Much like a household budget, add up all your business expenses, everything you spend per day, month and year. Write down your income including service sales, retail sales and gift certificate sales. Next write down variable expenses like salon supplies, sales /service tax, gift certificates redeemed and cost of retail product. Next write down fixed expenses like rent, insurance, phone, office supplies, everything. If you don't have this history track expenses for three months, multiply by 4 and divide by 12 to get your monthly expenses. Subtract your variable and fixed costs from your income to get your net profit . Divide your net profits by total sales and divide that by 100 to get your percentage of profit. Any percentage is good but a healthy profit percentage is 15-20 percent. Next we looked at pricing your services. You need your monthly fixed expenses to calculate the proper prices. To determine what you should be charging, figure out your fixed cost for the service. Figure out your monthly expenses. determine your monthly service count and figure out the monthly profit you want to take home after expenses. Ok, your price should be calculated by adding the fixed cost per service + product cost per service + profit per service. You still with me? For the sake of demonstration I used fill service at 45 minutes. my product cost is $2.00, my monthly fixed expenses are $1500.00, my monthly service count is 112, that's 5 days per week with 5 fills per day, and when it's all said and done I want to make $4000. profit. Divide the monthly fixed expenses by number of services, that's your fixed cost per service 13.39. Add your product cost $2.00. And add your profit per service, which is your desired profit 4000 divided by 112 equals 35.71 profit per service. To get your price per service, add fixed cost, (13.39) + product cost( 2.00)+profit (35.71).Making your fill cost 38.33.
Whew that was a mouthful. But I guarantee you if you do these calculations you will soon understand why you are making money or why you are not. You can play around a bit with the numbers. Try and cut expenses wherever you can, add more services per day. But at the end of the day the bottom line is still the bottom line. If you are not covering your expenses plus adding a profit margin for yourself per service you will struggle to make ends meet. period. We talked about a host of other sexy stuff like your productivity and average ticket price worksheets. Like increasing your productivity just 5% can result in almost $3000.00 in additional income and increasing your average ticket by $5.00 can ad an additional 10,000.00. Now that's hot. So the moral of the story. You can do all the marketing you need have a full house and still not make any profits sad but all too often true for many salons. Dig into your numbers, do the math and get your business profitable with a capital P.