Be Financially Transparent With Your Team!
There’s nothing like the shining light that truth brings to us. Until one has the truth, it’s easy to operate from one’s own perspective or “version” of what is happening. While this goes for anything in life it is certainly accurate when it comes to running a business.
Armed with the truth, employees have a better understanding of what is really happening in and to the business. Equipped with this knowledge they can then help to create solutions and to make a difference.
This is especially vital when it comes to the financial health of a salon or spa but, more often than not, salon and spa owners do not share their financials with their team. This choice creates a divide between the owner and the team, even if the owner doesn’t have that intention.
Think of this common scenario, a salon or spa owner sits back in their office exhausted from trying to figure out a way to squeeze more money out of the business to pay a bill or rearranging payment dates to get by, or even choosing what not to pay! This scene is being played out all across the country on a daily basis. They then leave the office, put on a brave face and act like everything is fine but when they see something an employee is not doing correctly or that is wasteful they tend to snap about it.
In the meantime, the team sees this as an overreaction. After all, the salon is busy, the chairs are full, the ambiance rocks, the owner is dressed sharp and drives a nice car, what gives? Why the attitude and nitpicking?
This chasm is common and leads to judgments, bitterness, and finger pointing. If left this way, pretty soon you have an environment full of anxiety, stress and tension. Not fun! And certainly not what everyone signed up for.
This is why sharing financials is critical. It’s for the good of all! But how can an owner go about doing this? If this is your situation or you face this in the future then here are some steps you can take:
- Get all financials in order. Before you can shed important light on what’s happening you have to make sure everything is in the right place. Meet with your accountant; provide any and all information needed to help them get an accurate, year-to-date profit & loss statement.
- Understanding the information. Once everything is in order, learn how to read the information so you know what it’s telling you. Where are you over budget or under budget? Why do you think this is happening? What ideas do you have that can help to rectify the situation? This work will be critical prior to meeting with your team. If you have walked through everything and already have ideas of what changes can be made you become more confident about what’s happening. Your emotion about it lessens as you become more analytical. This will come across to your team when you meet with them.
- Meet with the team. Schedule an afternoon with your staff. Make copies of your breakeven analysis. Begin by asking them if they think the business is profitable. Have them share. Most will probably think so. Armed with their perception, share the truth. Start by asking them to tell you what are all the possible expenses the business incurs each month. Write it on a flip chart. Keep going until they’ve exhausted their answers. At this point share the breakeven with them. Walk them through the sales, variable expenses and fixed expenses. Show them the positives and then where the challenge areas are. Help them to see your situation and ask them for their support in making changes to improve the situation. They need to see that everyone is in it together and that their performance makes an impact on final results.
- Gather ideas. Instead of sharing your ideas, get them to come up with some of their own. This will create more buy in. Break them into groups and give them 30 minutes to brainstorm ideas of what can be done to solve an issue. Each group can then present their idea and you can gather everything and create a plan. As the meeting comes to a close it is imperative to thank them for their support, to let them know that you believe in them, trust them and are counting on them. It’s also a great idea to let them know that they will be able to see future profit & loss statements so they can see progress.
Now, if you’ve read this far you may have two over riding thoughts that many salon and spa owners have:
- I’m not making money and if the team sees this, they will leave!
- When they see the profit the business makes, they will want a raise!
These two common thoughts hold back progress. They are perceptions that get in the way of operating a business based on the truth so let’s flip things around. Ask yourself these questions. If you were in their shoes, as an employee, wouldn’t you want to know how the business is doing? Wouldn’t you want to work in a salon or spa that is successful and profitable? Wouldn’t that empower you?
You probably answered yes! That’s your cue!
What will happen is your team will rally behind you if the business is in the red. They will work harder to help create profitability, stability and solvency.
If the business is profitable and you share the issues at hand that can create more profit, that profit can then be used for better education and marketing to help them grow (and make more money) as well as sitting up a 401(k) plan or savings account for them. This will create a deeper sense of stability and empowerment for them because they played a direct part in not only the success of the business but in also having more benefits, income and a plan for the future.
The only thing that is stopping all of this from happening is YOU. Act today, take that first step out of your current situation and make a commitment to create a financial future that is bright for everyone. As the saying goes, “The truth shall set you free.”