Business Tips

5 Ways to Manage Your Salon Inventory for Success

By Michelle Fergusson | 

Well, let’s cut to the chase – how you currently manage your inventory might be one reason your business isn’t where you want it to be. How much time do you spend in the back bar or at the front counting how much inventory you have? Or regretted ordering a certain product again because it just didn’t leave the shelf? We’re here to help you keep your inventory more organized and remove any uncertainty you may be feeling when it comes to your inventory management.

What is inventory management?

Inventory management is the act of tracking the number of products you currently have in stock. The goal is to reduce the cost of holding inventory but also when it’s time to order more, and how much you should order.

Why is it important?

Inventory management helps your salon to meet the demand for retail products or products used for services. Having control of your inventory not only helps you meet the demand for retail products and back bar services but also helps you manage your expenses a little better that can help generate more profit to your bottom line.

Managing your inventory can improve your business’ cash flow, increase your profits, reduce your order stock, eliminate guesswork for ordering, and save you time! If you don’t accurately manage your inventory your business can lose money due to overstocking or wasting money on products that don’t get used or purchased.

Here are our 5 tips to help you optimize salon inventory management

1. Order on a Budget:

It can be overwhelming sometimes to look at your budget, but it’s crucial to look at it, analyze your numbers, and get a strong understanding of what is happening in your business financially.

Start by going through your books and understanding how much you spend monthly and yearly; on both your back bar and retail. It’s recommended that you spend 5-10% of your service income. Ordering based on your percentage of sales helps you to stick within the allocated range and not stray from your budget. Another way to ensure you’re not ordering over your allocated percentage is to order off of last months usage!

Tip: Avoid purchasing impulsively, as this can leave you short-changed on the products that you may need.

A great way to combat this is to divide your inventory budget into two parts. Roughly allocate 20% of your products budget to retail and another 5-10% towards your back bar products. Having a portion of it for retail products and one portion for service products. This helps you to have a better idea of where your expenses are in your business. Combining them into one spreadsheet can make it difficult to identify how much money you’re spending on retail vs. service products, and cause confusion as to which products you’re profiting from and which ones are costing your business money.

Note: ensure that you are setting away time to go over your budget each month to ensure that you are not going over, and if you are consecutively going over, you may want to reevaluate it!

2. Audit your inventory.

Auditing helps to identify errors in financial reporting and inventory records. It also allows you to get a stronger understanding of where your money is going and what products are being used. It also can catch or reduce the risk of fraud in your salon. When it comes to your retail products, auditing helps to determine what products you are selling. Which products are your top, middle, and lower performing sellers? This allows you to prioritize orders based on what you’re actually selling. Be sure you are marking up your top and mid-level sellers.

Monitoring the color you have in your back bar is important. When you don’t order your inventory correctly, it can heavily affect what services you can provide to clients. On average 40% of salon color products are unused and just collecting dust. If they aren’t being used they likely are worth having moving forward. Using hair color management software can help you to monitor your current inventory levels.

Auditing can help to identify changes in your expenses too. It’s important to know what your business spends, monthly, and yearly! But it’s also important to recognize when your costs are increasing without notice. So that you can adjust accordingly and ensure all of your color costs are covered.

3. Avoid spoilage and shrinkage:

Like foods and make-up; products you keep in your back bar also have an expiry date. The average shelf life of color products is 1-2 years after being opened, and 3 years if unopened. And sometimes brands update their product ingredients… you would hate to be using old products.

Loss of inventory, or shrinkage, is also a loss of profit to your salon. This can include expired products, damaged products, and wastage. When inventory isn’t moving off of your shelf – it’s not an opportunity for potential sales, it’s a loss of income.

4. More isn’t always better.

Don’t overstock just because or just in case. Overstocking can cause your business to bleed money. Overstocking products that don’t get used can tie up your cash flow, which doesn’t allow you to put money into other parts of your business such as investing in salon software, having an emergency fund, trying a new product line, or other ways to grow your salon. Overstocking can also take extra time to count your inventory and it wastes space too.

Remember, money spent on extra inventory is money not spent on growing your business.

5. Use a system that centralizes all of your information

Using a Salon Inventory Management Software can greatly benefit your salon. A benefit of using SalonScale is that the product in your bowl is accounted for in real-time, it tells you the exact amount left in the same with the amount of product used from your inventory. You can see how much of your inventory has been used, and how much is still sitting on your shelf, and what it’s costing you. SalonScale software also creates order forms for you to download based on the products that you have used in your salon, saving you time and accurate ordering.

Want to learn more? Check out our Free Back Bar Business Building class with Guest host, Steve Gomez! SalonScale,

Michelle Fergusson

Michelle Fergusson is the Content Manager at SalonScale Technology Inc. With over 3 years of experience in the marketing field, she has worked with multiple tech companies and non for profits to help them grow their brand and optimize their profits.