Numbers Suck!
But Numbers Suck Malcolm!
During the last few years of my helping salon owners become better business owners there are definitely a number of recurring themes to their questions and comments… One strong one being “I’m hopeless at numbers Malcolm”, “I really don’t have an idea when it comes to knowing what numbers and how to read them for my business.” “Numbers Suck Malcolm!” “I’m a creative not an accountant!”
I can totally relate to this as numbers used to confuse me too, (in fact I was down-right frightened of them!) until I took some time to understand them and learn the ones that I needed to know about to have a better business… so my job today in this article is to help take the mystery out of the numbers dilemma for you and hopefully get you to see numbers can be fun, if you struggle to know how and which numbers are important to a successful business and want numbers to be fun, then read on my friend…
The answer to the abovementioned “Numbers” issue is to firstly acknowledge what numbers are important and secondly to create a system for making it easy for you to track them and thirdly, know what they mean and what you can do to influence them for the better into the future. Let me help you with that.
Firstly, WHAT numbers? Well essentially although ALL your numbers are important to understand there are a set of ‘Must Know’ numbers to successfully run your business profitably. If we break them into two sections it becomes even easier: Section one would be the Statistical Numbers, I like to call these the Management Numbers and section two are the Financial Numbers or in my words the Accountancy Numbers.
Let’s have a look at the Management Numbers first – these are often referred to as KPI’s (key performance indicators) as they track the performance of certain key areas that you really should know when it comes to knowing how your salon is performing. Critical numbers are: Total Income ($), Total Clients (#), Total New Clients (#), Average Client Spend ($), Retail Income ($), Client Retention (%)… other numbers not so critical but still very important include Rebook (%), Colour (or chemical) (%), Treatment (%) and Retail Units (#) – of course you can track most of these numbers easily enough through your front desk computer system.
As important as tracking these numbers you also should know what you want to (or NEED) them to be. So figuring this out is the next step in knowing your numbers. You need to set some targets to aim at – for the salon and each team member, easy enough if you know what numbers to target and then what they need to be for you to be able to pay the bills and make a profit. Have you calculated that yet for your salon? Tip: You need to calculate your Break Even Number which should include any profit you want to make so you know exactly how much you need to make each week – hit me up if you’d like some help with this.
Let’s now take a look at the Financial Numbers you’ll need to know. Typically the numbers you want to track financially are taken from your Statement of Financial Position (P&L in old terms) which you would get either from your in house accounting software (i.e. Xero, MYOB etc) or from your accountant. The actual numbers you want to review on a regular basis are as follows: Income, COG’s (cost of goods sold or stock purchases) Wages $, Rent $, General Expenses (looking to see if anything is too high in comparison to turnover) and Profit $ and/or %. Again it would pay to know what target numbers you’re aiming to hit for these and how you can alter them in a positive way with decisions you make in the business.
I like to convert the financial numbers into a percentage to compare the expenses to the income, it gives a better balance to them. For example, let’s say your wage bill for a year was $480,000 – you might say Holy S**t, that’s way too high, but if your salon income for the same year was $1.5 million the wages as a percentage of turnover is 32% – which would be right on target for many salons. So when calculating financials, percentages are always good for reality checks. Knowing what percentages your numbers should be against the income is important, as is setting targets to work towards as well. At Salon Business Coach we work closely with our clients to determine the percentages for them and then the process and strategies to affect them and make them work for the business not against.
Of course the secret for these numbers to work effectively for you after you have set them is they should be reviewed, if not weekly then at least once a month and compared with the targets you have set. I like to suggest looking at your management numbers weekly and financials monthly. If you know what numbers to look at and what they mean to your business success, then it should be a pleasure to review them and work towards improving them.
At Salon Business Coach we know what you need to hit in order to be profitable, and we work with you on nailing the strategies and decisions that will enable you to not only control and affect your numbers (both statistically and financially). We help you through simple and effective ways that are easy to grasp and easy to implement. Simple things like retention strategies, rebook systems, stock management and control, correct pricing policies, client acquisitions and much more.
It is our experience that when you take the time to learn and know your numbers, when you track your numbers and you have targets for your numbers, your business improvement is all the easier.
If you would like to know more about your salon numbers contact Malcolm to tee up a time where he can chat with you about your specific situation and get you on the road to better financial literacy. It doesn’t have to be a mystery anymore, when you know what to look at, numbers can be fun!
