Money Matters

Cut Your Cost to Boost Your Profits

As competition and tough economic times keep service prices flat, salon owners and booth renters need to look elsewhere to increase profits. Learn ways to cut your overhead costs — without sacrificing customer service.

As economic uncertainty cuts into jobs and stock portfolios across the nation, many salon owners and booth renters are rushing for their budget axes to survive sagging sales. But tough times are great times to improve your bottom line by implementing good business practices, say beauty professionals and the management experts who advise them.

Good management starts with a hard-headed analysis of your income, your costs, and your client base. “You should be analyzing your business every month,” advises Susie Fields of Salon Training International in Oceanside, Calif. That will give you a road map for where you need to become more efficient.

Remember: Little costs add up over a month. Multiply those costs by 12 to see how the dribbles turn into big bucks at the end of the year.

But also keep in mind the mission of your business: customer satisfaction. “No matter what we say about cutting overhead, nothing should ever sacrifice service,” counsels Susie Galvez, owner of FaceWorks Day Spa in Richmond, Va. Following are some specific ideas for trimming your overhead.

 

Rent May Be Flexible

A salon’s rent is usually a fixed cost, but you may be able to change that in some circumstances.

If your lease is due to expire soon, research the rates for your area. If your building has empty storefronts already, that will give you some leverage with your landlord, especially if you can show that similar locales go for less. “Play a little hardball,” urges Carol Shanks, an industry advisor with ProSpeak Consulting Co. of Denver.

You should already have been doing everything possible to cultivate good relations with your landlord. Now, when times are rough, it may be possible to negotiate some wiggle-room until sales improve. You could offer to make up the discounted rent as revenues allow, suggests Sahar Slosser owner of Anatomy Day Spa and Boutique in San Diego.

 

Professionalize Cash Handling

Your cash box can be a cash drain, says Shanks. “No more disbursements from the cash drawer. No more cash donations. I don’t care how worthy the cause is,” she says. “You need to get your day’s receipts recorded, and not minus your cash disbursements. It allows you to keep a much better eye on where your cash is going.”

Set up a petty cash account with no more than $40 for emergencies, and always get receipts. If you often need to run out and buy product, then plan your purchases ahead to get better prices. Write checks for services such as janitorial work. “That way, your cancelled check is your receipt,” Shanks says.

 

Shave Financial Costs

If you’re like many small entrepreneurs, you may have charged start-up or operating expenses to credit cards. Check your statement’s fine print: You may be paying as much as 23% annual interest. Transfer the balance to a card offering an introductory 0% interest rate, then pay it off as quickly as possible. Most cards bump the rate back up after six months, so check that the new rate will be lower than what you pay now.

To avoid paying interest, nail technician Pam Karousis of Cortland, Ohio, uses her debit card when ordering by telephone. “It appears on your bank statement because it’s like you wrote a check,” says Karousis, who operates Nail Designs Unlimited.

Here are other potentially money-saving areas:

  • Shop around for better rates on your credit card merchant-processing fee.
  • Banks often give discounts on checking accounts to their loan customers, including free checks and free online bill paying.
  • Paying bills online may be cheaper than checks, depending on the cost of the checks, how many you write each month, and the online charge. It also saves the cost of stamps and envelopes.
  • Consult your insurance agents; see if you can reduce your premiums by raising your deductibles. It may be cheaper in the long run.
  • Some insurance companies give discounts if they handle more than one type of policy. Industry associations may offer group rates.

 

Think Creatively

 

Nail tech Diane Bonn of Eclipxe Salon in Muncie, Ind., has gotten creative in reducing costs by blending products herself and finding unconventional suppliers. “I purchase quality acrylic products, but cut costs on non-essential items,” she says. Here are some of Bonn’s suggestions:

  • Add a scrubbing agent, such as salts, sugars, or oatmeal to your lotion for exfoliation. “This saves money on having two inventory items and makes the service special because you mix it in front of your client.” Bonn says.
  • Reduce inventory by using pure acetone to remove both polish and acrylic nails.
  • Use white paper towels instead of nail towels on your manicure table, and separate them ahead of time.
  • For mixing ingredients, buy scuffle cups from a restaurant supply store.
  • Find wooden craft sticks for stirring your mixes ax a discount craft shop.

 

Save Electricity

Call your local utility company and ask about getting an energy audit. For free or as little as $25, a representative will come to your salon and tell you what equipment draws the most energy, and how to save.

Utilities usually offer year-round flat rates. Jennifer Pealer, owner of Jenniffer & Co, in Mentor, Ohio, found she got a better rate with a yearlong contract. In areas where the energy market has been deregulated, other providers may offer lower rates. “Make them work for you,” Pealer advises.

In hot areas, turn your air conditioner to a higher temperature at night, instead of turning it off. It usually takes less energy to cool down the shop the next morning. Ask your power company for guidelines.

Install transparent shades on sunny windows to reduce the work for air conditioning.

Turn off the lights at night; the same for rooms when not used during the day.

 

At Anatomy Day Spa, the lights used to blaze all night through the storefront, windows. When Slosser shut them off and installed a pretty lamp with a 40-walt bulb, she noticed a $100 drop in her monthly electricity bill.

 

Slim Down That Phone Bill

Telephone companies compete fiercely for your business. Call both your local provider and long-distance carriers for rates. Ask about package deals and discounts on local toll service.

Karousis rents space in a small day spa. Instead of spending $60 on a separate business line, she added a second number to the spa’s line for just $5.Then they dropped their $ 10 monthly long-distance service. Now, each employee uses her own long-distance telephone card.

“It costs six cents a minute,” says Karousis. “We put the access numbers on our phone’s speed dial, so we don’t have to look them up.”

The change also saves them the time of noting down their long-distance calls and going over a shared bill.

 

Back-Bar Products Can Yield More

“If you have control over your product usage, you have control over your expenses,” counsels Slosser.

Manufacturers label their products with the number of applications a container can be expected to yield. Train your staff to follow those guidelines, Slosser advises.

Buy in bulk, book for price breaks for higher quantities and larger containers.

Nail technician Teresa Joyner buys files by the 50-pack, and buffing tools and manicure brushes by the bagful. Whenever possible, she gets together with the three other techs at Synergy Salon in San Diego to buy nail polish, soaking solution, and cotton. Now they’re looking into buying a paraffin bath together.

But don’t overbuy, cautions Fields, who suggests buying 1.5 times your rate of order. For example, if you order every week, order one-and-a-half times what you’ll use in a week.

Talk to manufacturers or your distributor about which products best fit the demographics of your clientele. This will keep inventory from sitting on the shelf.

Think about streamlining your inventory. “I used five different top coats for five different reasons. It was getting costly” recalls Joyner. “Then I found one product that works well on regular acrylics, pink-and-whites, and natural nails, so I stick to that.”

Expensive products aren’t necessarily better than less costly ones, Joyner adds. Experiment to get the best mix of quality for the price.

Avoid buying products C.O.D. “It’s usually $5 to $10 more, and that’s a fee we can do without,” Karousis says.

Find a manufacturer or supplier you can work with and stick with them as much as possible; they’ll often give you additional discounts, such as free shipping, or let you know about future sales.

“Some suppliers will even honor their competitors’ ad prices. It never hurts to ask,” Karousis adds.

 

Trim Paper Supplies and Services

Look at everything you use and repeat out loud several times. “Shop around!” Beauty professionals from self-employed technicians to owners of large salons say they have found better deals on nearly everything by educating themselves and comparing prices. But don’t tie up your money in inventory.

  • Paper towels, toilet paper, and cleaning supplies may be cheaper at big discount stores.
  • Buy quality coffee in bulk or on contract directly from roasters; check the Yellow Pages under Coffee Dealers —Wholesale.
  • Compare prices of bottled water at discount stores and from companies that deliver. The latter may offer deals for yearlong contracts. (But it is probably cheaper to buy a stand and dispenser at a water supply store than to rent them.)
  • How about all those magazines in your waiting area? Association memberships? “Review your dues and subscriptions,” says Shanks.

 

Advertisement: Work It Smarter

Marketing and advertising is a must for any business, says Fields, but it should consume no more than 1.5% of your gross sales.

Figure out what brings in your customers, and focus on that. Van Nguyen, operations manager for nearly 40 salons of the Happy Nail and Spa chain in Southern California, used to advertise in 10 metropolitan dailies, but has cut back to three.

“It seems that the Value Pack coupon packages and direct mailers to the homes around our salons have worked well for us,” says Nguyen, who is based in Rancho Santa Margarita, Calif.

When Slosser bought her spa, she discovered the former owner had been paying $300 a month for a listing on a local web page. Slosser left it there for awhile, asking new customers how they had learned of the spa. “Not one had seen the ad,” Slosser recalls. She dropped it.

Shanks advises beauty professionals to brainstorm for low-cost ways to attract new customers.

  • Re-energize your referral program. Find ways to get your staff excited about it, such as offering gift certificates to restaurants. Those, Shanks says, can be arranged in trade for salon services.
  • Offer brown-bag lunch chats to local businesses. “Talk about the benefits of a regular pedicure and then offer half-off coupons,” Shanks suggests.
  • Periodic photography sessions are part of Pealer’s marketing strategy for her 52-employee salon. To reduce the cost, she books the photographer for two clays. The first day she fills with her own work. For the second day, Pealer books time slots for other salons and charges them.

 

 

Keywords:   keeping your business competitive     salon finances     taxes  

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