Larry Kopsa As we worked on this story, Larry Kopsa was working hard on tax returns for this year’s April 17 filing date, but he took a quick break to give us some eye-opening tips for owners. A partner of Kopsa Otte since 1972, Kopsa has specialized in the area of salons and distributors for the past 20 years and even writes a blog for salon owners on tax topics.
ST: As a salon owner, what numbers should I be watching?
Kopsa: “One issue many salon owners have—your competitors are bad business owners and they either are not reporting all their income or are taking money under the table. It’s hard to compete against that. But from a business perspective, what you can measure, you can manage. Here are some measurables:
• One of the major issues that’s easy to spot: backbar costs. Take your backbar cost and divide by the number of services for rate. Adjust it for inventory. Watch that rate. If it’s going up, question it. If you’ve measured it, you can manage it.
• When it comes to your budget, you should know what is going to happen in 2012 if everything falls in place as expected. If it doesn’t fall in place, such as an employee becoming pregnant for example, then you go from there.
• You need to know what your break-even point is. I can say here’s the dollars worth of sales you need on a weekly, monthly, yearly basis. If you have X, here’s how many clients you need to see to break even. You always need to know how many clients you need to get in to break even.
• Understand the five ways to make more money: get more clients, cut expenses, raise prices, increase pre-booking, increase add-on services/retail sales.”
ST: What’s the best way for an owner to work with an accountant?
Kopsa: “Just like a client consultation, communication is key between the salon owner and accountant. I could be the best in the world, but if you drop off a box of papers and say, ‘Here are my numbers,’ and I don’t know what’s involved, I can’t help you. Owners should write down everything and communicate properly with their accountant. We actually see our clients’ numbers on an ongoing basis. At midyear, we look at what has transpired for the first part of the year, and then, based on that, project income to the end of the year. We also look at what changes may have taken place such as lower income because of loss or pregnancy of a major staff person; equipment purchase, etc. We then determine if the estimates we’ve set up look appropriate. If they are too high we can cut them back so we don’t have too much sitting with the IRS. On the other hand, if they are too low, then we need to be ‘rat holing’ some money for April 15. This is a good time to catch up on law changes and other goings on in Washington. In addition, it allows us to know the taxpayer’s plans so we can help.”