The $$$'s side of Salon's. (Part 1)

13/05/07 21:03 Filed in: Business
Business, Money. Money, Salon. Salon, Money. Business?

So you want to own a salon? Or maybe youre about to begin managing a salon? Perhaps you'd just like to know a little more about how things work on the business side?

Well Ok.

Here's the first installment of a multi-part series on the "Real Truth about the Business of Salons".
In this series I'll cover many issues related to the $$'s that flow through the salon and where the hell they all go to.

Topics will include:
- operating costs
- staff renumeration
- product companies & you
- marketing & PR
- the cost of sales
- essential fixed overheads
- taxes
and many other juicy titbit of fiscal joy.

I'll try to put most topics across simply & in a fun easy to understand way. That's most topics, some topics are just dead boring but you get that too in life.

So without further ado... let's start with...



Part One - $$'s per square meter.

I know, I know it sounds terrible. "Dollars per square meter?" what the hell is this you ask.
Well just give me a moment here. I can't lie to you this isn't going to spin your wheels in the same way as a Fashion Week gig would.
BUT...
this will set your salon up for the good times ahead. Promise.

So what does "Dollars per square meter" mean?

Well it's simple really. All this means is the actual cost of each square meter of your shop (per week) compared to (divided by) the actual amount of money that space makes for you in a given time period (per week).

Why should you care? Because if the wrong number (cost) is bigger than the other (income) then you are 'outta there'. Broke.
Of course if the opposite is the case (income nicely exceeds cost). Well - you're in the money. Nice!

But wait. That's a touch too simple isn't it?

Let's look at the different zones of the salon (cut, colour, basin, retail, ammenities,frontage etc).
Each 'zone' has a different cost to run it. Depending on what it does of course.

Colour for example requires colour stock, tools, consumables (foils etc), not to mention rent, insurance, lighting, furniture. And on and on...
For the 'Retail Zone' we can make another list. Stock, display, bags etc.

Ummmm... boring.
No not really. Get this next part.

If you do your equations properly you might find out 'good to know info'.
Like, you're not making money from your styling stations due to wasting the available space or underpricing the service.
Or, retail is making you stacks of cash with only 10% of the salon floor space dedicated to it.
What could you do with this knowledge?
Well... increase your retail space to make even more from it. How about taking two styling chairs out? Throwing in some more retail displays. And pumping up the styling chair service prices (cut & blow dries)
Result = more $$'s

Alternatively you might discover that you have 'zones' that bring you no income. Of course that will happen with areas such as the toilet, cleaning cupboard etc. So be it, we all need the essentials.
But what about 'zones' like the front window? That should bring in lots of income through client inquiries, impulse buying, retail and PR.
Use that 'zone' - it's yours.

A little secret. 'Zones' aren't necessarily floor space. Remember the air space. Like the way your shop smells so great customers stay longer & spend more. Or the music you choose. Same result, customers stay longer & spend more. Plus everyone enjoys the salon environment more. Remember, this does have a cost too (music system, smelly stuff etc) but details like this pay off.

So what if you have a brand new salon that has no income yet? Just map out what you'd like to make (goals) for the 'zones'. And then track it to stay on track.

Project

Take a piece of paper & pen.
Draw a rough sketch of your shop layout. Keep it as close to the correct scale as possible.
Now in red jot down the cost of running that floor space.
In blue pen, write down what the area made in sales.
Divide the two.

example, retail area is 5 square metres & costs $500/week. So $100/week per square metre to keep.
Actual sales $400/week. Or $80/week per square metre in the till.
Guess what? Bad news. You lose. Better lift your game.

The following week. You increase the retail sales to $1000 (because you're now aware of it). Cost for the area was the same.
Nice work. You're in the happy place - profit.

Isn't the sales number alone good enough you might ask? No. What if tha retail 'zone' is 50% of your floor space?

You get the idea.
Maximise your hot 'zones'. Minimise your loss 'zones'

But first you need to know your 'zones' and how they are performing.

Give it a go. You might like it.

Next week we'll look at Staff. And the real cost of employing people.

For those that are thinking ahead, you'll realise that adding the cost of staffing to the cost of your salon running costs will give us a number that is the "Actual Cost of Opening the Salon Doors".
After we get scared witless about that eqation we can think about getting some clients in the door to pay for all of this.

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