been a huge hit for Milk + Honey and accounts for over 30% of its product sales.
In 2018, sales of Milk + Honey products closed in on $1 million. This year, product sales are projected to jump 70%. The products are available in 95 doors, and Neiman Marcus, Free People, The Little Ark, Hemline, Arabelle Spa and Birchbox carry them. Milk + Honey’s locations account for about 30% of its product sales.
Bayer believes Milk + Honey’s product business can equal or even exceed its spa business. “From a purely strategic perspective, if you look at the valuations of service businesses versus the valuations of CPG businesses, the valuations are much higher for product businesses,” she says. “The spa business is very capital-intensive. It’s a lot of money to build, and there’s also hiring new people when you build. You can scale products rapidly in a way that you can’t with spas.”
In five years, Bayer envisions Milk + Honey’s product portfolio will be substantially enlarged – makeup, nail care and hair care could be in its future – and its spa network will reach 20 to 30 locations nationwide. She says, “I would really like to see Milk + Honey be a place that’s trusted for high quality and a really great experience.”