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Measure productivity to improve profitability

25 Feb 2015 by Brenda Perham

Lack of productivity can be a killer for any small to medium sized business. Unfortunately the cost of running your business is only ever likely to increase (reality check) and unless we have the ability to work smarter and be more strategic salon/spa owners we may find ourselves owning a business that makes no profit or even worse one that costs us money! It’s a pretty stressful situation to be in and as a salon business mentor a situation that I am beginning to see more often.

Fully booked salons that make no profit! Never fear though with an open mind, a strategy and some smart thinking you can change your course and start sailing in the right direction – I am a true believer that if you can THINK it you can do it!

Analysis is essential at this point. Here’s some tips to get you thinking:

1. What does it cost me to open my doors each week? If you don’t know this you are flying blind – ask your accountant – they should be helping you with this info.

2. Run the Staff Utilisation report – this will tell you how many hours your staff are being paid for and how many they are being productive for (busy with clients) this is always an interesting read.

3. How many new clients do you have stepping through your door? A salon/spa needs at least 10% new clients to maintain and grow (of course the higher the better) Check your Business Summary stats (right hand side of your report) for your New Client % to see how you measure up.

4. Wage percentage – Your target wage percentage should be 30 – 35%, if you are way above that then that’s probably what’s eating your profit. The solution for this is less staff (yes you could be overstaffed) or ramping up the teams performance. The other question you need to ask yourself here is am I charging enough for my services? I know especially in salonland that the colouring techniques are a lot more complex and time consuming than the good old days. Does your pricing structure reflect that? Your pricing structure needs to be build to be customized for each client. One size fits all never works when it comes to pricing!

5. Realise that numbers are your friend! Numbers are created by the actions of your team, they create a map of the strengths and weaknesses of your business. Identifying this is vital if you are going to change the status quo. Get to know Kitomba better, register for the weekly webinars and educate yourself on how to get the best from the powerful business tool you have at your fingertips.

6. Set a goal for your weekly turnover. In your wildest dreams what would you like your business to turnover each week? You can’t set sail unless you have a destination. Once you decide that you can work out how many clients you need each week, how much they need to spend and what you need to spend to service them….sound simple? Well it can be when you have focus and purpose.

Above is just the tip of the iceberg but it will get you thinking and understanding your business numbers better. Now is a great time to implement change in your business, don’t hesitate, just take action, if you need some help get in touch!

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