MIND YOUR MONEY

To be a successful salon or spa owner, it is imperative that you have an accurate grasp of your financial situation, says salon business expert Liz McKeon

Running a salon is very timeconsuming, and it is tempting to devote the lion’s share of time and effort to developing your services, hiring the right team, marketing and finding clients. But as the owner, you will be called on to make financial decisions on a daily basis, therefore it is important to carve out some time to tend to the financial health of your company.

1 Manage cash flow

Running a successful salon boils down to one critical point – making money. A healthy and positive cash flow enables you to meet current obligations, such as paying suppliers and staff, while also building up a reserve for emergencies. If cash flow is a challenge, your business will stall and your stress levels will suffer. Start the discipline of a running a ‘cash flow analysis’, which tells you how much money is flowing in and out of your business. This allows you to effectively plan for the future.

2 Keep an emergency fund

Always put some money aside in case an emergency occurs. Everyone runs into unforeseen costs.

3 Minimise your client acquisition cost

Know how much it costs your business in time and money to acquire a new client. Work towards minimising this cost by increasing your ‘word of mouth’ opportunities. Focus on retaining your clients by providing outstanding customer service and quality offerings. Make sure every client is happy leaving, wants to rebook and is delighted to send you referrals. This will reduce your marketing costs and maintain quality in your salon.

4 Focus on your core business plan

It is tempting to want to keep expanding when you first open a salon, and get consumed with short-term profits, rather than long-term success. So, run a tight ship. Don’t overextend yourself with loans for new ideas that go beyond your initial business plan. Instead, reinvest your profits back into the business to stimulate growth. You need to create a solid and sustainable business.

5 Create a budget

Create a budget and become strategic with managing your expenses, ensuring that you don’t overspend and run into debt. Avoid using credit cards to finance your overheads. Setting tight, conservative budgets is a trademark of successful salons and it will certainly make running your business easier. Your salon needs to be able to afford to grow. Give value for money and charge what you are worth.

6 Invest in professional financial guidance

If you find it hard to manage your finances, invest in getting advice from someone impartial, such as an accountant or a financial consultant. You may have to pay a little extra for this professional help, but you will save money in the long run and have an accurate budget to work with. All of this makes planning for the future easier and a lot more manageable.

7 Create a cash flow projection

This is based on payments you expect to get in the future and expenses you’ll face. Work with the numbers within a marketing context. For example, look at what occupancy is required on a daily basis to ensure you achieve your projections. Once you have them in place, you have a guideline that impacts every financial decision you make. As business changes, revisit your cash flow projections and adapt accordingly.

8 Know your numbers

Review your numbers regularly – even daily. At a minimum, know your sales, expenses, wages and bank balance. Monitoring sales daily helps you to purchase efficiently so you have enough stock to meet demand, but excess money is not tied up in having too much stock. Know when your bills are due for payment. If you have positive cash flow, pay on time, but not early unless you are getting a discount.

9 Set your goals

Separate your personal and business goals. Of course, you are building the salon business to make money to forward your personal financial goals. But, if you don’t distinguish between personal and business goals, you may end up compromising both.

Remember, powerless people make powerless decisions, and empowered people make powerful decisions. To make quality financial decisions, you must deal in facts that you own, know and understand.

Liz McKeon is an author, business coach, trainer and mentor, specialising in the hair, beauty and spa sector. For further information, visit lizmckeon.com or call +353 86 386 1243.