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5 Lessons for Beauty & Wellness Entrepreneurs On How to Grow Your Spa and Salon Profits
5 Lessons for Beauty & Wellness Entrepreneurs On How to Grow Your Spa and Salon Profits

5 Lessons for Beauty & Wellness Entrepreneurs On How to Grow Your Spa and Salon Profits

Real talk: being a skilled stylist or aesthetician will not guarantee the success of your salon or spa.

Performing your services and running your business are two completely different things, and you can’t rely on talent alone if you want your company to thrive.

It’s essential that you master the business side of things as well, so you can grow your spa and salon profits.

Let’s look at the ways that you can do just that.

Manage your time well

How much time you have has a direct correlation to how much revenue and profit you can make.

That’s why it’s important to manage your schedule properly.

When you’re on top of your calendar and are able to maximize your time, you can spend your days on more profitable tasks, such as serving your best clients and strategizing how to further grow your business.

When asked about his biggest challenges as an entrepreneur, Nicck Townsend aka “The East Coast Brow King,” said that time management was at the top of his list.

“When you’re an entrepreneur — especially a salon, a busy successful salon — you can’t do everything,” he shared at Genbook’s ISSE panel discussion.

“I have to be Nicholas to my family at home, I have to be Nicck Townsend to my clients, and I have to be Nicck Townsend to my community of brow artists and just the community as a whole.”
To that end, managing your time is key “because you have to delegate and manage who you have to be to everyone.”

According to Nicck, one of the reasons why he loves Genbook is because the software lets him manage his time properly.

He shared that “Genbook takes care of the booking side” of his business, so he can focus on other things, like giving clients his undivided attention. “I don’t answer the phone when I’m with clients. I think that’s rude. If a client wants to make an appointment, they can go online.”

And this is where Genbook has been a tremendous help, he said.

If you’re having trouble managing your time or if you feel like there aren’t enough hours in your day, take a leaf out of Nicck Townsend’s playbook and arm yourself with tools that can automate the cumbersome tasks in your business. Identify the things that only you can do (or the tasks that will earn you the most profit) and either automate or delegate the rest.

Separate the finances of various components of your business

A massive part of being profitable lies in making the right financial decisions. As a salon or spa owner, you won’t be able to do this effectively if your business finances aren’t organized.

As salon business coach Steve Gomez, explained:

“You have to remember that you are owning and operating a business that has multiple businesses inside of it, with each of them having their own budget and plans, and each of them needing your attention.”

According to Steve, they include:

  • Service business (i.e., the service you provide to your clients)
  • Retail business (i.e., merchandise like hair and skin care products that you sell)
  • Rental business (i.e., if you rent out chairs in your salon)
  • Gift card business (i.e., if you market and sell gift cards)
  • Boutique business (i.e., if you sell items like hats, jewelry, and other accessories; this should NOT be included in the “retail” component above)

Steve recommends separating all these components in your profit and loss (P&L) statement, so you can budget your resources accordingly.

“Separation is critical,” he said.

“If everything is lumped in on your P&L, then we can’t separate it out, and we can’t help you create budgets. And if we don’t know what the numbers are telling us, we can’t make the right decisions.”

Once you have your numbers in order, it’s important to see how you’re tracking.

“We gotta get organized, and we have to track it,” Steve continued. “Am I on track, over budget, or not?”

Steve Gomes
By taking the steps above, you can get a clear idea of how each area of your business is performing and ultimately make more profitable decisions.

Increase revenue PER appointment

We’ve said it before, but it’s worth mentioning again: to increase your spa or salon profits, you don’t necessarily have to find more clients or book more appointments. In fact, a far better approach may be to book more services per appointment.

Lauren Gartland, Founder & President of Inspiring Champions, said that the secret to working smart versus working hard in the beauty and wellness space is to offer multiple services per appointment.

According to her, providing several services allows you to make better use of your time, improve client retention, and ultimately be more profitable.

So, find ways to increase the number of services that each client gets from you. Learn sales techniques like upselling, bundling, and clienteling, so you can set up more services per booking.

For instance, if a client comes in to get her eyebrows waxed, see if she can use a lip waxing service while she’s at it. Or, if a customer wants to book a haircut, ask if they’d like to add coloring services.

Not everyone is going to say yes, but if you do these things consistently, you will see your transaction values go up, and you’ll ultimately maximize your time and profits in the process.

Be careful with spending too much on rent

While it’s great to have a spa or salon in a nice location, you need to be mindful about spending too much on rent.

Randi Rose, the co-founder of Thrive Business Services, warns salon and spa owners about being “house poor” — which is a term used to describe someone who spends such a large portion of their income in their mortgage or rent, that they don’t have much money left over.

Being house poor, especially in the context of salon and spa locations, can kill your profitability, says Randi.

So, how much should you be spending on rent, exactly? That depends on whether you’re running an employee-based salon or a booth rental salon.

Rent justifier for employee-based salons

Randi shares a guideline from the Professional Beauty Association, which states that if you run an employee-based salon, then you should be spending no more than 6.56% of total service dollars on rent.

To figure out the numbers in your own business, use the following formula:

Monthly rent + CAM x 15.24 = Monthly service sales target

For example, if your monthly rent + common area maintenance expenses amount to $4,200, then multiply that by 15.24. The equation would look like this:
$ 4,200 x 15.24 = $64,008

The formula tells us that if your rent is $4,200 then you should be bringing in at least $64,008 in service sales per month. That translates to $14,885 per week and $2,977 per day, which means that if a salon or spa is renting their space for $4,200 then they should be generating $2,977 per day.

You can further divide that figure by the number of chairs or employees that you have to figure out how much each team member should be making per day.

Rent justifier for booth rental salons

If you rent out booths in your salon, then your rent justifier is a little different. According to Randi:

“The rent justifier [for a booth rental salon] is 4… because according to the PBA, [if you’re] a top 200 salon, you want your rent to be no more than 25% of your expenses.”

She adds, “you can spend more on rent if you’re a rental salon. Why? You don’t have compensation. It’s a different structure completely.”

If you’re a booth rental salon, then use the following formula to calculate your monthly sales target:

Monthly rent + CAM x 4 = Monthly service sales target

For instance, if your rent is $1,750, then your calculation would look like this:
$1,750 x 4 = $7,000

Your monthly service sales target is $7,000, which means your weekly target is $1,627, and your daily target is $325.58.

Run the numbers in your own business to see how you stack up. If you discover that you’re spending too much on rent, then start thinking about how you can optimize your finances.

As Randi put it, “understanding the formula will give you the information you need for figuring out what your strategy needs to be.”

Manage your backbar properly

It’s essential to stay on top of your salon or spa backbar — which covers the products that you use on your clients (e.g., shampoo, color, etc.). When you’re budgeting for your backbar, Steve recommends allocating 5% to 10% of total service sales.

So, if you’re selling $1,000 worth of services in a given week, then your budget should be $50 to $100 to restock your backbar shelves.

Steve also discussed the importance of minimizing waste.

He recommended using the “clear bucket strategy,” where instead of pouring unused or wasted products down the drain, you pour it into a clear bucket to see how much you’re overmixing or wasting.

Another tactic, according to Steve, is to “reinforce manufacturer formulations.” If necessary, post the mixing and remixing formulations so you and your staff can optimize product usage and reduce waste.

Ready to increase your spa and salon profits?

Finance may not be the most enjoyable topic, but it’s a critical area to focus on if you want to increase your spa or salon profits. So buckle down, get organized, and do the math. Your business will thank you for it!

Do you know the preferred online booking channel for your clients?  Download this infographic to know more. 

Top Online Booking Channels 2020

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