WHY YOU NEED TO KNOW (AND NOT AVOID!) YOUR SALON BUSINESS NUMBERS.

By Rebecca Miller, The Zing Project

Okay, I’m going to bare my soul and share some big truths to hopefully empower you to take control of your business numbers so you can build a healthy (yes, healthy!) sustainable salon... A salon that you are not a slave to - just working to get by, but to create a business that really rewards you for your hard work. And, not just creating a business, but a life.

I am a natural born risk-taker, which has served me in many ways but also given me some of my biggest business lessons. The way I ran my business for 20 years was to look in the bank account and there was money, so I would spend. If things were tight, I would just work harder putting more clients in with me and trade us out of any time we were feeling the pinch.

I’ve had so many sleepless nights worried about the financial health of my business… A big BAS, holiday pay for my team, massive stock orders and the list goes on. I was a massive avoider when it came to the financial position of my business.

I had no idea what my business breakeven was…

I had no idea if my services were priced for profit…

I had no idea what KPI to look at to see if my business was healthy and growing…

I had no budgets or projections in place when ordering stock…

I had no idea when I went to my accountants how to read or understand my financial statements…

I had no money bucket bank accounts set up and was not building a war chest either…

Can you relate to this?! If so, it’s okay! This could be the very article that could change your life and business. Because if I can become financially literate then believe me when I tell you: so, can you!

As you can see, I had some really bad habits when it came to my financial health of my businesses and holes in my understanding but there were also so many stories I was telling myself that became my beliefs and shaped my attitude toward money.

The biggest stories I believed were: if I don’t work hard in the treatment room my business will not make any money and I’m just not good with the numbers or financials.

Admit it if you dare: these may be your stories you tell yourself too.

So, because of the stories I told myself, my behaviour was just to avoid understanding my numbers.

I’m very open about my business and life epiphany that happened around 9 years ago because I want other salon/business owners to know it’s never too late to make impactful changes. I remember sitting on the end of my bed on the verge of burnout, working 55+ hours in the treatment room plus trying to stay on top of the other million things we do to run our business - lead and inspire our teams, training our teams, socials & marketing, systems and processes, and the list goes on (and seems to never end!).

As I sat there in that moment my life really did flash before me… I had a lovely husband and three beautiful children Lockie, Toby and Izzy and to be honest these people are my world but by the time I got home I had nothing left in the tank… Nothing left in the tank to give to the most important people in my life. This was the moment I knew something had to change and guess what… it was ME who had to change.

If these words are resonating with you, keep reading because I wish I had read an article like this long before 9 years ago to help me see there was another way of understanding my business purpose, vision, and its financial wellbeing. I wish I knew that having my salon business didn’t have to be the thing that sucked the life out of me. Please don’t get me wrong, I loved my team and every single client that chose La Bella… It was really about working smarter not harder.

When I knew that it was me who had to change was one of the best moments. I realised I needed to learn more skills and gain more knowledge to take me to the next level and stop avoiding the things in business I feared.

Rebecca Miller 2.0 was born! A Rebecca that had a clear understanding of why she started her business, the impact she wanted to have, the legacy she wanted to leave behind, the dream team she wanted to inspire and, a new desire to

understand of the financial part of her business. I welcomed the new Rebecca with open arms and felt that I could not just a have business but a beautiful life for myself and my team.

You cannot manage what you don’t measure or understand

To build out the mission of your business and achieve your big hairy audacious goals, having a clear understanding of your numbers is super important… It’s also imperative to understand profit in your business. I was hitting big revenue numbers but still wasn’t profitable… Profit refers to the number you get when the revenue generated from your business exceeds everything you’re spending to run it (expenses, products, wages, taxes, etc).

First of all, I had to understand my stories and limiting beliefs around money, and I think from what I’ve shared so far you can see I had to really dig deep to find out where my money stories came from. I realised that most of them were passed down to me through my coding and conditioning and a lot of them were not even my stories really. I rewrote my money stories, creating new ones that served me because I was/am worthy of a financially sustainable salon business. Having a deeper understanding that money is just an energy source that likes to be respected and have order, I realised the more of this energy source I could understand and attract the more I could impact world…

Today I’m going to share with you the musthaves/must-knows to help you have a clear understanding of your finances in your salon business. These are the things I go through with my coaching clients.

Must have to understand your business numbers:

1. Business breakeven

2. Personal budget 3. Pricing for profit

4. Business health check KPI

5. Business bank account buckets set up

BUSINESS BREAKEVEN: My first must-know is your business breakeven. What does it cost you to open the doors each week? This is your baseline, which takes into account everything in your business (down to the cents) each week. Being conscious of spending is key, as is knowing exactly where your money is going so you can plan for the future and build wealth. This exercise is a big eye opener for salon owners but an essential tool to consciously make decisions based on the facts and the data.

I have an amazing spreadsheet that works out your costs/expenses live in the now and breaks it down into a weekly breakeven amount. This ensures our salon owners are not guessing what the cost is to open the doors each week but have the live data in front of them. It includes weekly (e.g., Wages, super etc), monthly (e.g., subscriptions, products, rent) and yearly (e.g., insurances, workers comp, etc) expenditure.

Relying on profit and loss statements cannot give you the data right now, as these are a historical review of what already has happened. My salon owner coaching clients are always really surprised at the real cost when they include absolutely everything! This stops the feast or famine mentality and provides a go-to document each week to see the profit in any salon business, it’s the go-to document when anything changes such as a new team member or if you’re considering making changes in your salon such as a new piece of equipment. It’s a live document so you know exactly where you are with costings and can update it at any time.

PERSONAL BUDGETS: Most salon owners have not created a personal budget (where personal spending can be put through the business), don’t have a clear understanding of profit in the business and what it costs to personally live. It can sometimes be wishy washy of what’s really a business expense and what’s a personal expense.

Lots of business owners run things through their business which is fine but getting a clear understanding of personal spending habits and puts you in control of your money. Control in this area means you can proactively focus on wealth creation now and in the future.

SETTING UP YOUR MONEY BUCKETS FOR SUCCESS IN YOUR BUSINESS: Setting up money buckets makes budgeting simpler and your bank statements easier to digest. I suggest setting up the following for money success: - A trading account where all your sales come into and your fixed costing come out of (wages, insurances, general expenses, etc) - A tax account for GST payments, PAYG payments and superannuation payments.

So often I see business owners just operating out of their main account and falling short when it comes to paying tax. - A term account to pay for anything you purchase on accounts such as products - A war chest where you deposit 2 - 5% of revenue and end of year profit. My coaching clients work on 3 months of breakeven in this account as a security buffer

PRICING FOR PROFIT: This is a big one! Most salon owners price based on salons around them and do not have a clear understanding of what it costs per treatment to have all services profitable and cost out. To effectively price for profit, you must take into consideration each service’s COGS (cost of goods) to perform the treatment, time, and therapist costs per treatment. You’ll also consider each team member’s experience and see what it costs for junior, emerging, and senior therapists to be conducting each service that you offer.

When my coaching clients undertake this exercise, there’s often a lot of shock when they realise their actual profit margins. I believe that you should be making 75% profit on your services. I have a great spreadsheet for our coaching clients to use and this has been a game changer for our salon owners to price all services for profit based on COG, time, and expenditure of treatment. This takes time but I’ve seen my coaching clients go from guessing what they should be charging to now feeling so comfortable with their pricing and profit on all their services.

BUSINESS HEALTH CHECK: If I had to pick, this would have to be my favourite document! A business health check is a document that shows KPI (key performance indicators) and nine areas of growth relevant for salon businesses. It’s a scorecard and a story of measurements that help business owners focus on growth. This is the opportunity piece in our business to improve areas such as client numbers, retail, rebooking, new and lost clients, and services growth. I have a beautiful tool where you can identify where are now and where you want to be, and what strategies need to be implemented to support your team for growth, training, and goal attainment.

These are five big areas to get your head around, but if you’re able to push through the discomfort that financial matters can bring up, realign your money stories, and implement these points, you will have a clear understanding of the financial literacy of your business. You’ll lead your business to build profit, create wealth and experience a freedom like no other.

Throughout this article, I’ve mentioned spreadsheets and resources that I use in my own businesses and with my coaching clients. I’d love to share these with you or answer any questions that this may have brought up. Find me on Instagram - @rebeccamillerzingcoach or email me - rebecca@zingcoach.com.au and let’s chat!