It’s never too late to start thinking about the numbers of your salon. If there are operational issues at hand, there may be some things you can do. Too many times salons are losing revenue for one reason or another, so it’s important that you stay on top of your data and run the numbers. However, you must do so efficiently so you don’t drown.
Here are some top numbers you should be aware of:
- Labor Costs – The cost of your salon’s labor includes the benefits you have to pay for each employee, such as health insurance or 401K contributions. If you don’t calculate how much your employee is really costing you past their actual wages, you could run into an unpleasant deficit by mid-year or sooner.
Whether you do your own accounting or hire an outside company, take a look at labor costs weekly. If some of your employees are paid hourly, you could be losing track of their total hours for the week and overall pay. It’s important to not go over budget. Not every hour worked is dedicated to salon services, some salons factor in preparation and clean up time as legitimate paid time.
- Overhead costs, which is all salon’s costs without labor – This is partly your lease payment, or mortgage (if you own the property), utilities, and other expenses. Overhead is a huge portion of the salon’s operating cost, and can be as much as 40 to 50 percent of what you can charge for your labor and materials.
- Profit – Of course you are in business to make a profit, which is exactly why you should know the profit margins. Salon owners can expect a net profit of 11-15% respectively, depending on the level of your clientele, location, and popularity. These numbers are simply industry-wide averages.
Other things to be aware of:
- How many new clients did I get this month? Track how many new clients came into your salon this month. You should be marketing to them going forward. Learn how they found your business and continue marketing in the same path.
- Client retention. How many of my existing clients are coming back? When was the last time they came in? These are questions you must ask yourself. Staying on top of this aspect will improve your bottom line. You worked so hard to get these clients, you should aim to keep them. Frequency of visits is the name of the game.
This is important: Next time a client checks out after a service, encourage them to pre-book their next appointment.
Your task should be to figure out how to make more money for your salon with little effort, so you can focus on your daily tasks. Selling retail products can help improve your margins, and give you the breathing space you need when it comes time to look at your numbers again. Experts say that there’s not much in pushing out retail products… you simply buy them, stock them in a visible spot, and wait for customers to purchase them. Of course, you can opt to sell more products by promoting them during a service.
Want another tip on how to stay on top of your numbers? Find a way to track your sales, from services to retail. You should know what percentage of your customers who walk into your salon are male or female, or how frequently they visit your salon. Back in the early 80s, there was no way of tracking such data.
Nowadays, you can use salon software like Millennium or Meevo, which help you literally track at least 15 different indicators about your client. What time do they normally check in? What’s their favorite service or product? How were they referred to your spa? All that data matters, and best of all, it is one spot (your salon software) instead of on your mind or an unorganized written-client book.