Operational advice
MONEY rules
Learning to stay on top of all your salon earnings and expenses will ensure you always know where your finances stand. Liz McKeon explains how
Strong financial management is the key to business success, helping you maintain stability, make good decisions and grow your salon with confidence. To achieve this, there are some steps you can follow.
1
Write a business plan: Listing objectives and goals of the business helps define your ideas, develop strategy and outline what you need to do in the next six months, 12 months and beyond. Consider the requirements and potential of your salon then evaluate the competition. This helps you outline your ideal client, set realistic objectives for the team and yourself, predict problems, and give guidance.
2 Pay yourself a salary: Neglecting your personal finances can lead to stress, burnout and long-term setbacks. Many salon owners use their personal money to cover business expenses, don't prioritise paying themselves and prefer to invest the money back into the business. This is not sustainable, so start as you mean to go on.
3 Separate personal and business finances: Open a separate business account to keep all income and expenses relating to your business in one place. Then pay yourself a set amount and avoid dipping into business funds for personal spending. Keep clear records so you stay tax compliant, while knowing how cashflow looks on a month-to-month basis.
It is also wise to apply for a business credit card to make it easier to track business versus personal expenses. Having a financial advisor is a good idea to ensure you are following the rules and help you uncover new ways to manage your salon's finances.
4 Take a realistic approach to budgeting: Don't plan for the best possible scenario, plan for the worst. If everything turns out better than expected, you end up with more money in the bank. Avoid underestimating costs, overestimating how much money will come in and failing to recognise that money might be slower coming in than expected.
5 Pay your tax bill on time: This can improve your business credit score and avoid hefty penalty fees and interest charges. Accurate record keeping is key to ensuring your tax return is correct, while knowing how much to set aside for tax means you are never caught off guard when your tax bill is due. Accounting software can help automate your financial records, saving time and effort.
6 Build an emergency fund: Aim to build around three months' worth of essential business expenses as a financial safety buffer. Work out your savings target by calculating primary costs such as rent, wages, stock and regular bills. Start small and save regularly, so you steadily save without pressure on cashflow.
7 Control overheads: Regularly review your bills to see whether there are ways you could cut back or negotiate better deals.
8 Monitor stock levels: Stock control applies to every item you use to deliver a treatment, and every homecare product you retail. Monitor stock at every stage, from purchase and delivery, to using and reordering. If stock becomes unbalanced, the salon owner is facing either losing clients or losing sales.
LIZ MCKEON
Liz McKeon is a salon business coach, trainer and mentor with a background in transforming businesses, from individual salons to clinic chains, stockists and brands across the aesthetic, beauty, hair, spa and barbering sectors.