Profit! The Gateway to Business Freedom.

By David Watts

In the Hair & Beauty industry higher profits aren’t just a numbers game, it is the key to unlocking the doors to personal freedom, business longevity, and a simpler, more fulfilling life.

Unfortunately, what I see a lot is misdiagnosis when it comes to business challenges. Success doesn’t come from knowing your numbers, it’s about understanding the story they tell so you can stop leaving money on the table.

If your business decisions seem to be draining your bank account instead of filling it, there might be undiagnosed issues at play. When you start uncovering opportunities that can boost your bottom line the magic starts to happen.

The true power of profit:

It is not just about financial gain; profit is the bridge to personal freedom. When your business is truly profitable, it becomes the vehicle for the life you desire, not a source of stress.

Financial freedom offers the ability to build a life that resonates with your personal values and dreams, set your own schedule and to pursue your passions outside of work.

Psychologically, the shift from financial strain is empowering. You feel more in control, your overall well-being levels up, and work becomes a source of joy, creativity, and personal growth.

Profitability in the salon is also important for the well-being of your team members. It provides the opportunity for self-improvement and personal development, the chance for skill enhancement, and the security to explore their professional potential.

Why it matters for business longevity:

Profit plays a crucial role in ensuring the longevity and sustainability of a business. It serves as the lifeblood that fuels growth, resilience, and adaptability. Salons that consistently generate profit are better equipped to withstand the test of time. These salons are able to invest in growth, navigate challenges, attract top talent, and importantly service their clients better.

In business, we need a buffer against economic downturns or unexpected challenges. Building profit into your salon will serve as a financial cushion, helping weather unforeseen circumstances without the wheels falling off.

Team members are more likely to stay committed to a salon that demonstrates stability and growth. They also find it easier to attract top new talent by offering competitive salaries, benefits, and professional development opportunities. Long-term client relationships contribute significantly to your revenue. Profit allows salons to invest in delivering high-quality products and services. Satisfied clients are more likely to be loyal and advocates for the brand.

Debt is one of the biggest challenges I see impacting salons’ bottom lines, it is crippling to cash flow. Profitability provides the money to pay off debts, reducing financial liabilities and interest expenses. A salon with lower (or no) debt is better positioned to succeed long term.

The profitable strategy for business freedom: When working with salon owners to diagnose financial issues we are effectively looking for which profit levers to pull. I think that salon owners should be generating 30% profit and accepting anything less is short changing themselves and the business.

How you approach the numbers will determine what lever to pull…

You can analyse your fixed expenses and ensure they are sustainable; they can blow out and impact your profitability quickly. If you ask your accountant, they will generally tell you to cut expenses, it is how their brains are wired.

However, as a strategy, it ignores the commercial reality of investing in valuable business activities like marketing or coaching. The true diagnosis would be to check the return on investment from your marketing or coaching as turning that tap off could have a detrimental effect on your profit.

There are some quick wins to be found in your bank statements generally; forgotten or unnecessary subscriptions, old insurances still active or finding other hidden expenses you have long forgotten are all things you can tidy up and save money on but in reality, your fixed expenses are just that, fixed.

To improve your ratios around fixed expenses you can generally only increase your sales. This strategy often creates more headaches and is an all too familiar story across our industry.

Many salon owners run into more trouble as their sales increase, they don’t have more money in the bank, in fact they often have less, and this is because their menus are not priced for profit.

Pricing is impacted by your variable costs like wages and cost of goods, yet these are often ignored when it comes to setting up our service menus. There are too many salons that have guessed the price of services or used the market as a guide.

You can analyse performance, utilisation and many other metrics in your salon but if you ignore the price you charge for your services you are likely to misdiagnose your problem and focus your efforts in the wrong place entirely.

It’s also not enough to say that you will raise your prices by a particular percentage, you actually need to do the work to know what it costs to perform EVERY service on your menu and build your profit into the pricing.

Honestly, this is a time-consuming task, but it is well worth it. You will need to measure usage and amounts of products and guessing or estimating here won’t work. You need to base this on how your salon operates and not what the supplier may suggest you are using.

Now for the reality check, you will probably need to rip the band-aid off and execute on implementing your new prices. Your financial future depends on it.

The fear of client backlash often looms large when contemplating price increases. However, the prevailing wisdom that “no one will notice your price increase” holds a powerful truth. The majority of your clients won’t even blink.

For you and your team it’s not just about adjusting numbers on a menu; it’s about ensuring you provide your clients absolute value that aligns with your newfound pricing. Clients accept price increases when they identify a corresponding increase in the value they receive. It’s not just a financial transaction, it’s their conscious choice to invest in an experience.

Strategic Profit Mastery:

Strategic pricing involves a multitude of decisions. It’s about recognizing the unique value you bring and balancing your pricing structure with the perceived worth of your services. This strategic dance ensures not only financial gain but a profound impact on the health and longevity of your salon.