Profit First for Salons

Do you love the creativity that being a salon owner allows you to have? The thrill of experiencing your client’s positive reaction post-transformation is addictive, with the release of endorphins running wild, it sure is hard to beat.

However, it’s not always sunshine, rainbows and glow-ups for salon owners. Like most businesses, the stresses of cash flow management can be overwhelming. Perhaps you are not even managing to pay yourself for all the hard work and many hours that you are putting into your slice of heaven. That sanctuary that you have created for your clients to come and escape their daily grind and indulge in a little self-care, yet you are not receiving its calming effect benefits. 

According to new data from the Australian Small Business Ombudsman, the majority of small business owners are earning less than their own employees, with The Small Business Matter’s report identifying 43% of small businesses are making zero profit. In an industry that generates a whopping $22 Billion in Australia every year, the potential for a successful beauty salon business is high, if you have the correct foundations in place.

Now is the time to take the first steps towards financial freedom by generating (more) profit, time to put you and your business first, time to pay yourself what you are worth, time to crush that debt! You can do this by following the Profit First money management methodology.

The tried, tested and successful Profit First strategies turn traditional accounting methods on their head. When you prioritise profit instead of expenses you will see a dramatic change in your business’s financial figures and your mindset. Mike Michalowicz’s revolutionary book is the game changer that you have been waiting for. Say goodbye to your business suffering a cash flow crisis, and hello to profits, hello to successful growth options, hello to knowing your numbers and gaining the confidence to make sound business decisions.

Like any business utilising Profit First, the power is in establishing your key bank accounts. Here is an overview of the setup of multiple bank accounts for Profit First:

Set up five accounts with your current bank

Income
(Everyday) This is where all your income is deposited into.

Profit
(Everyday) A percentage of your revenue will be allocated to this account.

Owner’s Comp.
(Everyday) A percentage is allocated to this account for you.

Tax
(Everyday) Set aside a percentage of your revenue to pay your tax. In Australia, you may also want to have a separate GST account.

Operating Expenses
(Everyday) This is your operating expenses account like rent, utilities, supplies, wages etc.

Then set up two accounts with a different/new bank. The reason we suggest these being with a different bank, is to remove the temptation of ‘borrowing’ from these accounts.

Profit Hold
(Savings)

Tax Hold
(Savings)

Next, you will want to determine TAPs (Target Allocation Percentages), you can use the Instant Assessment (free download) to calculate TAPs, just start with percentages that are achievable for the remainder of the quarter. 

As a salon owner, it is important to know what your hourly rate is. When you establish this foundational information you are able to ensure that your pricing is accurate as well as identify services that generate higher margin returns. This can help your salon grow as well as increase its profitability.

As a certified Mastery level Profit First Professional, Profit First Accounting is here to guide you through implementation and highlight areas of potential growth for you and your business. We understand that in today’s world, we are constantly juggling the many roles in our lives that we take part in, and usually our professional and personal worlds collide. When you have financial clarity you will reap the benefits holistically. Book a discovery call today so you can experience this for yourself. 

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