Why Most Salons Don’t Make Any Money And What To Do About It.
Did you open your salon because you were good at your craft and people told you that “you should open your own salon and start making all the money for yourself. You’ll be great at it.”
This is the biggest reason why salon owners open salons and the main reason why 85% of salons fail within 5 years.
If you’ve had your salon longer than 5 years, you should be proud that you made it, but for 95% of you, you will sadly never make a good living from being an owner. You will always be a worker, working for your salon.
The reason for this is because you don’t realise there’s a HUGE difference between owning a salon and running a salon.
Salon owners that run their salons know that they need a different set of skills to be successful. It will involve skills like marketing, building systems, staff training, client experience and financials
I’ve covered lots of posts about marketing, systems and the client journey before. You can see a recorded workshop that I did here if you want to get an insight into how it can dramatically increase your salon’s takings
It’s not all about takings though. I’ve had salons that have had massive increases in money coming in and takings going through the roof and I was only one or two weeks away from closing my doors.
I’ll share my personal story with you further along in this blog and what drastic measures I had to do to save my salon.
Few people have a true understanding of how to run a salon and make it profitable and they realise it’s not about how much money they take, it’s about how much profit is left.
This is the number one reason that salons close and what kills the salon owners dream.
The lack of it can keep you awake at night and can consume your daily thoughts, make you feel sick and it can cloud your judgement of what you should be concentrating on.
Salon owners that struggle to make good profits battle every day to keep their salon alive. They chase clients to fill their salon, they get scared to discipline their staff in case they leave and often don’t pay themselves a wage to keep money in the salon’s bank account.
I call this the war zone, where every week is a battle to survive. Most salon owners in this zone work week-to-week to pay the bills with no financial buffer for rainy days.
Being in the war zone has nothing to do with how busy your salon is or how much your salon has increased its takings compared to last year, absolutely nothing to do with how many staff you employ or how big your social media following is.
It has everything to do with how you run your business and includes attracting the right client, converting them to return to you and delivering on your promise to them in an experience second to none.
Once you have these 3 elements in place your foundations are laid to make sure that your team will be able to service enough clients to raise your takings and you will be able to balance the books by making sure your bills, stock spend and wages are all where they should be.
It’s very easy to forget or ignore your profit and how it’s achieved because before you started working for yourself, you imagined the salon owner you worked for was making lots of money. Lots of profit.
You did your days work and your wage was put in your bank by the end of the week.
Did you ever think about your previous employer when the salon was quiet that you might not actually get paid? Did you ever think that the owner may not have enough profit left and couldn’t afford to pay you?
Most don’t. But now your wage is dependent on how much profit your salon produces.
So this keeps money constantly on your mind, in your thoughts and in your dreams. Welcome to the warzone.
And that means on some occasions there isn’t enough left over in the pot so you juggle your money around, living week to week. You spend money that should be allocated for something else. Usually it’s tax money that gets borrowed first, then it’s stock money and before you know it, your wage is a day or too late. Some even skip their own wage to keep on top of the bills.
This is the road most salon owners unfortunately go down. Does this resonate with you?
Often, you have no idea why the salon is losing money. You’re busier than ever.
You actually lie to yourself that the salon is doing good, believe you are doing better than you are and eventually money will come if you keep working harder and harder.
I think you know the ending already, You eventually run out of weeks and something’s got to give.
The reality is scary and you don’t want to think about it, but it’s all you can think about.
If this sounds like you and your salon then you must act now and start being a BUSINESS OWNER and go and learn how to run your salon like a business.
I’ll share with you this week in my FACEBOOK GROUP about a client I worked with who was in this exact predicament and how we turned her salon around, but only after she hit rock bottom.
I’d like to share with you my story and what happened when I took my eye off the ball.
We had great staff, clients that loved us and money was coming in fast and furious. Happy days, or so I thought.
We were growing at a massive rate of 33% year-on-year.
In fact, we were growing so fast I was looking for a second salon to make even more money.
Then the bombshell hit!
It came to my attention that the bookkeeper was struggling to pay the bills on time. There wasn’t enough money to pay everything and we were advised to put our tax on instalments because we didn’t have the money in the bank. We’d spent it on wages and bills. Our stock company refused to send stock and made us pay cash on delivery. The landlord kept phoning and we ignored him for a few weeks to give us some time.
What was going on?
We were flying a few weeks ago.
As the salon was so busy and we thought the growth would last forever. We took on extra staff to cope with the workload and stopped all marketing as we were fully booked.
I didn’t care about wage percentages, stock spend or any bill, for that matter. We always had more than enough.
This is the case for many busy salons. They feel they don’t need to look at their finances and wages as the money is coming in so fast, but that’s how they take their eye off the ball.
The bills grew bigger, the wage bill was out of control, my personal taxes were ridiculous and my stock spend doubled.
The realisation hit me, I felt sick that we didn’t have enough money to stay open. The debt was bigger than my week’s takings. If this has ever happened to you you will know what I’m talking about. Stressed, sick, scared, and it’s all-consuming. You lie to everyone that everything is ok. You hope that you become busy again and that the takings rise higher still to help you.
But the realisation is that even the busiest of salons cannot sustain huge growth year on year, eventually it will flatten off.
Thats what happened to mine. Takings remained the same and the bills were too high to keep the salon open.
Drastic measures were needed and needed NOW.
I had to spend a few days crunching all my numbers and come up with an action plan to save my salon, nothing less.
The wage bill was hurting me and I knew I needed to let a staff member go. I had too many non-producing staff – a luxury I now knew I couldn’t afford. My stock bill was ridiculous too and I needed to use a cheaper brand so I could pay back what I had owed.
I crunched my numbers, starting by concentrating on the staff’s wages and how much each staff member produced for the salon. I made a decision on which staff member had to go. I didn’t sleep that night. My mind was racing over and over again, playing out what I was going to say to soften the blow, knowing full well that I was changing the life of a person tomorrow. You see, she had a child and was a single mum. She had been looking for a job for 6 months before I employed her. I felt sick to my stomach. The clients loved her, she was great at her job and I thought she was one of the best employees I have ever had.
But to save the salon, the finances needed to be balanced, and fast.
I walked into the salon that day and called her into my office. I told her the whole story about me taking my eye off the ball and the salon would close unless I did something about it. She immediately burst into tears from the shock of the news, and so did I.
She asked if she had done anything wrong and why her? I told her ‘no not at all. You’re fantastic and will go far’.
I promised that I’d try to get her another job and would make some calls. She didn’t stop sobbing. I was sick to my stomach. This was all my fault. We hugged each other and then she gathered her belongings, walked out the salon, turned to the staff and said goodbye. You could hear a pin drop as she turned to walk to the door. The looks on my other staff’s faces said it all. They knew that would be the last time they would see her in the salon.
I called an emergency meeting that night before the staff went home and explained everything to them.
They knew that things were scary, but also knew the salon was busy and I if I took control of the business side, then it wouldn’t be long before we would be profitable again.
I promised myself that I would never be in that situation again. Ever.
It took me almost 12 months of hard work and controlled spending to finally get on top of my debt, but it was worth the experience in the end. It changed everything.
I built a rock solid business after this, I went and learned how to make more profit from my salon then ever before. All the trials and tribulations on your salon journey are giving you life lessons. You can take them on the chin, be knocked down or learn how to avoid them.
I chose to avoid them. I created a new way to sort out my salon finances so this never happened again. It changed my world so much that I use the same system in my coaching business. It’s all about paying yourself the right amount, getting your wage bill perfect and putting some money into a ‘rainy day’ fund.
A lot of salon owners have asked me how I did it, so I built a course so they too can copy my system. It’s called ‘Profit Now’ and you can check it out here
Please feel free to share this blog if you feel it will help others
Richard McCabe
‘The Lifestyle Salon Coach’
P.S
When you’re ready to work smarter, here are ways I can help you…
- WATCH MY FREE WORKSHOP – where I show you the 3 ways to grow your salon
https://isaloncoaching.lpages.co/lifestyle-salon-plan/
- BOOK A FREE, NO OBLIGATION CONSULTATION. If you have a salon with staff, find out how we can help you grow your salon faster and more profitable.
https://calendly.com/isaloncoaching/salonstrategycall
