It is possible to run a very profitable business in the salon industry - but… only if you have your two key variable costs under control! - If you don’t, then a strong profitable business is almost impossible!!
These two variables are your stock and salary costs.
Firstly, what does variable mean?
Well simply, they vary according to your sales - the higher your sales, the higher these will be - unlike a fixed cost, say for example your business rates, which will be the same whatever your sales.
If your sales are low, variable costs will be in you favor whilst fixed costs will hurt you, but, once you start achieving success and growing your sales, it’s the variable costs that start to kill you if you aren’t careful.
Controlling your stock % is relatively easy - if it’s too high it will be one of or a combination of the following:
Poor deals from your product supplier
Poor buying practice, too soft, no budget, etc.
Poor stock control
Team ‘borrowing’ excessively
- all of which can be changed or controlled fairly easily when you put your mind to it.
However, it’s the wage % that will be your biggest issue. Even if you pay a fixed salary to your stylists/therapists or assistants, you need growth - we all do - you need growth today just to stand still!!
Therefore you should always consider stylist/therapist, assistant salaries as a variable cost. Front of house and any office staff would be considered a fixed cost.
So why is this a problem - surely if it’s variable it’s OK? Yes it is as long as you have the figures right in the first place - but there will always be a safety net, often the minimum wage.
That is fixed - so if you have a stylist who is not putting enough money in the till to justify the fixed salary they are earning, then… your wage percentage goes thorough the roof!
I started a new course last year called ‘Manage your Wage Bill’ - it is so popular - but the best bit is when I show how your wage bill can go up by 5% to 10% with just 2 stylists out of 5 who aren’t hitting their targets - and the huge impact on your profit that has.
However, of course the best bit really is when I show you how to reverse that and bring the wage bill down by 5-10% - increasing profit dramatically this time!
So the message is - always manage your variables! And, in particular your wage bill!!
You can check out my one day seminar on this at http://bit.ly/tfhmywb - I promise you it will be well worth it :)
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