4 Tips to Build a Profitable Salon
As a salon owner, it’s part of your long list of responsibilities to run a profitable salon. However, there is a lot more to it than having a smart budget in place, so you operate in the black. Building a profitable salon means providing your team, and yourself, with opportunities for freedom, security, benefits, growth, education and much more! But like most aspects of running a business, it’s not an easy task. So today I’m going to share four tips to help you build a profitable salon.
What Does Profitable Mean?
Are you looking at your profit and loss (P&L) report on a monthly basis? Your P&L is a theory of how well you’re doing. The saying goes, “What you don’t manage will manage you.” It’s so important to see the summary of your financial input and output. But please don’t get confused. Your P&L is not king — cash is. What is happening in your bank account is where the truth lies. Profitable salon owners understand that one of their major roles in running their business is knowing the numbers. Your profit is what you have left over after all your expenses are paid, all your specific savings are accounted for, and after you’ve paid yourself.
Many salon owners pull their income from profits – this is a costly mistake. You must include your salary into the monthly numbers. One way of knowing if your salon is truly profitable is if an outside buyer could purchase the salon, take over the business, and earn a great income without having to work behind the chair. You see, what most salon owners forget when they go to sell their salon is that they’re selling someone a job — especially if the owner is behind the chair pulling in 20 percent or more of the revenue. You have to think bigger and plan for bigger.
Profits are important because we need to operate a high functioning business without worrying if we can purchase new equipment, education, or backbar tools. It’s also important because we all have dreams of our own that would not be possible without profiting. Examples would be if you wanted to sell your business so that you can retire comfortably. Or maybe you want to draw from profits annually to donate to your passion projects. It could be that you want to remodel your salon, add a second location, or even buy the building you’re in.
At the end of the day, none of this is possible without profits. What do the next two to five years look like for you? What long-term goals do you have where financials are specifically tied to them? If your salon isn’t profitable, you’ll be without the flexibility to focus on bigger dreams.
What if your salon wasn’t your only mission, but rather a vehicle that drives a larger vision. Winn Claybaugh joined me on the Beyond The Technique podcast recently and shared the three human needs we all have. We want to feel safe and secure. We want to feel like we belong, and we want to have purpose in life. If money is keeping you up at night and you’re lacking in any or all of these human needs, now is the time to focus on what you can do to grow your salon’s profits.
Four Tips to Increase Profits
Set a goal. Track it daily.
The first way to increase your profitability is to set a growth goal and track it daily. Sometimes our only issue is that we don’t have a revenue goal to begin with! If we don’t have a clear target to hit, how can we expect to grow our profits? At our salon, Be Inspired Salon, we have a monthly revenue goal that we break down into daily goals. Each day our salon administrative manager emails me the revenue from the day prior, along with the weekly goal we need to achieve in order to maintain our revenue expectations. Our budget is tied to these numbers and we share this openly, so all of our guest service representatives are motivated to book guests with our stylists. We have to keep the main thing, the main thing—butts in the seats! Additionally, each of our guest service representatives have the ability to earn an increase in their pay when they’ve contributed to the sales of the salon. They have performance goals similar to our stylists. These goals include things such as gift card sales, service add-ons, retail sales, personal referrals to the salon, VIP membership sales, and setting up multiple future reservations for guests. I cannot take the credit for the sales focus with our front desk as that was shared with us by Kim Light from Urban Betty Salon, but I’m happy with our decision to implement it. The real goal here is to have a number to work towards that we track against to hold ourselves accountable.
Increase your prices.
The second way to increase your profitability is to charge more. Seems simple, right? Then why are we so scared to increase our prices? Our CPAs, attorneys, product companies and contractors are all very willing to increase their prices on an annual basis. We come to accept that is the price of doing business with the people we trust and like to work with. Why would we look at ourselves any differently? The majority of our guests, whom I’d consider our “A” clients, wouldn’t blink an eye when we do the same. Did you know inflation increases annually by about 3 percent? We must be in growth mode! There are many reasons you can increase your prices in addition to the inflation reason, and all of which add a ton of value to your guests’ experience. Here are some reasons to increase your prices… Your salon is now certified in (fill in the blank). Your salon now offers a new shampoo experience. Your salon remodeled the waiting area for a “try before you buy” experience. Your stylists have been promoted to higher levels related to their benchmark achievements and productivity percentages.
Stop offering discounts.
The third way to increase your profitability is to STOP offering discounts. Have you heard the saying, success is what you say no to? For example, if I wanted to be successful in my pursuit of being super fit and healthy, I’d probably say no to eating fast food. If I wanted to get out of debt, I’d probably say no to friends when they ask me to go on weekend getaways — at least until I was debt free of course! You get the idea. We don’t have the time in this blog to go through all of the reasons discounts don’t work, but what it comes down to is this: you’re going to attract fickle guests who are easily swayed because you’re using devalue-based propositions. It’s just like shopping at Bed Bath & Beyond without coupons, you wouldn’t do it! Why? Because you know everything in the store is actually worth less, so you’re not willing to pay more. Remember this, people don’t want to pay less, they want to be given more! There are many ways to offer value to your guests’ experience without devaluing your services, products, or people. To learn more about how to get new clients without offering discounts, watch this video!
Finally, the fourth way to increase your profitability is to THINK BIG! When you’re in growth mode, you’re thinking about all of the ways to grow your team, your guest list, your brand, and your long-term potential. As mentioned earlier, this could mean you buy a building! Imagine if your salon rented space from you, and you were also able to rent out additional space to other businesses? You essentially get into commercial real estate. Would this shift help you increase your profitability? I’d say so! You could also divide and multiply. Meaning you open second, third, and fourth locations. If your systems, processes, culture, and training procedures are in place, this can be easier than you may think! What if you follow Coral Pleas’ strategy and license your salon brand? There are so many ways you can grow profitability if you’re willing to think beyond what’s currently tangible. Is anyone as excited as I am to think about this?!
About the Author: Kati Whitledge, Entrepreneur, Speaker, Author & Podcaster
Kati Whitledge opened Be Inspired Salon in 2010 in Madison, Wisconsin. Her passion for salon marketing and business grew tremendously and encouraged her launch of Meet Your Stylist, a matchmaking marketing tool used by salon owners nationwide. She’s also the beloved host and founder of The Beyond The Technique podcast—where valuable education is provided on the vast topics of salon business. Kati’s mission is to equip salon owners and their teams with the most innovative business marketing strategies.
Originally posted on Salon Today.