Profit First for Salons is a simple, common-sense methodology of managing the money you make in your beauty service business. It is designed for you to pay yourself profits, your owners pay and your taxes; all before spending a single penny on expenses. This system is based on the book, Profit First, by Michael Michalowicz. It’s perfect for salon, spa, suite and barbershop owners who want to create endless wealth in their business.
I am so happy you are here on this article because it’s my true passion. I love helping salon professionals learn Profit First. In case you don’t know me, my name is Ronit Enos, founder of Salon Cadence. And I can boldly say that “Profits” are the lifeblood of your business. As I am writing this, I’m thinking about all my salon owner friends from the past 30-years, and how much this one thing could have helped us all through years of struggle. Maybe right now the wheels are turning in your salon. You’re hiring the right staff, seeing an increase in clients, you’re digging into your niche. You’re feeling GREAT and the community is taking notice of your salon.
But where is the reflection in your paycheck?
If you’re reading this, congratulations on taking the first step to increase the profitability in your business and putting your profit first. This post is a basic introduction into the Profit First Methodology, which again, is based on the Michael Michalowicz book, Profit First. His entire book was designed to help small business owners of all types take control of their cash flow and eradicate debt.
I believe in this system because its SIMPLE, EASY TO IMPLEMENT, and DOES NOT require changing your habits, (not to mention myself and dozens of my clients having wild success after implementing it!).
How do I learn more about Profit First and Michael Michalowicz?
There is a ton of information on Profit First. It has been adopted by tens of thousands of small business owners across the globe. The book itself lays out all the fundamentals of the system and it quickly became a New York Times Best Seller.
Click here to get the book on Amazon
The Profit First for Salons Formula
The basis of the Profit First for Salons stems from flipping a universal rule on its head. The GAAP or Generally Accepted Accounting Principle states that: Sales – Expenses = Profit.
The Profit First Methodology is mathematically the same, but institutes a huge change in human behavior with this formula:
Sales – Profit = Expenses
Once you realize that your profit should be allocated BEFORE dishing out money to your bills, the rest is easy.
The Core Bank Accounts
Most of the clients I start working with have only one or two bank accounts for all of their finances. We implement what we at Salon Cadence like to call “small plates.” Whether you eat from a plate with heaping amounts of food, or a small amount of food, you’re most likely going to try to finish the whole plate (even if you’re stuffed!). This is human nature.
The same goes for your salon: If you don’t specify the expenses that take priority in a systematic and calculated fashion, you will over-spend in one area, not leave enough for another, and all your needs become out of whack and undefined. Thus comes a perpetual cycle until you land in even more debt, or even bankruptcy.
When you’re looking at one large lump sum in your bank account, you’re going to be more likely to freely spend your money because its only a small portion. But if you separate all of your income to pre-determined allocations based on percentages, you have limited yourself to think more critically about your spending.
This is one of the first steps we implement with our clients. All money is deposited into one account, then bi-monthly you allocate to each individual section. This leverages your already existing financial systems and allows you to further identify exactly where your cash is flowing.
By dividing everything out, you are imposing limitations on your spending to reduce temptation. To further reduce temptation, we advise you to open another bank account at a different bank, with no ATM cards.
Remember, this is only a brief introduction to the world of Profit First and what it can do for you. I hear some of the same questions over and over again, so I’ve taken the liberty to go just a bit further to answer some of them for you, because you’ve taken the time and gotten this far.
How much should I allocate to each bank account?
Truth is, every salon is at a different point in their journey and is continuously evolving. You must consult a Profit First Professional like me to do an assessment and determine your Current Allocation Percentage (CAP) and you Target Allocation Percentage (TAP) but here is a general guideline:
But I have a lot of debt, when should I start Profit First for Salons?
Immediately! Establish your accounts and allocate percentages right away. When you see your quarterly profit, most should go towards tackling the debt, while leaving a little to celebrate. We implement an exercise we call a Debt Freeze:
- Write down all of your expenses and debts
- Cut the non-essential expenses or get CREATIVE to work around them. Expenses now = future debt.
- Always pay all minimum amounts to remain in good standing
- Then, pay off the smallest debts to the largest debts, as fast as possible.
How can I hold myself accountable?
Our module not only comes with a full course and 1-on-1 coaching but an amazing community of salon and small business owners in the exact same boat as you. I, as well as our community, hold each other accountable through our own secret system. We dive deeper into every aspect, hashing out the details, creating a plan, and implementing it together.
How do I implement Profit First for Salons?
Profit First for Salons is our customized “hands-on” implementation program based on the Profit First methodology. We will work with you directly to integrate the system into your business. To get started, I invite you to Schedule a Profit Strategy Call, which is complimentary and includes a Profit First Assessment. I don’t offer this to just anyone, but if you have taken the time to get to this point, I know you are serious about improving your business, you are coachable and willing to listen to advice. I only work with business owners who are high-achieving, coachable, and ready to enter into the top 5% of salons in the world.
To learn more about profitability in your salon, get a free profitability assessment Profit Strategy Call.
FREE resources: Download my complimentary guide, The Complete Guide to Building Wealth and Freedom.
