How to Keep Better Track of Your Nail Salon’s Finances
When you’re in the beauty business, watching industry trends is a good idea, but also a trap into which you can easily fall. The only thing that matters is how your business is faring and what you are doing to pump up your bottom line. Still, when the rest of the world is telling you that the nail industry is less active than usual, it’s only natural to start panicking, especially if you feel that you’ve recently seen a decrease in the number of your clients. However, if you’re keeping track of your business records, then you’ve already taken the first step toward keeping the anxiety at bay. If you’re not, here’s how you can get started.
Looking at business records with a fine-tooth comb is not for the faint of heart, but if reduced stress and increased profits are what you seek, it must be done. Using the history of your salon to plan for the future is easy once you have the right tools.
Tighten Up Your Records
You can’t build something without a toolbox; first, gather what you need in one easy-to-find location. How organized you are—whether you’re a salon owner or a booth renter—is going to determine how quickly you can move ahead to the next step. Next, answer the following three questions:
• Do I have a budget? If yes, is it broken down by month and year?
• Do I track—on paper or in a computer program—the daily receipts? If yes, how far back do those records go?
• Do I keep accurate, accessible records of
all expenses, including bills, payroll, and
expenditures for retail and back bar items?
If you answered “yes” to all three questions, you’re in good shape. If you’re missing information, try to locate it. Ideally, to get a good idea about the micro trends in your salon, you should be able to go back at least three years. If your business is less than three years old or you don’t have all the information you need, now is the time to start fresh and work with the information you do have.
Choose Your Method and Work Space
Once you have your records assembled, decide how you want to keep track of them. Using a computer and Microsoft Excel (or a comparable spreadsheet program) is the best method—and probably the neatest. If you’re a technophobe, this may be more frustrating than it’s worth, in which case you can purchase graph paper, colored pencils and a binder to keep everything in one place.
Make sure that you have time to set aside and a quiet space in which you can work without disruptions such as phone calls and children. Constant interruptions will inhibit your ability to concentrate, and your brain needs to be focused when you’re working on this project. Thinking of it as an investment in the future of your business may make it easier for you to dedicate the time you need in order to get the job done.
Build Your Information Base
1. Create a spreadsheet that details your daily business. You’ll want to include the different methods of payment (cash, check, credit card, gift card, “other”) on one side of the spreadsheet, and detail where those payments apply (services, retail, retail tax, gift cards sold, petty cash expenditures) on the other. For each day, the payment side should equal the purchase side. Sometimes, daily financials won’t balance. Don’t panic; consider things like human error or cashier carelessness, and then make appropriate changes to fix the problem.
2. Once you have the monthly totals, plot them on a line graph using a different colored pencil for each year. It’s best to go back at least three years—if possible—in order to truly track the trends in your salon.
3. Using the line graph, make adjustments in your marketing plan according to which months need an increase in business. Also, consider what you’ve done right in the past during those months that represent the high points in the graph—and keep doing it!
4. While you examine these trends, consider how they jive with your budget. You may just find a speed bump in your system that can be easily fixed by paying more attention to your financials.
Going Back in Time
Now that you’ve been diligent with record- keeping and charted your business, you can locate trends by closely examining your financials by each day, month and year.
First, take a look at the details of each business day. Sometimes, you will discover things about your business under the microscope that you wouldn’t normally see, like how inconvenient it is that more than half of your technicians can’t put in hours on Thursdays, or that Saturday is a big retail sales day, or that you’re overstaffed on Mondays. Does the salon bring in noticeably less income on Tuesdays? That may be a good day to offer some “door-buster” specials. Do Fridays appear to be so busy that you could schedule more technicians so you don’t have to turn away any potential clients? Try it for a while and see if profits rise.
Next, look at the details of each month as a whole. Did your service income take a sharp dive in July? Why are you selling few-to-no gift cards in March? Where does your bottom line sit in relation to the surrounding months? Are there specific reasons for highly profitable months that you can easily identify? What about those that aren’t so profitable?
Finally, look at the big picture by making a line graph. After studying data from at least three years on the graph (and continuing to add to it as you calculate new monthly figures), you will start to see definite trends that will inspire you to do month-specific marketing. Another benefit of the line graph is the calming effect it may have on you when you’re worried about your business; you’ll probably see that your salon or booth has always been more quiet at certain times of the year.
Keeping great records is one of the best things you can do for the success of your business. In addition, being organized helps with things like paying taxes and keeping an eye on your budget. With these tools, you can tighten and refine your marketing efforts, ensure that your salon is always properly staffed, and be forewarned about both slow and busy times of the year in order to be the most prepared business owner possible.
– Melisa Wells
[Image: Flickr Creative Commons via Chris Potter]