“The easiest way to increase profits is to cut overhead costs.”
Combating Rising Business Costs:
The cost of owning your own business will continue to escalate. Rising business costs, rising taxes, fees, new minimum wage and overtime mandates, price and commission wars, the list goes on and on. As business costs rise, your profit margin will continue to be lower.
This coupled with your personal living expenses, rising costs of living, costs such as food, gas, etc, will also escalate. Your challenge is to find ways to to combat this growing trend.
Despite all these challenges, you can take steps to combat these rising business costs and improve your bottom line.
Well managed salon owners who pay attention to the numbers and are able to make the cost cutting decisions, will be able to stay ahead of the game. We can begin by finding ways to combat rising business costs.
For starters, the easiest ways to improve profits is to eliminate wasteful spending and cutting expenses.
The following tips will provide you with a plan of action that will help you monitor the progress of your salon’s profitability.
Follow these tips:
- Legal — are you a sole proprietor, sub chapter S, an L.L.C? Ask your accountant, what is best for you. Make sure you have the right legal structure that may save you money.
- Cut Your Expenses — examine all your expenditures, and then find ways to lower. Too much product waste and inventory is a good place to start. Are you spending too much money on a certain product line? Perhaps do a little shopping and find a product as good or better that are more cost effective.
- Client Retention — losing just one customer and their family over the course of a year, can be costly in terms of money and bad word of mouth publicity. You must monitor your customer return rate and referrals. Losing customers will greatly affect your bottom line.
- Taxes — make sure you take advantage of all your legal deductions, making sure you itemize and keep good records. Refer to your accountant for your options.
- Advertising — Is it working? The cost of advertising continues to escalate, far too many salon owners are wasting money on advertising that is not effective. You have got to monitor your advertising results the same way you measure your customer return rate. Social media will be extremely cost effective especially e mail marketing.
- Profit and Loss Statement — it is important to monitor your profit and loss statement periodically, numbers don’t lie. Do you know if your really making a profit? Is your overhead expenses out of control? Do you have an inventory control system in place? Examine all your monthly expenses,make sure you add your salary with your expenses, then add up all your sales;then add up all your expenses, then subtract all your expenses to find your net profit. Review with your accountant.
- Labor Costs — many owners are paying too high commissions . Many hairdressers think they make more money by a higher commission. Earning 100% of O is still O. I would rather be paid a lower commission and be booked solid and periodically raise the prices for your services than earn a higher commission and not be busy.
- Hiring Coaches — can be costly in terms of your valuable time, travel, etc. Make sure you check their background, experience, referrals. Are these programs affordable and easy to understand. Like anything else their are great coaches and not so great coaches, shop around before you spend your hard earned money and valuable time.
- Unproductive Staff Members — do you monitor their referrals and customer return rates? Are they contributing to the growth of your business and your team concept?
These are just a few ideas that will help you plan ahead. The next year is going to be extremely challenging.
For ongoing information, follow me and share with your friends and staff. A reminder to hairdressers, those of you who want to take your skills to a higher level,I will be presenting my extensive all day Personal Development seminar in Las Vegas, Nevada on Monday September 19. I can only take 30 people, don’t be left out! Click here