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Business Blog 24 July: Costs, Breaking Even, Targeting & Making a Profit

At the end of the day, aren’t we all in the business to make a profit?

But that isn't going to happen indefinitely until we learn two very basic, but very important business skills. Budgeting and Targeting.

Budgeting is the only way to have some sort of control over costs in relation to turnover. You MUST understand exactly how much it costs you to run your business.

Costs & the Break-Even Point

In your business you have fixed costs and variable costs.

Examples of fixed costs are rental, salon insurance, management costs and fixed salaries, which are pretty much the same every month.

Examples of variable costs are commission, cost of sales (stock), utilities such as electricity and water which fluctuate depending on how much business you do.

Other variables which can be fixed are things like cleaning materials, refreshments etc - even toilet paper, the costs of which must be budgeted for.

On your budgeting you should also make an allowance for maintenance and repairs (just in case) as well as marketing.

Once you have calculated these costs you have a set of budgets, but most importantly, you know your salon's break-even point, i.e. how much it costs you to run your business.

Target Setting & Profit

This is where Targeting or target setting comes in.

  • You know how much it costs you to run your business,

  • You know how many days you will be trading in the forthcoming month,

  • You know how many productive staff (service providers) you have working for you,

  • And you know how many clients you have on your client data base.

By dividing your break-even turnover target by the number of trading days, you know how much turnover you need to do EVERY day to cover your costs. So now you should target the amount of profit you want to make. This is where it gets really interesting!

The Importance of Staff Soft Skills

By integrating all the soft skills your team has such as:

  • Pre-booking clients before they leave the salon ensures at least 1-2 additions visits to the salon annually.

  • Up-selling via consultation, education, and making professional recommendations to your clients

  • EDUCATE your clients on the importance of maintaining their hair between visits to the salon by using professionally recommended (prescribed) home care products.

  • Motivate your clients to act as your ambassadors by referring friends and colleague and reward the via your Loyalty Programme.

When it comes to making turnover, Targeting is important. When it comes to making profit, Budgeting is crucial.

– Terry Miles, MD MySalon Software


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