Business Basics
Ch-Ch-Ch-Changes
by Jackey Bell for Crystal Focus
The industry is changing. We hear this every day! Therefore, we have to come up with ideas and strategies to survive. Focusing on your front desk first can mean the difference between profit and loss. Here are four changes to make today!
1. Change your front desk from a “reception area” to a “profit center.” If you are paying an individual an hourly wage to work at your front desk, have them help you bring more revenue into your business. We ask ourselves the next question, “I would love that, but how do I make my team members sell?”
2. Implement a goals and reward system! Your salon service providers have goals, right?
They have to meet their goals to advance to the next level, make more money, receive benefits, etc. What about your front desk team? Shouldn’t they have goals as well?
Implementing a reward system at your front desk will help transfer this “idea” into a “reality” that has immediate business results.
For example, if your front desk team has a goal of 40 additional services a month, and they reach that goal, they should be rewarded for their efforts. What gets rewarded gets repeated! Track your goals and rewards with the Team Synergy Daily Tracker.
3. When you offer additional services and sell retail, you are maximizing the profit availability for the day. Did you know that 68% of salon clients who aren’t buying products are skipping on the retail purchase because no one talked to them about products? Sometimes the client needs just a little education or one more testimony about a product to seal the deal.
Your front desk can introduce specials and promotions before the client even steps into the salon for their service. If the service provider educates the client about the products during their service, then the close at the front desk when checking out the client is easy. My colleague, Ashley Griffin, wrote a great article with three easy steps for retail success.
4. When you pre-book appointments, you ensure future income and increase your income potential. In a recent Behind the Chair Business Builder publication, they did the math on pre-booking, which reveals the importance of pre-booking. “If you booked 300 clients every 8 weeks and they spent about $50 per visit, you would make $90,000 a year. But if you pre-booked them to come in every 5 weeks, you would increase your income to $150,000 a year. That’s a whopping $60,000 difference!”
Bell, Jackey. “Ch-Ch-Ch-Changes – It’s time to face the change.” Crystal Focus. 17 May, 2011. 7 June, 2011 <http://www.summitsalon.com/news_details.php?nid=207&did=13.>
Profit and Loss Statements vs. Real Cash Flow Profit or Loss by Mike Kimble, CPA, SSBC Consultant/Accountant
Have you ever looked at your profit and loss statement and wondered why your business showed a profit but your bank account did not?
This puzzling phenomenon is almost always due to items that flow through your balance sheet. The balance sheet is the place that keeps track of your assets, liabilities and equity.
Assets are cash, inventory, furniture, equipment, and improvements.
Liabilities include the amounts you owe, such as loan balances, credit card balances, payroll tax, sales tax and unredeemed gift certificates.
Equity is the amount invested by the owner(s) and the profit or loss retained by the business.
Other items that effect the profit and loss statement are non-cash items called booked expenses. Booked expenses usually are depreciation and amortization. These expenses are used to expense assets such as furniture, equipment and improvements over time.
Cash flow runs through the balance sheet in various ways. There are several kinds of cash flow decreases. Every time you purchase assets with cash/check such as inventory (adding a new product line), furniture and equipment, the assets increase on the balance sheet and the cash/checking decreases by the same amount. Every time you make cash/check payments on liabilities such as loan principal balances and credit card balances, you decrease the liabilities and also decrease cash by the same amount.
Cash flow increases also take various forms. For example, the sale of gift certificates will increase cash/checking balance and also increase the liability gift certificates not redeemed balance. Keep in mind that there may be additional items on the balance sheet, which could have an effect on cash flow.
It should be noted that gift certificate sales are not a current income or revenue item but a pre-sale of future income or revenue. Think of gift certificates as a savings account to draw on when the services are performed or the retail is sold and paid for with those gift certificates.
In order to get a true cash flow profit or loss you need to do a cash flow analysis which includes all items of cash inflows and outflows. This includes cash-item inflows and outflows from both the balance sheet and the profit and loss statement. This cash flow analysis is formulated on the cash basis of accounting, not the accrual basis. The accrual basis of accounting is a system of recording receivables as income and payables as expenses whether or not any cash has actually changed hands. The cash basis is a system of recording income when cash/checks/charges are collected and recording expenses when the check is written or cash is paid. The cash basis analysis does not include the booked expenses such as depreciation and amortization.
SSBC bases its budget guidelines on the cash basis analysis approach. It is a way of looking at your true cash flow profit and loss statement as a cash management statement. It allows the salon owner to get the real cash picture of the business. The SSBC budget guidelines are based on several years of analysis and are continually adjusted for current trends in the salon
Kimble, Mike. “Profit and Loss Statements vs. Real Cash Flow Profit or Loss.” 23 January, 2011. 7 June, <2011 http://www.summitsalon.com/news_details.php?nid=106&did=13>
