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Management Practices

The Bottom Line: Finding More Profit

Stacey Soble | April 6, 2012 | 1:33 PM

IN THE END, it’s not about how much money you bring in, it’s about how much you take home. Here to talk about profitability is Scott Missad, who, with Frank Gambuzza, is one of the founders of Strictly Business, an intense four-day business course that firmly guides owners to the bottom line and shows them how to build profit.

ST: With the recession and the increased costs of doing business it’s more challenging for owners to forecast their P&Ls, is there a specific set of percentage ratios that salons should now use?

Missad: “There are no magic numbers. It all depends on your organization, what you’re trying to build and where you’re located. We tell people in Strictly Business, ‘You can’t believe the athletes, there is no 110%—when it comes to business there is only 100%.’ If you want to take home 10% profitability at the end of the year, you have to budget it and operate your business at 90%. It’s called forced bottom line accounting. You pull your fixed costs out of the mix and look at your variable costs, and try to keep it all below 90%.

“It will get tougher though—there will be a significant profit pressure on service revenue as the cost of providing service is going to raise at a level faster than salons can increase their prices to the consumers. As energy prices go up, wages go up, prices of professional services like banking fees go up.”

ST: Where are the best profit opportunities for salons?

Missad: “For many owners, they believe the road to pro­tability is to automatically go out and get new clients or add new stylists, but they don’t calculate the costs associated with those activities. Nor do they consider how many of the new clients they’ll actually be able to keep. Are you maximizing the opportunity you have with each client? There’s signi­cant more profi­tability in add-on services and retail than in traditional services, yet owners typically put 99% of their energy into services, then put some retail on the shelf and hold a product knowledge class twice a year. Services are important, don’t get me wrong, but you have to pay equal attention to your retail.

“Of course, there’s more to this than I offer here, if you really want to learn the systems and processes and procedures that’ll drive more profitability, you need to get yourself in a business class. I prefer ours, but get yourself to a business class.”

For more information and a schedule for Strictly Business, the live education seminars by Scott Missad and Frank Gambuzza, contact Julie Oeffling at 800-718-5949. Catch their column, The Profitability Project, in SALON TODAY.

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