If you are a service provider company, salon owner, spa owner, manager, entrepreneur, or any professional who wants to learn how to increase your hair salon profits in the service-based industry, this blog is for you.
When you started your salon, were you planning for profit? With every decision you made, did you factor in yourself, your free time, your income? This is the first mistake I see so many new salon owners make.
Salon Owners start with a great idea; a beautiful vision of their own salon. They take all the leaps, invest their precious time and money, but never plan for themselves. Then, they take home whatever is leftover at the end of the month, instead of factoring it in at the start. They work day in and day out, pour their heart and soul and hours into their salon business, all to work 50+ hours, break-even, or even worse, shut down in the first 5 years.
The Salon Owner’s Journey
I know what it feels like, I have done it myself. I remember the endless nights and days that I was dreaming of a life where I could hang with my family, travel and see my family, visit a friend or just do yoga once-twice a week without feeling guilty. When I was at the salon I was thinking of how much I wanted to be with my children, husband, dogs, and plant nice planters. When I was at home I felt guilty for not being at the salon working with my team… does anyone feel the same way? Especially now in the current world, no matter what you do you don’t have a great steady paycheck and savings to show.
Hair Salon Profits through the toughest times
The time for this has come and gone, now exacerbated by the threat of COVID-19 and the effect of its hardships on your hard-worked, well-earned company. The truth? The problem isn’t COVID nor complications due to the lockdown or staff not wanting to come back. The problem lies in your numbers, your accounting, and your spending. Time spent in quarantine should have sparked a flame inside of you. A flame of realization, innovation, followed by some cold hard change. I’m here to work on that with you.
Business is not complicated. There is a recipe. Increasing your hair salon profits is no different.
Ronit Enos
At Salon Cadence, we help service-based industry professionals create profitable businesses and careers so they can have success and confidence to allow you to see things in a different way, help you shift your thinking and actions.
The Facts of Small Business Success
When I first started my own salon, I had no idea how much the odds were stacked against me. I found some statistics down the road that downright scared me:
- 2 out of 3 small businesses are not profitable
- 83% are surviving check to check
- 50% of startups fail within two years
- 25% of those don’t make it to year 5 years
- 75% of American households are living paycheck to paycheck
- Only 5% of new companies end up thriving
I was blown away. I had to look at my salon company and make an incredibly tough decision. We needed to be 100% all-in, or it was time to cut our losses and move on. When I huddled with my partner, we made the decision to jump in again, head first, but this time armed and ready.
Learning How to Have Consistent Hair Salon Profits
It ignited some incredible motivation within me. I started learning as much as I could to not only stay afloat but start thriving. I read all the books, hired advisors, salon business coaches, and mentors. They all lead great practices and of course, my leadership got better. But I still couldn’t get the paycheck or the free time I wanted.
The turning point for me was when I looked outside the salon industry to see exactly what successful business owners are doing. I learned there are 3 categories to a successful business and life, regardless of the industry: Mindset, Wealth, and Freedom. But these areas could only reach as far as the income generated by the salon.
Salon Coaching that is focused on hair salon profits
These are the main subjects I develop with my clients and on their businesses. We make a bulletproof vision board and plan for all of these areas, we hold them accountable, and help them develop and grow their company to the next level by increasing their salon profit.
The Bottom Line: the problem lies in your numbers and system of finances. We start at the biggest foundation: income/sales. I’m going to dive into the nitty-gritty behind the math of your income numbers and what they should look like as a salon business. This will be your first step to clarity, so join me in these calculations. Your answers will help you understand the areas you are doing well in and the areas that need attention. Your income, cost, and salon profit calculations are essential for you to know in order to adjust your business, prices, and services. If you don’t identify where the leak is in your boat, there’s no way to fix it. Investing in an accountant, bookkeeper, or Quickbooks is always something to consider. Remember, growth starts with clarity.
Calculating Hours Sold
Total hours sold ÷ total hours available = productivity
Example: you sold 200 hours in your salon ÷ 400 hours available in the month = 50% productivity.
Calculating Income
This is an easy way to see how profitable you are as a hairdresser or for an entire salon. Your life will become easier if you can monitor any income that you have and create a tangible goal to work towards.
Total sales for the month ÷ Hours sold for the month = Income per hour
Calculating Expenses
This is everything it takes to run your company, from travel to staff payment to electricity and rent.
Total expenses for the month ÷Hours sold for the month = Cost per hour
Calculating Profit
Income per hour – Cost per hour = Profit per hour
Example: $50/hour profit
Total sales and services for the month ($40,000)÷ total hours booked for the month (200) = Income per hour ($200)
Total expenses for the month ($30,000) ÷ total hours booked for the month (200) = Cost per hour ($150)
Profit per hour: $200-$150 = $50
So that means every service that is being done in your salon needs to be making at least $50 an hour to maintain your current profitability. If you want to increase your profit per hour, you need to make adjustments.
Ways to Increase Hair Salon Profits
Now that you know where you are, you can plan for where you want to be. Here are some ways to increase profits:
- Increase Your Prices
- Improve Your Time Standards
- Lower Your Expenses
- Increase in Retail Sales
- Raise Your Productivity
- You Align Your Service Rates with Your Profit Goals
- Check out my recent article on how to create additional revenue streams in your salon.
A Quick Intro to Profit First for Salons
The Generally Accepted Accounting Principle of Sales – Expenses = Profit, is not the best rule to follow, it is flawed. Instead, follow Sales – Profit = Expenses. In the GAAP standard, your salon profit becomes the last item considered. What you should actually be thinking is in terms of your ideal profit and income, and then adjusting your expenses to achieve this.
Typically, I see that if you don’t have confidence in knowing your numbers inside and out, your salon business is not functioning right, and your hair salon profit will fall. I created an assessment quiz that allows me to evaluate where the leaks lay within the company, and build a strategy to tackle each area based on their priority and urgency.
Financial Systems is Key for Success
Building a solid financial system that works and thinks for you and your habits is essential to weathering this storm. I believe so much in this cashflow system; I know that it will change your life and protect you and your company, but more than anything it will allow you to make great decisions.
Yes there is always more to do. There’s more to train, more to learn, and more to protect; but if you don’t apply these key things today you are not going to finish first or finish at all. You will be exhausted and chasing your tail for little profit… believe me I did this, I was there.
The best part is that once you implement the system, you are almost on cruise control and can now focus on building new streams of revenue to build your hair salon profit. Once you have that financial confidence you can make great decisions based on cash security and not fear of losing clients, staff, or paying bills.
Becoming one of the Top 5% of Successful Salon Owners
We’ve seen tremendous happiness and success with our clients (even in these times!) after implementing this system, so I want to share this with you so you can do them too. More than anything I want you to know that it will create a bulletproof company; one that will work for you even in challenging times. I won’t lie, it wasn’t easy to implement and follow the new cash money mindset, but once I did it, I created cash and confidence freedom. Now, I’m teaching our clients to do the same. Through challenging times, they remain clear and certain. They are innovating, working hard, and looking forward to the future with eyes wide open and newness in their heart.
Please join me; share your goals and challenges with me. I want to help you, but if anything please start here with this blog. If this resonates with you, you know where to find me. My mission is to help 1000 salons, spas and service-based businesses change their money story and freedom to live the life they want to lead. The Profit First method allows you to be profitable even in the first month.
In Summary
I hope you’ve been able to gain some clarity and understanding of the numbers and expenses in your business. At Salon Cadence, we work extensively with our clients to identify issues, fix them, and set high goals for their business. We work with you every step of the way to create the life you want for yourself. Working on your income and sales is only the first step, and we cover it all. If you want to know more about our process and program, I urge you to schedule a complimentary discovery call with me here, which will include a Profit First Assessment.
