Turnover Or Profit – What Drives Your Salon?

Are you producing Profit or Revenue in your salon

by Pam Stellema

in Business Development

At my last workshop for salon owners, “Attract More Clients and Make More Profit“, it really brought home to those who came along, the importance of actually planning for PROFIT generation in their salons rather than driving up the turnover by keeping “busy” through doing more services.

Being busy is actually not that hard to achieve.  I have seen countless salon owners and their staff, run off their feet with customers pouring in through their front door and yet there was still no money in the bank to pay the bills at the end of the week.

But when there is confusion around turnover vs profit, bad things can happen!

Profit vs Turnover

Let’s clear up that confusion…

Turnover is all that fabulous money that your salon takes in from the sales of your services and products.  It’s the money you have before you pay a single expense but sadly, you generally don’t get to keep a great deal of it.

Increasing turnover seems like the top solution to increase your profit, but this can only happen when the expenses incurred in producing it, are less than the actual turnover amount.

For instance, if you run a promotion that costs you $400 for advertising, $275 in wages, and $150 in product but you only turn over $750 from your promotion, then you have made a loss of $75.

Turnover = $750

Expenses = $825

Loss = $75


It can happen so easily and often does when services and promotions are not planned out with some care and a little maths.

Cheap services and increased staffing requirements can easily turn your increased turnover into an unwanted loss.

Profit is what will keep you in business, not just turnover!

Profit, on the other hand, is what is left after you take away all the money it costs for you to run your business.

A poor pricing policy, ill-conceived promotions and lack of control over your expenses can cause your business to run at a loss even when turnover is great.  This is when the cost of doing business (your expenses) can become greater than your turnover.

It is possible for some businesses to actually reduce their turnover and increase their profit by focusing on:

  • more profitable services, packages, and product sales
  • more profitable promotions
  • reduction in expenses

One of the most common mistakes that many salon owners make is not taking the time to understand what their services are costing them to provide.

Guessing or relying on other people’s estimates just won’t cut it!  You need to know the real cost of the services you are providing so that you can determine how much you must sell your services for to actually cover your expenses and still make a profit.

Taking the time to carefully evaluate the pricing of your services, packages and promotions can save you from falling into the trap of being run off your feet but not be making any money.

Is it time for you to look at your pricing and see if you are in the business of turnover or profit in your salon?

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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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{ 2 comments… read them below or add one }

Anonymous

Such a great post Pam.  It’s vitally important that business owners know the difference to keep their business healthy and growing, and unfortunately so many don’t.  Thanks for sharing! Cheers, Nicole

Reply

Pam

Thanks Nicole, I agree!  High turnover looks great on paper but often leaves business owners scratching their heads and wondering why there is nothing left for paying the bills.  It’s very important to know how to generate real profit in any business.

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