As a business coach, one common thing I see salon owners miss is taking their retail profit and paying monthly bills. This is robbing Peter to pay Paul as the expression goes.
In order to have your retail profit truly work for you follow these important steps:
- Take retail sales to cover retail expenses only, keep the rest in your savings account as true profit! The only money you take out of retail is to cover the following expenses: retail commission and the payroll tax associated to them, sales tax based on retail sales, retail inventory purchases and credit card processing fees associated to retail sales. THAT’S IT! What is left over is pure profit!
- If you are taking the rest of the monies left over in step one and paying other bills, you are eating away at your profit. If that’s the case, take a 3-month average of what that number is and set a goal to grow service sales by that number (be sure to add on your gross profit percentage to cover the hard costs of growing sales such as commission, back bar, etc.). Over time, once this is accomplished, you will then be in the position of keeping your retail profit!
- As you begin to get that profit back in your hands, I recommend every 90 days take half of it out of the account to chunk down debts or credit cards, invest in marketing, education, etc. The other half, leave in the bank to cover yourself for any emergencies like a water heater breaking or replacing equipment.
Keep in mind that the process I describe above may take you 3-6 months to achieve so be patient. What’s important is to stay the course! You work way to hard not to keep your hard-earned profit and make that money work for you!
If you need more support, check out my new book, Financial Fitness. You’ll learn how to track your retail sales and profits at a whole new level!