One of the most overlooked and misunderstood salon areas is inventory control. Learn how to develop a finely tuned, automatic system that ensures smooth retail sales, boosts profitability and frees up your cash flow.
Salon owners know keeping
tabs on inventory
requires a huge balancing
act. Your inventory,
or the stock of your retail
and backbar products, must be
sufficient to meet the needs of your
customers and staff without running
out or tying up too much of your
budget. You need to keep hot sellers
stocked, and you need a plan to
keep slow sellers moving. You need
to order on time, and at the right
times. You need to track your stock,
audit your numbers and keep your
display shelves attractive.
âItâs a lot of workâI feel for anyone who
has to do it,â says Meghanne Haran, director
of salon operations at You Salon, Inc. in
Ellicott City, Maryland. But itâs crucial that
you do track it. After all, inventory translates
into dollars, and more importantly, it often
represent a good deal of your salonâs profit.
Beate Assmuth-Ong, co-owner of Mane
Attraction Salon in Phoenix, Arizona, puts it
this way: âOwners dread inventory, but if you
have systems in place, itâs really easy. And itâs
important, because thatâs where your money
is!â To that end, weâve rounded up owners
and experts who have created successful inventory
systems and answered our questions
about best methods and tools:
Whoâs in Charge?
Too often, a busy owner will turn over the
ordering of inventory to front desk coordinators
who rely on their district sales coordinator
to advise them of what and when
to purchase. This system seems easier, but
it isnât to the financial benefit of the salon.
Experienced owners stress the need to
have one designated person in charge of
inventory. Why? It helps centralize the process,
allows the individual to gain experience
over time, and places accountability in the
hands of one person. These inventory managers,
who are typically in charge of both
retail and backbar product as well as other
general supplies, have titles such as director
of salon operations, manager of inventory
and procurement, or director of purchasing.
While they may have a business degree or
experience as a retail buyer, the most important
criteria for an inventory manager is
someone who understands the numbers of
your business, can read reports and will work
to stay on budget. In cases where businesses
are not big enough to have dedicated inventory
personnel or lack a sufficiently trained
individual, the responsibility usually lies
with the owner.
A competent inventory manager needs
in-house training and may opt for further
training from manufacturers or outside
consultants (see âTips from the Expertsâ on
page 28). But a lot of learning is on the job,
too. Anna Martin, operations director at The
Loft Hair Design in Escondido, California,
says she was initially trained on the salonâs
then-existing inventory/ordering systems
by the lead salon coordinator. But over the
past three years, â[I have] combined our pre-established
systems, training from Bumble
and bumble, trial and error and personal
experience to perfect our inventory and ordering
systems,â she reports.
|Tips from the Experts
Plenty of salon owners, including some interviewed for this report, have relied on industry consultants like Summit Salon Business Center for training seminars and personalized coaching in areas such as inventory management. We interviewed Summitâs Director of Training Dave Kirby and Director of Communications Heather Bagby for their expert take on the profit potential and pitfalls of inventory. For more information on their services, visit summitsalon.com.
Q. What are the biggest mistakes salons make in regard to inventory ordering and management?
A. Salon owners are not traditionally aware that retail and professional inventory is the number two company expense. There are two common mistakes made by salon owners: The first is simpleânot ordering on a budget. Most owners simply walk over to their retail area or dispensary and create an order based on visual need. The second most common mistake is not conducting a physical count of all on-hand retail and professional products once per quarter to ensure that they are managing the trends and have adequate inventory controls in place.
Q. What are some signs that retail inventory is not being ordered/ managed correctly?
A. One indication is products that are unsold for more than 60 days. Another is phantom profit. Phantom profit is when a salon owner receives a statement from their accountant indicating they were profitable that month; however, that profit doesnât translate to cash in the bank because it is likely sitting on the shelves as inventory.
Q. Is there an optimal number of retail lines that a salon should carry?
A. It is common for salon owners to get in financial trouble when they try to manage too many product lines. For most salons, it is important that that they have a belief system that connects the professional and retail products. For example, matching the color line to the retail line is a wonderful way to provide a consistent message to the consumer. Other niche lines should be added as needed (menâs products, thinning hair). It is not necessary to overwhelm the consumer with multiple choices, but rather impactful to have a dedicated consistent message that the entire salon company can stand behind.
Q. Are there rules or guidelines for how much and how often a salon owner should order retail product?
A. If possible, weekly ordering provides the most efficient use of inventory dollars. SSBCâs formula for retail ordering is 52% of the previous weekâs retail sales if you are ordering weekly. Additionally, we recommend the owner also calculate the order prior to submission to ensure they have not gone over budget. A salon owner should never be surprised when they open a supply bill; they should already know what they spent!
Q. How much of a salonâs budget should be tied up in inventory?
A. The amount of income that comes from chemical services and retail sales impacts the inventory budget. As a rule of thumb, starting with enough product for one month of chemical and retail sales is a good starting point.
Q. What tools can help track inventory? Are there any in particular that you recommend?
A. SSBC utilizes a manual tracking form for monitoring and ordering. This form should be updated on a weekly basis for management and on a quarterly basis via a physical count. The salon should have processes in place for receiving and deleting product in its inventory. Many salons utilize software systems. These are excellent resources as long as the data entry is done properly. Regardless, a salon owner should understand how to manage the inventory and canât afford to ignore this important part of owning a salon.
Q. Do you recommend designating an âinventory managerâ and what kind of training should this person have?
A. Remember, we are talking about the salonâs number two expense so in most cases the salon owner needs to be the inventory manager. With some assistance from a well-trained sales consultant, this can actually be a very simple process. Owners may utilize hourly employees to assist, as long as the budget is set and approved by the owner. The training required is to understand the budget (formulas), monitor the top eight retail products, and monitor trends in professional use.
Ginger Bay Salon & Spa in St. Louis,
Missouri, created a director of purchasing
position when they started open book management
in 2008 and realized they needed a
better handle on their inventory systems. âNo
person really âownedâ inventory,â explains
owner Laura A. Ortmann. Now, Colleen May,
who has filled that position, is responsible
for ordering all inventory and supplies in the
company, as well as âoverseeing stocking
and safekeeping of all inventory, overseeing
the budget for inventory purchases, and
reporting regularly to leadership regarding
her budget and what irregularities she identifies with inventory counts and usage,â says
Ortmann. âOn our P&L, Colleenâs name is
beside each inventory and supply expense
entry to signify that she is responsible for
those items.â Inventory managers are accountable,
but they donât work alone. They need
assistance from everyone else in the salon
to maintain an accurate count and efficient
turnover (more on that later), so inventory
management is truly a team process.
How Much to Order?
Ordering inventory is more complex than
just refilling your shelves. Most salons utilize
software or spreadsheets that track how
much product has sold or used for backbar,
then averages it out over a weekly or
monthly period to determine out how much
to re-order. Since you donât want to sell out
completely before you re-order, youâll need to
keep a certain amount of product on handâ
typically a one-to-two month supply. A hot
product or a busy season (think Christmas)
may warrant two or more months of supply,
but if you have slow moving product that
you wish to keep selling, or are coming up
on a slow time of year, a few weeks supply
might be sufficient.
Whatever amount you keep on hand, you
should know its âturnover rate.â Thatâs the
period of time it takes to sell-through an established
amount of product, explains Bryan
Nunes, co-owner of Blo in Raleigh, North
Carolina. âWe set our on-hand minimums
to a predetermined turnover rate. In other
words, if a product has a âminimumâ of 12
units on hand, and our turnover rate is 90
days, then we expect to sell 12 units in 90
days. If we do this, then our minimum or
ârightâ amount of retail product is in line
with what we like to have on hand.â On the
other hand, he says, âIf we discover that our
minimum is taking 120 days to sell through,
then we adjust the minimum to make sure
we are not leaving cash fl ow on the shelves.â
At Mane Attraction Salon, Assmuth-Ong
uses an Excel spreadsheet to track sales and
usage of both retail product and backbar (see
âKeeping Track: One Ownerâs Methodâ
on page 30). That way, she has a history
on each product that helps her know how
much to re-order at a glance to fulfill the
two-month supply that her salon keeps on
hand. âIt works for us,â says Assmuth-Ong.
âThree to four months is too much money
out of pocket, and two months guarantees
you wonât run out of product.â
New products can pose a challenge because
their sales are diffi cult to predict. For example,
Assmuth-Ong had no history on a new Brazilian
Blowout product they decided to stock, so they
estimated an order. But the novelty of the item
excited stylists, who received training and education
on it, and they helped drive up sales.
âSales can spike up two to three times what a
manufacturer suggests,â warns Assmuth-Ong.
While enthusiasm is always a good thing, you
never want to lose a sale due to inefficient inventory.
If youâre out of stock, take a tip from many
owners and get the clientâs name and payment
infoâoffer a 10% discount for prepayingâand
then notify them when itâs back in stock, or
even ship it to their home for no extra charge.
To streamline your order process, consider
limiting the number of retail and backbar lines
you carry. Steve Gomez, professional development
manager for Milady/Cengage Learing,
says a good rule of thumb is no more than four
lines that appeal to different customers and demographics.
Fewer lines also help you keep a
consistent message and develop stronger partnerships
with your distributors and manufacturers.
As a bonus, ordering more product from fewer
manufacturers means it will be easier for you
to fulfill their minimum order requirements.
Now that you have an idea of quantities to
order, make sure those numbers are in line with
your budget. Gomez suggests that a salonâs
weekly retail budget be no more than half
of their previous weekâs retail sales. âOrder
product based upon a 50% budget per line,â
he says. âMeaning, I sell $400 this week in
line A, my budget to restock the shelves is
$250.â Backbar budgets will typically be even
less than half, sometimes substantially so.
Laurie Helmick, co-owner of Luxe Salon
in Denver, Colorado, focuses less on percentages
and more on hard numbers. She
keeps total inventory at $30,000 at cost. Her
ordering assistant takes care that inventory
never goes above that dollar amount, and
sheâs rewarded for it with a quarterly bonus.
Whether you base your inventory by budget
percentages or specific dollar amounts,
youâll know youâre on the right track when
your products are consistently stocked with
neither shortage nor surplus.
When to Order?
When to place your order is a two-part
question: How often you should order, and
what day of the week you should order.
Most salons we talked to order on a weekly
or biweekly basis, but how frequently you
order is influenced by your sales volume,
your manufacturerâs order minimums and
even by shipping charges. The shipping
charges are no joke, says Helmick. âOur
financial statements break out shipping, and
we spend five figures annually on it.â For
that reason, the salon limits retail orders to
twice per month, with the exception of the
KÃ©rastase line, which is ordered weekly
since shipping is free. So far ordering twice
a month has worked for the salon, Helmick
says, noting that most importantly, âI donât
sit with a lot of inventoryâthat is cash I
could spend on something else.â
An optimal time to place an order is after
a busy weekend, says Nunes of Blo. âWe
currently order every Monday before 8:30
a.m. This allows our distributor to guarantee
delivery by Tuesday morning, which is
not a high-traffic time because we host our
continuing education on Tuesdays. This
allows our guest services department the
opportunity to check the inventory without
distraction.â Because his salon has recently
expanded to nearly 5,000 square feet and
two color bars, Nunes says he will likely
switch to ordering two times per week. He
feels the benefits will outweigh the costs:
âChecking in inventory for that type of
volume can take half the day,â he explains.
âThat is not prudent for maintaining proper
on-hand amounts, as well as minimizing the
opportunities for human errors at check-in.â
For ordering purposes, salons with more
than one location may want to treat them each
as separate entities. âFor our larger salon, we
have chosen to continue weekly ordering,â
says Johanna Morgan, manager of inventory
at Mango Salon in Richmond, Virginia. âFor
our newer salon, we have chosen to use biweekly
ordering for retail because the manufacturer
only allows ordering in quantities
of six and they have a high shipping cost.â
However, both locations order backbar weekly
to keep stock consistent. The benefit for individualized
ordering is that you can adjust
for each locationâs specific needâif one has
more walk-in traffic, for exampleâbut still
have the option of transferring product from
one salon to another in a pinch.
How to Track It?
Software is a valuable tool when managing
inventory. Make sure your salon software
has a program for tracking stock levels in
real time, generating automatic retail orders,
creating reports that list the fastest selling
and slowest moving products, and displaying
sales trends over timeâthen make sure
you or your inventory manager knows how
to use it. Additionally, manufacturer inventory
workbooks and customized spreadsheets
from Milady/Cengage Learningâs Financial
Analysis and Coaching Tools package can
assist with tracking.
Integrated POS systems utilize a barcode
scanner so that when a product is sold
or put onto the backbar, itâs simply scanned
out and inventory automatically updates in
the computer system. To eliminate stylists
forgetting to âscan outâ backbar, You Salon,
Inc. developed an easy system: âWe have a
bin in the styling area, and everyday stylists
throw their boxes (with the barcode) in that
bin,â explains Haran. âAt the end of day, we
take them out and scan them so they are out
When salons see they have a product that
is not moving, they can take action. That
may mean specific product education for
stylists, or creating a promotion or product
focus display. Helmick of Luxe Salon tries
to negotiate a poor seller with her rep, who
might let her swap it out with something that
does wellâthough Helmick cautions that
most reps donât work like that! If she canât
return it, sheâll mark it down 40% to get it
moving. âIt hurts my margins, but itâs better
than it just sitting there,â she says.
Ginger Bay Salon & Spa puts slow movers
in hard numbers. They distribute a list of
poor sellers to the team leads, service providers
and guest services, and include the dollar
value of each and how much is still sitting in
inventory. âOur department team leads can
create goals and mini-games around selling
these products within 30 days,â says Ortmann.
âWhen our teams meet weekly for their respective
huddles, they can see the progress
they are making with their mini-game.â And
after the mini-game is over, service providers
can see the monetary value of their efforts
and, sometimes, even share in the rewards of
moving a poor seller out of inventory.
Blo staff like to piggyback a slow seller
onto a hot seller. âBuy this top performer and
try this poor performer for free, or vice versa,â
says Nunes, who defines a âtopâ performer
as a product that consistently outperforms
its minimum turnover rate. Curious about
which products are hot at these inventory-savvy
salons? Answers vary, but most owners
say their biggest category is styling products,
followed closely by shampoo. When
you track whatâs selling for you, youâll see
where youâre making moneyâand where
you might be losing it.
How to Audit It?
To ensure accuracy, physical counts are
performed to ensure that whatâs on the shelf
matches up with whatâs in the system. Many
salons do a monthly audit on retail and a
quarterly audit on backbar, although some
may even do it more frequently. Typically,
two or more employees join the inventory
manager to do the count and check each
otherâs count. It sounds boring, but itâs serious
business, says Haran: âIf you donât
know what you have, you donât know what
At Luxe Salon, physical inventory is
done every month at the same time, with the
same employees. âYou learn to understand
the product better and how to order better,â
explains Helmick. Not only that, she adds,
but consistent inventory means you stay on
top of your product and protect yourself
against theft. That rings true: The majority
of salons reported that a strict inventory
system, as well as loyal employees, means
that internal theft has never been much of
a danger. However, shoplifting is a threat
to any business. Haran says that she has
noticed discrepancies in retail stacked by
the front door of the salon. To counter that,
the staff makes it a point to offer assistance
to shoppers walking into the salon. Ginger
Bay Salon & Spa takes more high-tech
measures: âWe have security cameras in
the salon to deter theft, and we do prosecute
shoplifters,â says Ortmann. âIf an individual
displays suspicious behavior, we have the
ability to immediately review video camera
footage. Often, however, inventory losses
are not that obvious.â When there is inventory
missing, they record the loss.
Most inventory discrepancies are innocent,
say owners, whether from a backbar product
that was not scanned out or just human
error in counting. Since it canât always be
avoided, most salons, such as Ortmannâs,
accept a reasonable minimum variance of
around 2%. âOur 2% variance benchmark
was derived from looking at past losses, estimating
the dollar amount equated with any
loss and creating an acceptable benchmark,
and from looking at other acceptable inventory
systems from our manufacturer, other
salons, and other small businesses, such as
restaurants/bars,â she says. âSince creating
our 2% variance benchmark, we have managed
to stay below it in losses.â
How to Display It?
Assmuth-Ong cites the old retail slogan,
âStack âem high, watch âem fl y,â when she
discusses the importance of a full display.
âWe keep 4-7 of each product on the shelf
at a time,â she says. âYou want people to
know youâre serious, that you believe in
Other salons have mentioned stocking
an entire two-week supply on the shelves,
and Helmick concurs that full shelves are
essential to healthy retail: âItâs a proven fact
that people donât buy the last product on the
shelf. You have to commit to having stock at
all times, and it needs to be consistent.â She
should know, as she reports her salon does
$300,000 a year in retail with little walk-by
traffic. Helmick proclaims, âWith inventory
controls in place, anything is possible
Not only should the retail area be teeming
with product, but make sure it is pulled to the
front of the shelves and organized professionally
with rotating product spotlights, say our
owners. That creates an exciting shopping
experience for the customer. And after all,
with all the time and money youâve invested
in inventory, youâll want to show it off.
Keeping Track: One
Beate Assmuth-Ong, co-owner of Mane Attraction Salon
in Phoenix, Arizona, shared her Excel spreadsheet with us,
which tracks her inventory in easy-to-read columns. In this
snapshot of January 2010, she can easily view numbers
for every product she carries, such as open count, amount
received, and amount sold. An Excel formula automatically
calculates the âshould beâ count. Finally, Beateâs team
takes a physical count, and any difference between the
âshould beâ count and the actual count is recorded in red.
This same chart is created for every month, and quarterly
averages are tallied for a big-picture view of the whole year.