In the Burning Questions feature in the November issue of SALON TODAY, we gathered our readers' most urgent questions, and posed them to industry experts. Here, Allyson King, founder of the Beauty 360 Consulting Group tackles the following question:
SALON TODAY: How do I know if I'm making money? The flow of business is so different, and I've spent my savings--how do I stay ahead?
King: The next six months are critical for all salon owners to take control of their business and have intention with their finances. There are three critical steps to knowing if you are making money:
#1 Know your salon’s BREAK-EVEN.
Your break-even is the sales you need to be even—no loss, no profit. Know your weekly and monthly break-even. Then, create a weekly plan for your business to allow you to make critical decisions early in the week, before you’re upside down on cash. Your accountant can help here.
#2 Know What You Can Spend – Have a Budget!
There is no reason to spend a dollar on anything you don’t need in the next 12-18 months. Have a plan for payroll, maintain an appropriately lean inventory and secure 12-18 month rent relief.
Let’s start with your biggest expense—payroll. Do you know the sales your salon professionals need to commission? You should. Front desk and assistant payroll should be tightly managed to key benchmarks. Then, manage your payroll in “live time,” meaning if your week looks soft, why run the same number of hours. Make the needed adjustment to ensure your break-even or make a profit. Here is the reality, you many need to cut the fat and keep the best of the best to protect your investment.
Don’t leave cash on the shelf, literally. Most salons we coach have +$10,000 in excess inventory and spend 5% more on professional supplies than needed to effectively run their business. Don’t run out, but why let your cash gain dust on a shelf when in can be in the bank keeping you in business. Technology is your friend here.
Reapproach your landlord, look for 12-18 months of relief, without repayment at the end of your lease. We need to weather this pandemic together equally.
#3 Implement NEW Revenue Streams
We can’t run businesses that aren’t profitable. Charge what you’re worth! The challenge is a price increase isn’t always the answer, it doesn’t bring enough to the bottom line. Explore non-commissioned revenue streams like environmental services fees, charging clients for the product used, creating an online shop. This is about the long-term health of your business, now is the time. Don’t take it for granted.
For reprint and licensing requests for this article, Click here.