DEBT FREEZE: a salon owner’s way to freeze all debt and start making a pr​ofit.



Richard McCabe

The one thing that never changes. Your salon needs money to survive and you may be slowly killing your salon with a debt that may need to be gone quicker than you think.


First, you must agree to a spending freeze that will free you from debilitating debt. The goal here is to cut cost, not to compromise the business.

You will want to cut out the fat in your business, the stuff that is not generating or supporting income for your salon. We don’t want to cut the muscle, the stuff that you absolutely must have to deliver your service and product to your clients.


The first step is to assess where you are today.

Don’t be afraid, fear of the unknown is worse, I assure you, you will feel better once you know how bad it is. You cannot change what you don’t acknowledge, so you need to know exactly what you are dealing with.

1) Print out your business statements for the last twelve months, Bank Credit cardLoan payments Including payroll.

2) With a highlighter, draw a box around any labour costs, salaries, commissions, and bonuses for employees. Exclude owner salaries and payments to freelancers or subcontractors.

3) Now highlight expense’s that were required to generate revenue. For example, if you are a private detective and you bought a USB drive to store evidence on and give that to a client. If you bought a USB stick and did not give it to a client initially, that item would not be highlighted.

4) Next highlight any expenses that are absolutely necessary to keep your salon open. This does not include employees or contractors, or people you have boxed with your highlighter in step 3. If you are a mobile hairdresser and need a car highlight it, if you have a salon and the car is the only way to get you to work and back, don’t highlight it.

5) With a red pen, circle all the expenses that repeat every month, quarter or year and will continue to do so. Note some expense items, like wages, will get highlighted or boxed and circled.

6) Add up all the expenses for the year; include everything you highlighted as well, circled, boxed, or left blank. Exclude tax payments and owners wage. Divide the result by twelve to determine your monthly total. You now have a number that you need to cover each month.

7) Determine the difference between your current monthly operating expenses and the number that you take in takings per month. For example, you currently have $20,000 in average monthly expenses and your takings are $15,000, you need to cut your operating expenses by $5,000. Period. There will be no justifying past spending mistakes, no saying, “but I need everything”. You don’t! You’re healthy and fit we hope, your competitors have figured it out. You need to put your big girl pants on and accept that you spent too much, and today is the day we fix it.

8) Band-Aids come off more easily when you tear them off with determination. Trying to pull the band-aid off slowly just prolongs the agony and it’s the same with the debt. It needs to be done quick and fast to save your salon. Ripping off the band-aid is painful at first but as soon as it’s off the pain quickly goes away. The same is true about debt. The best way is to cut expenses until you are operating at 10% below the number you are taking in the salon. So if we know that you are taking $15,000 to be in profit even mode, it’s good to do that as sometimes you have taken too much away and the business suffers, so you will not have enough time to make more money, so we allow a 10% buffer in case of this happening. So expenses will be cut to $13,500.

9) Your wage bill is usually the most expensive part of operating your salon. This is the first expense you put a highlighted box around on your statements, and you circled it in red also. If your salon is racking up debt, it is all too often because your staff costs are too high. The problem with cutting this huge bill is, our minds quickly defend and justify why the staff need to stay. (I know this first hand and I had to make this decision myself.) You may have to work more hours yourself until the debt is gone, you do have choices here. You can let staff go. You can replace staff with better faster ones, getting rid of dead wood. You can reduce the hours that they work. Ask yourself, “do I need all my current staff and what role do they play in the business?” Remember we are taking a step back, regrouping to start again.

10) Evaluate each employee. Are there any employees that are not A-players? Are some staff costing you money? Getting 5 people to do the work of 6 can easily be achieved.

11) Ignoring the wage bill and how you feel about your staff, determine the following, which staff are a luxury that you can no longer afford.

12) Plan the layoffs. Now I know this is going to be painful and heart wrenching, I know you will try and resist this because I did. But you have made mistakes, you have gotten your bills bigger than your earnings and now it’s time to amend this. You owe it to your family, the rest of the staff, the clients and you yourself. It is necessary to your salons future, trying to keep all employees on; you are putting all of their jobs in jeopardy. And, because you are looking at who is being laid off when you can control it, you get the chance to choose to lay off poor performing staff and start to build an infrastructure of really good workers as you grow again. Keep in mind when letting these people go, you are freeing them to find a salon that is a better fit.

13) Get legal advice on letting employees go, before you decide to fire anyone.

14) Among the highlighted, boxed expenses, you will have commissions and targets. Look for ways to reduce these, but remember that you are now affecting someone’s pay. You could ask your staff to postpone all bonuses for a few months to help you out. Be careful not to reduce staff morale in the process.

15) After the layoff call, have a staff meeting and share what you have done. Explain how difficult it was to have to do it. And take responsibility that it was your mistake, and taking your eye off the ball let the business fall into this mess. Assure your team you are onto it now, and letting some staff go will immediately stabilize the bills, and it won’t happen again.

16) Now to your stock, I have been doing this for over 20 years and I know you can run your salon stock really dependent on your takings. So this is also a must. From today all stock bills cannot be more than 10% of your takings. So if you are earning $15,000 a month, your stock bill must not exceed $1,500. If you are behind with stock, call your rep and negotiate a payment plan, not too long you will want to pay your back bills as quickly as possible because that is coming out of your 10% as well

17) Now the hardest part is over, call your bank and credit card company and tell them to stop all automatic payments from your account that you have decided to stop, except for any you highlighted in steps 2 and 3.

18) Cut every single circled red expense that you can. Get rid of unwanted monthly recurring bills. When you cannot get rid of them, highlight it.

19) Renegotiate the highlighted expenses. Everything is negotiable, and I mean everything is negotiable, I once got my rent from $38,000 to $21,000. Eftpos, electricity even credit card charges. This is not a time of pride. You are surviving first and then growing, remember that.

20) Put a big tick mark in all the highlighted expenses that you have negotiated or replaced.

21) Now go through all those expenses that are left on the list. The ones you left blank. It’s time to wipe them out. You are going to take at least one full year break from these expenses they are not necessary and you do not need them.

And if you made it to the figure you wanted without downing a bottle of red, I say job well done.

Cutting costs is embarrassing.
You have a reputation and also you want people to think you have made it, you are successful.
But completing your debt freeze is a relief and a lot more powerful than embarrassing.

No matter how bad it is there is always a way out.

We have a concept of owning a salon to make a lot of money, what if you can operate a salon and save a lot of money?

Don’t try to pay off the biggest debt with the biggest interest first. Go for the smallest, easiest to get rid of, that frees up more money to pay off more debt.

Just one more thing before I’m done, you cannot rack up any more debt as you pay the old ones off.
That’s just moving money around.
You need to get your debt freeze on.
And that means freezing ALL debt once and for all.

Good luck.
Richard McCabe

‘The Lifestyle Salon Coach’

When you’re ready here are ways I can help you…

1. WORK DIRECTLY WITH ME AND MY TEAM  If you own a hair or beauty salon and you’re fed up with having no cash leftover then check out our group coaching programs. If you’re a new salon owner or have less than 2 employees then this just for you: Check it out HERE

If you’re established and have 3 or more employees this is perfect for you: Check it out HERE

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