When was the last time you took a good look at your numbers? Take this quiz designed to shed some light on the numbers that underlie your bottom line and why you should care about them.
Gross Income Per Square Foot
This is a simple formula. You take your annual gross income and divide it by your square footage. Some salons break it down even further and track the gross income of each treatment room or area. The idea is to examine the relationship between income and space.
How to make it work for you: Now that you know how much income the space generates, you can look at ways to reapportion it or increase the effectiveness. Is there too much seating in the reception area? Is there room for retail displays in treatment areas? How many additional technicians could comfortably work in the space? Do you need a bigger (or smaller) space? If you generate little or no business from walk-ins, do you really need premium shopping center space? You get the idea. The more you sort the numbers the more you will be able to use them to boost your bottom line.
Whether you track retail sales as a percentage of services or per service ticket, it’s up to you. With computer software, you can choose a myriad of options. Retail sales carry a big bang. They don’t take up much space, don’t require much employee time (compared to services), and they are consumable. Because clients buy them repeatedly, products such as nail polish and lotions become a second stream of income. Tracking retail sales also lets you know which technicians encourage shopping. Along with average service tickets, retail sales let you know who the top earners are in the salon.
How to make it work for you: Borowy hosts contests among the staff members. Techs compete to see who can increase sales by the greatest percentage. Offering clients an assortment of shopping options ranging from nail polish to novelty handbags may be the key to fattening sales. Keeping displays full, dust-free, and rotating frequently will help increase interest. The clients will be looking to see what’s new each time they arrive for a service.
At VIP Salon & Spa, booking procedures are based not only on seniority but on client retention as well. Every three months, the booking order is reevaluated.
How to make it work for you: Keeping clients with a particular tech is important, but it’s even more important to keep them in the salon. Help technicians develop the skills to suggest another tech if they feel the client might leave the salon. Work some role-playing into your next staff meeting. By creating a mutually supportive environment, clients can be retained by the salon — which helps all the employees.
Fixed vs. Flexible Expenses
Fixed expenses are those that you have to pay every month whether you service any clients or not. They would be things such as rent, insurance, advertising contracts, etc. Flexible expenses are those that change proportionately as your client load increases, such as payroll, products, and water. It’s important to know the difference. Chances are good that you take all of this information to your accountant for reporting purposes. Does your accountant ever sit down and help you determine if your current business model is working, or how to improve it? If so, great, hang onto that accountant. For the rest of us, we have to tweak our own plan. Roughly, gross income minus expenses equals profit.
How to make it work for you: Schrabeck prices services based on a formula that includes time and product costs that is designed to keep her salon profitable. Her salon uses a metric of at least $1 a minute in the formula. Even more impressive is that Precision Nails succeeds in doing it with only two treatment areas. The key here is to use your own stats to set prices. If you base your prices on what the salon down the street charges, you are taking for granted that they have a functional business plan. That’s a lot of faith to put into someone you don’t even know. It’s understandable that salon owners are concerned about what price the market can bear, but it won’t matter if they are out of business from flawed pricing. Remember, profit is the goal. From time to time, price increases are necessary.
Recruiting and Training
“Tracking training and ongoing education is important because the more knowledge you have, the more you can charge,” says Peters, a veteran nail tech and educator. When salons invest in employees it can reduce the amount of money they spend overall to train new hires. It’s a cycle. Ongoing recruiting and training go hand in hand. Recruit even when you aren’t hiring; train even when you don’t know how long they’ll stay.
How to make it work for you: Put it down on paper. Commit to a date once a month. Go to your local nail school and volunteer to give a talk or mentor enrollees. This isn’t about screening them upfront. Just put yourself front and center and get to know them. Make sure they have your business card and an invitation to call you. You never know when you will have a vacancy or they will be looking for a job. Schedule staff trainings regularly. Put them on the calendar in big, bold letters. Be known as the salon that never stops learning.
You’ve probably heard at least one person say, “Statistics lie.” Statistics don’t lie; they paint a picture as vivid as we will allow. Crunching the numbers can be liberating. Patterns start to develop. There is no magic. Your business model may not look like the salon down the street. But it’s okay. The idea is to use your unique statistics to work harder for you.