By understanding and committing to the principles of good management, your business can succeed and even flourish. Are you doing all you can do when it comes to smart scheduling, customer relations, employee management, and analyzing the numbers behind your business decisions?
When times are tough, it can be difficult to think about growing your business. But that’s the right time to review your management practices and make sure you are doing everything possible to maximize your income.
“There has never been a better opportunity in your own town,” encourages Robert Cromeans, the owner of four multi-service salons in Southern California and Las Vegas. “People aren’t leaving town and going to Miami. They have $1,200 more of disposable income to treat themselves with.”
Start by looking at four pillars of good management: a monthly business analysis, client scheduling, customer relations, and employee management.
Analyze Your Business Monthly
You could start out with what’s called a “break-even analysis,” suggests Susie Fields, who has counseled thousands of beauty business owners over the past 12 years. Basically, you need to add up all your fixed expenses (such as payroll and rent) and your variable expenses (such as commissions and the cost of retail products), then deduct the total amount from your income. This will show you how much money you must bring in to meet all your financial needs.
Then, whether you rent a booth or own a large,multiple service salon, ask yourself these questions:
• Are my budgets for payroll, commissions, front desk, back-bar costs, retail products, advertising and overhead in line for a salon of my size and customer base? (see “Typical Salon Expenses” below)
• What does each of my services cost me? How much time do they take? Which are the highest income-earners? Which require the highest investment on my part?
• What is my average service sale and retail sale per customer? What proportion of my income is from basic services, add-on services, and retail sales? What is each employee’s (or my) average service and retail sales for the year? What is each employee’s rebooking rate? What is my customer retention rate?
• What are my goals for profit, shop size, and customer base?
As you answer these questions, a guideline emerges that becomes the roadmap for managing your business.
“Eighty percent of the salons and spas in the country are losing money because they don’t have budgets and don’t make basic business calculations,” notes Fields. “We are an emotional basket-case industry. By looking at their business in terms of profit and loss, owners can base decisions on the numbers rather than emotion.”
By creating profit-and-loss statements, balance sheets, and cash-flow reports, you will see precisely where your money is coming from and where it’s being spent in your business. Through her consulting firm Salon Training International in Oceanside, Calif. (now a division of Milady Cengage Learning Center), Fields has developed formulas to help beauty professionals figure out how much they should be earning and spending for a business of their size. Many techs will discover they need to charge more for their services.
“The profit-and-loss statement should dictate how much you charge for a manicure — not your community. Every time you do a fill, if you charge $15 because that’s what everybody else does, but it costs you $20, you’re slowly dying,” Fields observes. “You need to be up-selling, doing pink-and-whites. Waxing is another service that’s often underpriced.”
Fields urges business owners to computerize their information for what should be a monthly analysis of the entire operation. She uses the program QuickBooks Pro, which will automatically add up the numbers that you put into the program. She also recommends finding a good accountant who will give you a profit-and-loss statement (a report on where the money is coming from and where it’s going) in the first week of each business month, allowing you to make a timely analysis. You can get more help from the local office of the Small Business Administration, in community college courses, and through your local library.