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SEARCHIn his class on reading P&Ls at Data-Driven Salon, World Class Salons' Jim Pacifico talks about how he breaks down the numbers so his team can follow them easily.
When taking information from his salon’s Profit & Loss statement and conveying it to staff members, Jim Pacifico, CEO of World Class Salons and World Class Financial Services, normally tries to break the big numbers down into smaller numbers that are not as intimidating. “For example, I’ll take a corporate goal and break it down by the number of people and the number of days—sometimes down to the hour,” he says. “Then it becomes so non-intimidating that staff immediately agree that can beat the goal.”
In Pacifico’s salons each stylist has a sales plan, and he gives them a form that shows the plan by chair. “If they don’t have a sales plan in place, how do they grow?” he says.
“Say you are open 70 hours per week and you are 80% productive – so that 56 hours a week per chair or 336 for the salon,” Pacifico says. “To keep the math easy and the goal attainable, I calculate that each chair can bring in $50 per hour. It’s not a number that’s out of reach for most stylists, and it keeps the math easy.”
So when setting a weekly goal for this example salon, you’d expect each chair to bring in $2,800 per week (56 x $50) and the salon to bring in $16,800 per week (336 x $50). While the salon can forecast using the weekly goal, the stylist is more motivated by the hourly goal.
Pacifico also offers salons industry P&L averages, so they can see where their budget may be off. For example, he typically uses 6% of the budget for rent, but that can be as high as 9-10% depending on the location. Payroll he says should be at 45% of service sales.
“When it comes to a P&L, there are common areas that get out of whack and these are areas on a salon’s P&L I’ll always check first. Payroll from a commission standpoint as well as from a front line. Sometimes legal and accounting fees will get out of balance if a salon is battling a certain issue. And professional product or backbar can be too high if there is a lot of color waste or product is disappearing out the door,” Pacifico says. “But most important for owners is getting familiar with the P&L in the first place—many don’t look at it until they have a serious money issue, and then it can be too late.”
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