Create a financial plan

In order to create a financial plan and budget, you’ll need to know your numbers. You need to know what it costs to open your salon door each week. Identify your salon’s weekly income and plan a budget knowing your incomings and outgoings.

How much does it cost to open your doors each week?

If you don’t know this then ask your accountant. You can then take this number and work out how much it costs to run your salon each hour. How does this align with your pricing structure?

What’s your profit and loss (P&L) statement?

This summarises the revenue, costs and expenses incurred during a specific period.

What is your wage percentage?

Generally the two big overheads in a hair salon are your stock and your wages. Ideally your wage percentage should be around 30–35% of your turnover. If this is out of whack then you either have a problem with your pricing or your productivity or both.

Is your pricing right?

Your pricing structure should allow for extra time and product usage. You can’t take a one size fits all approach to pricing—extra grams of colour and extra application time costs must be passed on to the client. Also watch the time allocation—if you have stylists stretching booking times you run the risk of losing profit on those appointments.

Setting financial goals

Once you understand where you’re at with your finances, you can set financial goals and specific financial targets that will lead you on the path to success.

Your financial goal could be to increase your revenue by a specific amount, but you’ll also need to know how you plan to achieve that.

For example, you could:

• Reduce your average client revisit period
• Increase your client retention rate
• Increase your new client rate
• Increase your client retail attachment

Did you know?

Kitomba’s Business Summary Variance report enables you to compare date ranges for the most important metrics in your business in one handy report.

Leadership

People don’t leave companies, people leave people. Great leadership is at the helm of every successful business, and it’s your job to set the bar, inspire and motivate.

Do you have the five key traits of a great manager?

• Great managers inspire their team
• Great managers communicate effectively and listen
• Great managers mentor, not bulldoze
• Great managers empower their team
• Great managers are consistent

Culture

Culture eats strategy for breakfast, as Peter Drucker famously said, but how do you create a positive, inclusive and inspiring team culture?

When choosing which targets to track, you need to understand what your overall business goals are and what areas in your business you want to improve. This will help you to decide which targets to set.

Introducing targets to your team

After you’ve set your retail and sales targets you’ll need to get your team onboard! It’s important to be thoughtful about how you do this, as your approach will affect how your team feels about their targets, and ultimately how successful they’ll be at meeting them.

Our top tips for introducing targets to your team include:

• Communicate your ‘why’
• Pick your timing carefully
• Upskill your staff
• Be realistic

How to track your team’s targets

Targets won’t achieve anything if they’re not being monitored and tracked, so it’s important that you understand how you’ll achieve this before introducing targets to your team.

If you and your team can successfully monitor targets it will give your staff a clear understanding of their targets, how they’re tracking towards them and what they need to do in order to achieve them. It will also give you the insight required to be able to support your team to hit their targets.

Kitomba Salon and Spa Software enables you to set targets for your individual team members and their progress will be updated automatically based on what they have sold. You can then run a report to see how each team member is tracking towards their targets, and you’ll see your business’s progress as a whole.

With Kitomba you can track seven different targets:

• Total sales
• Service sales
• Retail sales
• Appointment retail sales
• Total appointment value
• Average appointment value
• Client rebooking

These targets can be set weekly or monthly, depending on what suits your goals and team.

Featured article: How to introduce targets to your salon team for rapid growth

Knowing how and where to start with introducing your staff to targets can be overwhelming. This guide covers everything you’ll need to know about introducing targets to your team in a way that inspires and encourages them to perform to their best.

A study by Microsoft found that 96% of customers say customer service is important in their choice of loyalty to a brand, so when you focus on customer service, your client loyalty will improve.

Tips for creating an exceptional client experience in your salon

1. Make the booking process seamless
2. Send appointment confirmations and reminders
3. Greet your clients with a smile
4. Stick to the schedule
5. Get to know your clients and remember their preferences
6. Follow up with a thank you message and keep in touch

5 things to think about when creating a marketing plan

Check out our guide for marketing your salon or spa.

With stock management, it’s important that you:

1. Understand how much stock you have currently.
2. Stocktake once a week, preferably using specialised software that can automate this as much as possible.
3. Know what you need for your staff and clients, and take seasonality into account.
4. Create an ordering system and process that’s consistent and works for you.
5. Consider the storage of your stock and the conditions. Don’t order extra stock if you can’t store it properly.

Use stock management software to keep track

For example, Kitomba Salon and Spa Software’s stock management feature enables you to automate your daily inventory to ensure real-time stock control. This prevents you from running out of stock that your clients want to purchase, or that your team needs, and it ensures you won’t over order and end up with too much stock.

Find out where you’re spending your time

Track how you’re spending your time for an entire week to be able to analyse where your time is going. It may surprise you! You’ll be able to identify where you’re wasting time, where you need to offload, and how you can use your time more efficiently.

Set your priorities

We all know that when we’re short on time the things that are lowest on our priority list will fall off our to do lists first. Therefore, it’s important that you’re prioritising your tasks accordingly. This includes prioritising ‘you’ time, too!

Plan your week in advance

Armed with your list of priorities, it’s time to block out your calendar so you know exactly when you’re doing a task and have set aside time for it.

Important finance terms every salon, spa, or clinic owner should know

Accrual accounting

This is a way of accounting for income at the time it is earned, rather than when you receive payment; and accounting for expenses when the good or service is received, not when they are paid for. An example would be recognising the income from a voucher when the voucher is used, rather than when it is sold.

Cashflow

Cashflow is money coming in and out of your business over a period of time, either cash in your cash drawer, or money in your bank account. If your business has received more money than it has spent, this is called positive cash flow. If your business has spent more money than it has received it is called negative cash flow and isn’t usually a good thing.

Liability

A liability is something a business owes. This could be money or services. For example, if a client has purchased a 10-trip concession, you owe them those 10 services.

5 key metrics you need to know

The best reports to run for your hair or beauty business

Business summary report

The Business Summary report is the most popular report in Kitomba. It provides a top-level summary of how your business performed over a specified time period, from service and retail sales, vouchers and concessions, gender stats, rebooking, retention, new clients and more.

This report is accessible in both Kitomba and Kitomba 1, but the Kitomba 1 report is customisable so you can add your KPIs, such as rebooking, retention and client revisit rates, and run the report to show the figures you’re most interested in. This provides the ability to focus on what’s most important to you.

Appointment value report

The Appointment value report tells you the value of all your future appointments that have been booked within your selected date range. For example, you could choose to see the value of all the appointments you have booked in for the next week, or month, to provide a snapshot of your expected income for that period.

This is useful for understanding whether you’re on track to meet your targets, or if you need to do something to attract more clients through the door, like running a SMS or email marketing campaign.

Product sales report

The Product sales report brings your retail products into the spotlight. With it, you can view product sale information including total revenue, quantity sold, and profit margin. This is important to get an overview of which products your customers love, which can help you make more informed decisions when your supplier launches a new product range, or you are considering selling a product you’ve never offered before.

This report is also useful as it can help you choose what products to discount. Ones that don’t sell as often but have a high-profit margin are perfect to choose – just don’t choose one that has never been sold – that’s a good indication that your customers aren’t interested in it!

What should I look for in a salon software?

The salon software features that will vastly improve your business are ones that automate admin-heavy tasks, streamlining processes and helping you to delight your clients. These include:

• Appointment book
• Client cards
• Point-of-sale
• Automated client messages
• Client loyalty programmes
• Digital forms
• Stocktake
• Online booking
• Reporting
• Timetables and rotas