Keeping a business afloat is not easy. Finding out what the keys are to continue to grow it further gets even more complicated.
We know how hard it is to narrow down on the specifics of running a business, and sometimes a few, but very important, details slip though your schedule and yet another year passes without doing these tasks that could substantially impact business. Summit Salon Business Center gave ESTETICA some guidelines to start the year with more momentum, and all because you understand your books better, understand what services and products sell the most, and show you how to reevaluate the hairstylists representing your salon.
1. Do You Know Your Average Ticket?
Feel empowered to grow your annual income one guest at a time just by knowing your average ticket. Identifying our high-ticket guests enables us to stop taking them for granted, reward them for rebooking, offer them retail products, and ask them for referrals. More importantly, knowing our average service ticket empowers us to take actions that will raise our average service ticket by PLANNING to offer services that will turn our lower-ticket guests into higher-ticket guests.
One example Summit Salon gave us is if we were working 5 days a week, serving 4 guests a day, a $2 increase in our average service ticket could mean as much as a $1,200 increase in annual take-home pay. A $10 increase in our average ticket could mean as much as a $6,000 increase in annual take-home pay! Keeping track of our low-ticket guests also helps us to become painfully aware of the number of low-ticket guests who have become our deal-getting “friends.”
2. Always Aim to Expand
Every salon owner is used to wearing many hats, fulfilling a number of diverse roles. They learn most of these skills through trial and error and through repetition. Some are simply never taught to hairstylists but could have a massive effect on business.
Perhaps one of the skills that owners struggle with most is salon lease negotiation, simply due to a lack of knowledge or experience in this area. Although salon rent payments need to be less than 7 percent of gross sales in order for a salon to be profitable, owners often pay exorbitant amounts and feel powerless to negotiate with landlords. This single budget line item can often make or break the financial success of the salon. Many salon owners are at a disadvantage during a lease transaction simply because they have never had the opportunity to learn this particular skill, so get your learning caps on in 2016!
3. Find out your Salon’s Net Rent
Avoid overpaying and lost profit! The landlord will usually quote you a Net Rent and then tell you there will be common area, maintenance (C.A.M.) and Reality Tax charges on top. Begin by asking the landlord to specify each of these amounts.
If the C.A.M and Realty Taxes for the current year are not known ask for last year’s and ask for a guarantee in the offer to lease that they will not increase by more than the consumer price index (CPI) for your area in future years. This puts the risk and accountability for managing these expenses on the landlord not you. The key thing to remember is that the total rent payable per month and per year cannot exceed 8-9 % of the anticipated average yearly sales over the term of the lease. Let’s look at an example: time and time again we see independent salon owners sign leases based on emotion instead of intelligent analysis. The result is overpayment and lost profit. As an example overpaying by as little as $5.75/sq. ft. on 2500 sq. ft. over a ten year period results in $5.75 x 2500 sq. ft. x 10 yrs = $143,750 in lost profit
4. How should you be paying yourself?
If your salon company is profitable, it is amongst the top five percent of salons in North America as ninety-five percent are either cash flowing or losing money. In this ideal scenario, Summit Salon Business Center believes you should pay yourself as follows:
- (1) Services. If you are a service provider, you should pay yourself a commission for the services you provide. Your commission rate should be the same as other service providers who operate at your level.
(2) Management. If you perform a management role, you should pay yourself the equivalent to what you would have to pay someone else for the same role.
(3) Profit. As a business owner, you should also enjoy profit from your company.
5. Report Tip Income The Easy Way
Salon owners are responsible for reporting tip income on behalf of their employees. We realize this means that you will have to match FICA on money that did not contribute to your company. Regardless of your opinion on this point, the IRS considers tips to be taxable income, which is subject to federal income tax. Tips that your employees receive directly from customers are generally subject to withholding as well.
The IRS mandates that tips be reported to you by the tenth day of the month following the month in which the tips were received. Tips are to include amounts that you remitted to your employees from credit card and debit card receipts, as well as tips that customers gave directly to your employees. If you want more information on how to appropriately report tips, IRS Publication 4902 provides an overview based on the Cosmetology and Barber industry, says Summit Salon Business Center.
For more information, please visit www.SummitSalon.com
- By Summit Salon Business Center – www.SummitSalon.com