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Know your Costs, Control Your Bottom Line

Know your costs control your bottom line

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Know your costs control your bottom line

Fixed And Variable are the two types of costs that your salon incurs through goods and services sold at your business. 

Variable costs vary with the number of services that your salon has, meaning your costs increase/ decrease based on your salon’s activity.

While fixed costs stay the same for some time no matter how much your company produces. Therefore, even if you have no activity in your business, you will still incur these costs. 

This style of accounting helps to provide you, the business owner, the correct knowledge to make rational decisions about your business expenses which have a direct impact on your profit. 

Fixed costs: 

  • Accounting
  • Advertising and Marketing
  • Bank Charges
  • Bookkeeping
  • Corp Renewal
  • Debt Repayment
  • Depreciation
  • Employee Salaries
  • Insurance
  • Loan Payments
  • Maintenance, Cleaning and Repairs
  • Memberships, Dues, Subscriptions (ie: ABA, PBA)
  • Office Supplies/Expenses
  • Payroll Processing
  • Rent
  • Salon Software and Apps
  • Software (Booking, Back Bar)
  • Telephone and Internet Costs
  • Utilities (heat, light, water, etc.)

Variable costs: 

  • Color product orders
  • Commissions
  • Credit card processing
  • Goods sold for resale (retail products)
  • Loan/Credit Card Interest
  • Meals & Entertainment
  • Operational expenses (supplies like foils, color products, etc.)
  • Supply (Back Bar Supply ie: foils)
  • Supply (Front Bar ie: retail)
  • Training/ Education
  • Travel

Why Should You Know Your Fixed and Variable Costs? 

As a business owner, you should know and understand the costs and the changes that occur in your business. When you see your expenses increasing it allows you to adapt your business to changes to ensure you can continue to keep your doors open.

The breakdown of your expenses influences the pricing of services at your salon so that you can be profitable. Variable costs should directly influence your pricing. When your color usage varies session to session, shouldn’t your pricing also vary session to session? Using hair color management software, like SalonScale, to account for your color costs will help in combating those variances in your color sessions.  

Fixed and Variable expenses are used to help identify your break-even analysis, which helps to identify the number of services needed to be performed before you make a profit. Read our  Labor Blog to find your break-even point. By conducting a break-even analysis you can understand the relationship between products you sell, the volume of services performed, and your costs. 

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