“The easiest way to improve profits is to cut wasteful overhead expenses.” Jon Gonzales
As we exit from the holidays and begin a new year, the cost of owning your own business will escalate; rising taxes, fees, and operating business costs, and what many see as a slowing economy will bring many challenges to business growth and profitability. As business costs rise, profits are lower or nonexistent.
This coupled with your personal living expenses, costs such as food, gas, etc. will require you to start planning for the new year. Despite all these challenges, well managed salons will be in great demand, provided you plan ahead and work hard at making your salon profitable.
The easiest way to start the new year and improve profits is to cut overhead. The following tips will provide you with a plan of action that will help you keep pace with the high cost of rising business costs, as well as improve profits. Make sure you attend one of my extensive all day business seminar ,I have a wealth of information that will help you take your business to a higher level.
Follow these steps:
Profit and Loss Statement — are you really making a profit? Are your overhead expenses to high? Numbers don’t lie. The first thing you should do is to monitor the cost of running your business and ask yourself did you make a profit in 2012. If not,find out why. Perhaps your overhead expenses were out of control? Do you have an inventory control program in place? Product waste is a profit killer. Maybe your staff is not performing. Examine all your expenses, then add all your sales by subtracting your expenses; you will clearly see your net. Review with your accountant. Without monitoring your profit and loss statement, how can you combat rising business costs?
Legal Structure — are you a sole proprietor, sub chapter S, an L.L.C? Ask your accountant, what model will help you save on taxes and what model is best for you.
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.
Taxes –— make sure you take advantage of all your legal deductions, Making sure you itemize and keep good records.
Client Retention — losing just one customer and their family over the course of the year can be costly in terms of money and bad word of mouth publicity. You must monitor your customer return rate and referrals.
Advertising — Is your marketing and promotional efforts adding value to your business and is it working? The cost of advertising continues to escalate, far too many salon owners are wasting money on advertising that is not working. You have got to monitor your advertising results the same way you measure your customer return rate.
Labor Costs — many owners are paying too high on commission. Many hairdressers think they make more money by higher commission. Earning 100% of O is still O.
I would rather make 40 0r 45 % commission and be booked solid and raise prices and have a benefits package, rather than just sitting around waiting for customers. I will be releasing a blog post soon for hairdressers on this topic soon. If the owner is unable to make a profit,how can they guarantee job security,advertise,and offer an incentive or a benefit package.Personally an hourly wage and a benefits package is one way to measure your labor costs.
Unproductive Staff — make sure you monitor their performance, customer return rate, and referrals. Either turn them around or let them go.
These are just a few ideas that will help you plan ahead. For ongoing information,follow me and share with your friends and staff. Click here.