Focusing on Your Salon or Spa Profit

by Pam Stellema

in Business Development, Financial Management, Salon and Spa Management

Focusing on Your Salon or Spa Profit

Why is it that making a profit from your salon or spa is so elusive?

Is it because you don’t work long enough or hard enough?

Is it because you don’t have a passion for making others look and feel fantastic?

Or is it because you don’t deserve to be financially successful?

The response to all these questions is, of course, a resounding ‘NO”. As a salon owner, you probably work harder and longer than any of your team and are absolutely dedicated to your profession and clients.

In fact, if these were the only things that determined whether you were going to be profitable, then you’d be planning a fabulous Hawaiian holiday, instead of reading this article.

Making a profit goes beyond hard work, technical skills, passion and even dedication. It needs something more from you, and the great news is that you have what it takes to achieve it.

Basically, there are three things you need to change about the way you’re doing business:
1. First, you must bite the bullet, do the sums, and learn about which services offer your salon a worthwhile profit (and which ones don’t).
2. Second, you need to put all your focus on promoting and delivering these services in your salon.
3. And third, you have to change your mindset around receiving money for what you do.

Many salon owners struggle to determine which services they should specialise in, and so they end up drowning in a sea of zero or low-profit services – being busy but making no money. These services often take the same amount of time and skill to deliver but don’t return a decent profit to your salon.

But before you make the decision about which services your salon should specialise in, some knowledge is required.

Service Pricing

A no-compromise fact for greater profitability is that you must know for certain how much each service costs you to provide. No guesstimates permitted! Without this information, you can’t begin to define which services deserve your undivided attention, and which services are barely worth having on your service menu.

Unfortunately, not many salon owners go to the trouble of doing this, and that’s a big part of why making a profit seems to elude so many.

When asked, most of the salon owners I’ve spoken to tell me that they determine their service prices based on what their competitors are charging (sound familiar?). The problem with doing this is:

They have no idea as to whether or not their competitors are actually making a profit from their services.
• It doesn’t take into account the difference there may be in product costs, specialised skills and equipment required, general expenses or time taken to provide the service.

You can’t price your services this way and expect to know for sure what profit you’re going to have at the end of it. There’s always a good chance that your competitors have used the same pricing methodology, and so in the end, nobody really knows which services are making a profit for their salons and which ones aren’t.

Yet everybody is copying the pricing structure of the salon down the road!

Let me give you a great example of why it’s important to know how much a service is costing you to provide. I was recently working with a very experienced salon owner who was resistant to the idea of calculating the cost of her services. She didn’t think it was really necessary and felt that she had enough experience to determine fairly accurately what a service was going to cost to provide.

She was keen to introduce a new whizz-bang, top-of-the-range facial, had looked at other salons top facial prices around the area, and settled on a selling price of $139. This was a substantially higher price than the other facials she offered in her salon, and so she felt sure that it was going to make her some nice profit.

Before she got too excited about it all, I suggested we do a quick calculation on the basic cost of the proposed facial by looking only at the cost of the product, consumables (throw away items), and labour. It took only a few minutes to realize that the cost of this new facial was going to be around $124 due to the very expensive products it required, plus the ninety minute delivery time.

So, once we took out the GST component of her facial selling price, (because you don’t get to keep that bit), the actual selling price was only $126.36. This means a gross profit of $2.36 cents after we’ve deducted the basic cost of $124. And of course, the remaining $2.36 had to contribute to the cost of all the other expenses to keep the salon running.

Who’d have thought that a $139 facial treatment wasn’t even going to make a profit – and it happens far more often than you might think!

Now you may be saying to yourself, ‘There’s no way that I’m not making a profit on my services’, but how do you know for sure if you’ve never calculated the cost of the services you provide?

I won’t argue with that fact that it’s time-consuming and not much fun to sit down and work out the cost on every single service, but it’s also very necessary if you’re going to grow your profits.

No long-term successful business guesses its selling price based on what its competitors are offering up, and neither should you. First, you must know what it’s going to cost you to provide.

But that’s only one part of the formula, so let’s take a look at how your focus contributes to your success.

How to use focus to get what you want.

A quote from Star Wars, Episode 1, from Qui-Gon to Anakin, “Always remember, your focus determines your reality.

When you fully focus on becoming a more profitable business through increasing the sale of more profitable services, most of your future decisions will be based around achieving that outcome.

You’ll consider things such as:

  • The image of your business. Is your image telling prospective clients that you are a specialist in those profitable services, or are you sending mixed messages? As an example, a salon wishing to be known for its cutting-edge technology-based treatments needs to project a modern image rather than something like shabby chic, or country charm. The right first impression to prospective clients is critical if you want to been seen as a specialist in certain treatments.
  • The qualifications of the staff you employ. You may need team members with specific skills who can deliver your most profitable to the highest possible standard. If you want to build your business around these profitable services, you need team members who are qualified to deliver first-class treatments.
  • The marketing promotions you generate. Once you’re clear on which services you need to promote to make more profit, you will focus on promoting those services more effectively and more often.
  • Your product range. It’s important to align your product range to the most profitable services you intend to specialise in. The right products with the right mark-up equals better profits for your salon.
  • Your equipment purchases. When you’re clear about the services you need to promote, you’ll also be clear about the equipment you need (and don’t need) to deliver those services. Spending money on dust-collecting equipment that you seldom or never use will be a thing of the past.
  • The training you attend. Specialised services delivered at the highest standard will require on-going training to keep you at the top of your field. It pointless undergoing expensive training for services that don’t deliver a worthwhile profit. No more wasted days for training for your or your team members that won’t support your goals of making more profit.

Changing your money-mindset.

To become more profitable, you must first be comfortable with the idea of taking more money from your clients. Many salon owners and their team members are uncomfortable with asking their clients to try a new product or service if it means asking for more money. Perhaps they see themselves as being greedy or perhaps they feel that their clients can’t afford it, but in fact, that’s a decision that should be made by the client. As a professional, it’s your job to recommend the services and products that will help your client achieve her goal, and it’s up to her whether or not she wants to purchase them.

[bctt tweet=”It’s not your job to judge whether a client can afford a treatment or a product.”] It is your job to be able to deliver positive outcomes and let the client decide if she can afford it.

Making a profit is what allows you to stay in business, continue to deliver first class services to your clients, keep your team members in worthwhile employment, and make enough money for yourself to help your family enjoy a wonderful lifestyle.

You don’t have to be unscrupulous to make a great profit from your salon, you simply have to know your numbers and focus on the things that will return a profit in exchange for your hard work, ongoing education and determination to offer the best to your clients.

Recommended Module Package: Increasing Profits

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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.
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