How many slices of pizza do you want?
Enjoying working with numbers and being a hairdresser or therapist usually isn’t something that goes in the same sentence, but now you are a salon owner and a business owner its time to work on the numbers of your business.
As you look at the facts about your salon you will see exactly what is going on.
You shouldn’t even consider doing a staff review or even chastising staff without the facts in your hand, saying to them “you are sometimes late, your takings are not as good as last year or even you are doing great, much better than last year”. Is a waste of your time.
You need evidence to back up your side of the story and the facts are the only friends you have on your side to help you, because if you try and get other staff members involved to back up an argument for you it will turn nasty.
The fact is, you need numbers, they are your best friend, so re read this over again and change the word facts to numbers.
This is what you need to prove to your staff that you have proof of what your about to say to them, not just some wishy washy moan. You were 10 minutes late on 3 occasions this week, “I don’t think I was” well the computer says you were as you signed in., You are taking on average $3500 that’s great as we are looking at a 15% increase on last year well done Dave. Your rebooks are at 45%; last year they were at 79% is there something wrong? Get the idea, numbers are the only things you have on your side treat them with the importance they deserve.
They also have the power to tell you why your salon is not doing well, you just need to take some time out each month and look at your numbers.
Looking at the numbers in your salon, you can estimate your takings and your profit in advance. There is only so much money going into the pot, and it leaks like crazy.
The Less you pay out the more that is left for you, easy, but sometimes it is hidden and there are a lot of numbers to work through, where do you start?
Its easier to see your numbers if you turn them into percentages, that way you can see the difference easier and also get a little detached as money always has a habit of clouding the issue.
Start at the lowest hanging fruit, the cream, cherry pick, its looking at the easiest numbers to change, for example you are stuck with your rent amount (until your next review) so no need to work on that one, But wages you can lower, and also you could lower how much you spend on stock.
Lets say you have a few friends coming over for supper and you order the biggest pizza you can find.
Your friend’s names are
Stock (basin and retail),
General expense (car, bank fees office),
Advertising,
Operating expense (rent, electricity, telephone),
Wages,
Staff training
Tax (vat,gst).
They are all very hungry and cannot wait for the pizza to arrive. You are hoping that you have ordered enough to go round as you too are very hungry.
You start thinking, how many slices do I need, so you need to know how much they will eat to satisfy their hunger. To find out how much they all need to eat will be in last years accounts, if you don’t have any you can borrow my figures, they have been benchmarked against hundreds of salons.
Well the tax he cannot eat any less, he needs 15%, the Operational Ex he needs his share of 11%, Advertising and training needs 5%, Stock needs 15%, General Ex needs 5% that leaves wages and you.
You have 51% to share between you and wages. Wages is a pig and will eat it all if you let him, but wages is also your best friend and you don’t want to up set him. You decide to let wages dive in first and hopefully he will leave you some.
Most of you will realise that someone will always be going hungry, as you know that there is more hungry people than pizza. Someone will have to go with out. Most of you will choose advertising and training to cull because you think they bring nothing to the table, and also you choose yourself to go hungry because you don’t want to upset your friends, and just keep trying to find more pizzas to go round, but the more pizzas you order the more tax and wages get hungry and so the merry go round of madness starts. As you remove advertising and training the clients stop coming, and the staff get demotivated so these should be the last ones to be left out. Some of the above statistics can be manipulated to get YOU more money and some cannot.
Items like tax, electric, rent, car, phone, bank charges are hard to change quickly and are will not have the biggest impact on your salon.
They need at least 26% of your money.
But Stock and wages are the easiest to deal with.
And make the biggest impact; most salons I deal with have a stock level of 20% and wages bill of 60%.
So if we add 60 % (wages)+ 20% (stock)+ 26% (Running cost) you will see you are over the 100% and so you are in the red, losing money.
Stock should be kept between 10% and 15%, but the representatives of the companies you use would say otherwise, don’t fall for the next fad without checking your stock percentage spend.
Your wage bill should be around 30% to 40% if you emply receptionists or apprentices, if you have neither you can afford your wage bill to get up to 45%.
Remember you only have 51% to share between you and wages.
Wages will eat all you money if you let it.
I hope I haven’t lost any of you and you haven’t shut off as we went through the numbers.
You need to know them.
This is where you money is going.
Like it or not these hungry bills will eat as much as you feed them, and they come round to your salon faster and faster.
If you turnover an amount of $800,000 and employ over 10 stylists everyone reading this would think you are a millionaire that you are creaming it in, even your staff will think you are loaded. But I know and you know it’s all gone at the end of the month.
The bills are bigger then ever. Learn to master the numbers in your salon, look at the biggest and easiest to change. Take time out every month to set your budget and check you are still on track.
There is gold in them there hills.
This is free, just a little time spent on basic salon budget good make the difference between paying yourself a good wage and having a great weekend, or robbing Peter to pay Paul and worrying all weekend.
Work smarter not harder
Interested in knowing how to grow your salon faster and smarter?
Then check out a great webinar that i put together to teach you how I made my lifestyle salon.