“I want to grow my business and make more money, but we’re almost at capacity and I can’t afford to employ anyone else. My staff seem busy; the appointment book looks full and sometimes we turn clients away, but I still struggle to pay my bills. There’s no cash left for a decent wage for me; I’m working more and more hours and I’m exhausted!
Why aren’t I making any money?”
So your staff are busy but not making anywhere near their targets. They say it’s not their fault. They’re doing everything they can but people just don’t want to spend more money. They think you’re being very unreasonable; your targets are way too high and they really get their back up when you talk about money, right?
You’re working twice as hard as them and generating way more income but it all goes to paying them! You feel like you’re doing all the work yourself but getting nowhere. How can everyone seem so busy but there’s never enough money to cover expenses?
The answer? Your staff are not generating the turnover they need for the time they spend with clients and whilst there may be many reasons for this, in most cases, it will come down to just 3.
- Your pricing structure: you are not charging enough to cover your costs.
- Wasted time: your staff are spending far longer with clients than they are charging for.
- Poor consultation and very low average $ spend per client: the physical impossibility of being able to do enough clients at such a low $ value to make enough to cover costs.
Let’s look at each one in more detail.
If you are priced correctly, you should have the right amount of money to cover the time spent with clients but unfortunately this is rarely the case. Most salons base their prices on what everyone else around them seems to be charging or even a bit less (clients would always choose the cheaper option, right?). Pricing correctly means knowing how much per hour you need from each level of employee, then calculating prices according to the time required. E.g. At $100 per hour, every 15 minutes requires a minimum of $25, 30 minutes is $50, 45 minutes is $75 etc. This hourly rates is determined by each employee’s total employment costs (inc. leave, super & entitlements) x a multiple of between 2.5 – 4.5, depending on the market niche you target. Work through your price list, allocating time allotted for each service and compare what you are charging with what you should be charging. If you’re under, each service you perform is done at a loss. Imagine what that adds up to by the end of the week!
(That’s why you’re working 55 hours per week and still not making any money. You’re just spinning your wheels!)
The biggest source of lost income for many salons is time spent with clients that isn’t charged for. You know the deal: a long hair blowdry should be 45 minutes but your client’s hair is so long/thick that you allow an hour. That’s fine, IF the extra time is charged for, but if not, every 15 minutes is another $25 loss (or more). If that happens 3 times a day x 5 staff, you’ve said goodbye to over $1800 by the end of the week. Ouch!
Other issues to check:
If your senior people are spending time on non-income producing tasks like stock management, reception duties etc and you’re turning clients away, it might be time to re-think that. Are your stylists slow & always running behind? It’s costing you a fortune. Work on timing issues and have your highest paid seniors doing the highest income producing work, freeing them from tasks someone else (who costs you less?) could do.
Very low average $ spend per client.
This is usually because your staff believe that suggesting additional services or home care products is ‘pushing’ or selling, rather than offering excellent service and adding value to their client’s salon experience. They’re doing the bare minimum; (‘same again?’) resulting in a very low average $ spend per client. Very little effort, poor value to clients, everyone gets bored and the only thing you have to compete on is price which is dangerous. Your average client $ reflects their care and effort with each client. Expand your service, excite with fresh new ideas, add another $10 to your $ average multiplied by your # of clients per week and see how much that adds to your bank account! (and imagine how much your clients will love the extra attention, advice and new ideas.)
“Profit is the applause you get for providing awesome service!” Raise your levels of service and watch your income grow.