To suggest that owning your own salon is a learning curve would be an understatement. While you likely spend your days and evenings looking for new ways to lure in clients, refine your offering and really nail your marketing efforts, there’s another area that needs a whole stack of your energy – the financials. Yes, it’s boring, but it’s necessary. And if you don’t wrap your head around the key financials of running a salon, chances are yours will join the 60 per cent of small businesses that fail within their first three years.
Here are the key financial areas that need your attention.
Accounting
Unless you track your numbers, you have little chance of knowing how much money you’re actually making. “You need to look a the income that’s chiming in, and even more important, the expenses going out,” says Josh Bauerle, co-founder of The Prestige Journal, which provides accounting services for businesses.
Knowing your numbers also helps you to set prices for your services and treatments.
Have a cash pile
If you’re out of cash when a bill becomes due, it could be lights-out for your salon. “I stress the importance of cash,” says Josh. “Businesses need a good cash management system to make sure there’s always enough funds to pay the bills.”
Think big
While you may be starting small, you need to also be planning for expansion and what that will look like, financially. “If your mental model is [what you’re currently doing], and you don’t have a mental picture of where you’re going, it’s a slower process,” says financial expert Christine Rico. “You need to do the math on how much cash you need to grow.” So while it may sit easier with you to think small and play it safe, having big growth ambitions allows you to financially plan and forecast for them.
Look for predictability
Salons tend to have seasonal busy periods. Plan for them and ensure you invest the income from the busy times to keep the business afloat in the quieter times. Consider setting marketing budget aside to bring in clients in the traditionally slower trade periods.
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