How To Avoid Making These 5 Profit Killing Mistakes in Your Salon.

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by Pam Stellema

in Business Development, Customer Management, Financial Management, News, Salon Management, Salon Marketing

If you are making these mistakes then you don’t need to be, because there are lots of ways to improve the bottom line in your salon.  Boiled down to a simple formula, creating greater profitability consists of increasing your revenue and decreasing your expenses.

Sounds easy, doesn’t it?

But hidden away in this uncomplicated sounding formula, is a minefield of potential mistakes that you could be making.  Mistakes that are most probably robbing you of the healthy profit margin you want, need and deserve.

Are you making any of these 5 common mistakes that salon owners make every day?  Are you letting profit slip through your fingers?

Mistake # 1 Focusing on revenue instead of PROFIT

Remember this – revenue (turnover) and profit are not the same animals.

Revenue is simply all the money you take in your business; whereas profit is what is left over after you have paid all the expenses.

It is very easy to have an incredibly high revenue, and still run at a loss.  Many salon owners have discovered this the hard way.

Why does it happen?

Well, it is often the result of underestimating what it is REALLY costing you to provide your services.  Added to this, many salon owners put together promotions that further erode their profitability but don’t realise it until it’s too late.

Let’s face it, if you want to make a profit, you simply have to know what something is costing you to provide before you settle on a selling price.  It’s when you take the cost away from the selling price that you have your all-important profit.

So, what’s the answer?

You need to know for sure that every service and product that you are selling is making you a PROFIT.  To know this for sure, you need to consider things like the cost of the labour, the cost of the products and consumables plus the overhead costs of simply keeping your salon doors open.

Just guessing won’t cut it.  You have to know absolutely so that you are not tricked into thinking that all those extra dollars in your cash register at the end of a busy day are profit dollars.

Mistake # 2 Using your premium services as loss leaders

How many times have you gone straight to your premium services and offered a big fat discount on them when putting together a salon promotion?

Yes, it’s just about what every single salon owner does to try and get more clients through the door.

And guess what?

It usually works – but at what price?

Well in the short term you are most likely going to generate extra revenue and that will make you happy for a little while – but it won’t be long before you realise that it came with a financial loss attached to it.

In the long term, the cost outweighed the turnover and there was no profit in sight.

Mistake # 3 Holding off on necessary price increases

OK…be honest!  When is the last time you had a price increase in your salon?

Mmmm, just what I thought.  So long ago, you can’t even remember when it was.  Am I right?

Well, while I hope I am completely wrong, chances are you are just like the majority of salon owners who have held off having a price increase because you feel that times are just too tough for your clients to weather any kind of price increase at the moment.

There’s no doubt that times are tough – but not just for your clients.

What about you?

The truth is that your costs have continued to increase.  Most salons have to accept increases in rent, utilities, wages, superannuation, products and much much more.  Those salons who do not, or will not, increase their service prices to cover these additional expenses, will find themselves in dire financial trouble.  Some will suffer so badly that shutting the doors will become the only option.

The fact is, you simply cannot afford to hold off on a fair and reasonable service price increase.  The minimum should be at least once per year. Not to do so could send you broke.

If you don’t feel comfortable in increasing your prices all at once, divide your menu into 4 segments and increase one segment every 3 months.  Continue to do this every year by at least the amount equal to the Consumer Price Index (CPI), and you will at least stay on top of your extra costs.

Mistake # 4 Making client attraction more important than client retention

Salon owners are always trying to work out ways of getting new clients into their salon.  And getting new clients is a good thing…as long as it’s not at the expense of losing the ones they already have!

It is sometimes quoted that it is 91% cheaper to keep an existing client than to gain a new one.  If that is true, you have to wonder why salon owners are not focusing more on doing just that.  Perhaps they simply don’t notice all those clients who are slipping silently away.  Never to be seen again. 

Is this what is happening in your salon?

Unless you are monitoring this area of your business (client retention and attrition), chances are you could be losing 3 out of every 4 new clients that you are spending a small fortune to try and attract into your salon.  On top of that, you may also be losing existing clients who are dissatisfied with the services they have received or the care they have been given.

Why should you care as long as you are getting enough new clients to replace lost ones?  Well, long term it’s an indisputable fact – existing clients invariably spend more in your salon.

They have had time to build rapport with your salon and their favourite team member.  They are therefore more likely to have additional services and buy more retail product.  They are also the ones who will introduce new clients to your salon.

All things considered, long term clients are extremely valuable to you.

Salon owners who understand this, spend more time nurturing their existing clients instead of continually focusing on new client attraction.

They understand that existing clients are also their best resource when it comes to bringing new clients into their salon.  A happy and well serviced existing client can bring in many new clients if given the right incentives to do so.

Referrals from existing clients will always be one of the long-term strategies for client attraction, so remember to stay focused on keeping those existing clients happy and singing your praises.

Mistake # 5 Spending too much time working in, instead of on, your business

This one thing is probably the biggest mistake most salon owners make.  It’s the very thing that stunts their growth and limits their profitability.

Once a salon owner leaves behind being a technician and providing client services, and becomes a business owner; everything changes.  Nothing can alter this fact. If everything doesn’t change then they are surely headed for disaster

It is impossible to run a business while spending all your time providing client services.

If you think of a salon as being like a ship; your will realize one very important thing and that is every ship must have a captain!  Without a captain guiding the vessel, making strategic decisions and commanding the crew, there’s a very good chance, that ship will end up on the rocks.

The same holds true for a salon.  If some well-intentioned person has told you that all it takes is a passion for your craft and lots of hard work to succeed, then you have been misdirected.  And badly.

The truth is that, you have to be the captain.  You have to make the time to guide your salon, lead your crew and make good decisions.  You simply can’t do that if you are too busy providing services to clients.

If this sounds like you, then you had better rethink what you want from being in business.

If your passion is to provide services to clients then it’s time to sell up and work for someone else.  However, if your passion is to be a successful Salonpreneur, then it’s time to make time for business management.

If you don’t have the skills it takes to do that… get them.  Get the guidance of a mentor or coach who can show you how to make more money by looking after less clients.

So, how many of these 5 Profit Killing Mistakes are you currently making in your salon and more importantly, what are you planning to do to change things?

Pam Stellema
Join me

Pam Stellema

Pam is an industry experienced coach, salon owner, speaker, author and copywriter.She works beside salon and spa owners to show them how to effectively grow their profits and remain in business for the long-term.
Pam Stellema
Join me

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