4 Proven Strategies to Boost Your Profits by The End of 2024

When it comes to running a successful salon, it's not just about the revenue you bring in but how much of that revenue actually sticks around as profit. We've gathered insights from seasoned professionals, Caylee Auge and Alicia Soulier, who bring decades of experience and hard-earned lessons to the table. Whether you're struggling with cash flow, managing a team, or just looking for ways to streamline your operations, we want to provide you with game-changing strategies to help you end the year strong.

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Check out the replay of Caylee and Alicia's latest webinar here.

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“When will the time come where this business gives back to all the love and all the energy that I've put into it?” - Alicia Soulier, CEO of SalonScale

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🔢 Analyzing Your Cash-Flow

Many salon owners focus heavily on increasing their revenue, believing that higher sales will translate into business success. However, this approach can be like filling a leaky bucket—no matter how much water you pour in, it keeps draining out. Instead of focusing solely on growing sales, it's crucial to prioritize profits and expenses first. By identifying and patching the financial "leaks" in your business, you can create a more sustainable and profitable salon. This shift in perspective allows you to need less top-line revenue to achieve the same or even better results, leading to a healthier, more stable salon. 

Profit, often misunderstood as just the money left over after expenses, is actually a critical resource for maintaining and growing your business. It’s what you rely on to restock inventory, make essential repairs, or invest in improvements. Mismanaging profit can quickly lead to cash flow problems, which is one of the top reasons why Salons close their doors so quickly. Understanding the difference between cash flow and profit is essential for long-term success; while cash flow keeps your business running day-to-day, profit is what ensures its future. By focusing on profit first, you’re not only safeguarding your business but also setting the foundation for sustainable growth.

Check out your profit potential!

💲When Was The Last Time You Adjusted Your Pricing?

Adjusting your pricing is more than just a necessary task; it's a vital strategy that should be systematically implemented to ensure your salon's sustainability. If you've raised your prices without carefully considering your compensation structure, you might not see the profit you expect. It's crucial to balance your pricing adjustments with your team's compensation to ensure the changes truly benefit your bottom line. Additionally, simply raising prices isn't a strategy on its own; it needs to be grounded in the reality of inflation and productivity. The truth is - If you haven't adjusted your prices in over a year, you're actually charging less than you did last year because your buying power has decreased. This reduction in value means you're paying more for the same services, which can erode your profits over time.

It’s essential to routinely assess your pricing based on demand and economic factors and there's no one-size-fits-all approach—it really depends on your unique circumstances and goals. Annual price increases of 1-3% help maintain your buying power and should be as routine as an oil change for your car! Beyond that, you should consider a supply and demand-based approach to pricing, especially when your time becomes highly sought after, and you're struggling to accommodate all clients. This could mean following Caylee’s advice - “Once you reach that 60%-95% productivity mark, this is a good indicator that if you’re looking to free up some time in your schedule, you would begin to raise your prices for this to happen”.

More frequent adjustments must be made until you reach a balanced state where your prices reflect the true value of your services and the demand for your time. Regular measured adjustments not only prevent burnout but also ensure that your salon remains profitable and competitive. By systematically reviewing and adjusting your prices, you’ll create a stable business model that supports growth and sustainability.

It pays to be a SalonScaler. Book in for a demo and let’s talk all things pricing.

🫰🏼Pricing For Profit

When it comes to pricing for profit in a salon, you need to ensure every service provided or product sold has a margin. But, before you add a margin, you first need to understand the balance between fixed and variable expenses. Fixed expenses, like rent and utilities are predictable and remain consistent month to month, making them easier to manage. However, variable expenses—those costs that fluctuate depending on client needs, seasonal trends, and product usage—are the wildcards that can significantly impact your bottom line. Imagine your salon chair needs to generate a specific amount each month just to cover your fixed costs. Now, consider the variable costs that fluctuate with each client, like the cost of hair color, which can range from $8 to $15 per tube. If these variable costs aren’t accurately tracked and factored into your pricing, they can quickly eat into your profits.

For example, let’s say your salon uses $1,000 worth of products in a month. If those costs are included in commissionable earnings, you might end up paying an additional $500 in commissions on top of the $1,000 product cost. This means that instead of your product costs being $1,000, they're now $1,500, which erodes your profit. To avoid this, separating the costs of products from service charges is essential. By doing so, you ensure that every dollar spent on products is covered by the service charge, creating a self-sustaining cash flow. This approach prevents profit erosion and allows you to reinvest in your business.

Familiarize yourself with the basics of parts and labor here! 

One of the biggest misconceptions is that the product cost can be bundled into service pricing without considering the need for replenishment. A toner might cost $15, but without accounting for the need to replenish that product, you could find yourself dipping into profits to restock. Over one single year, this could add up to $15,000 in unaccounted costs. By separating product costs (parts) from service pricing (labor), not only do you cover these expenses upfront, but you also build a sustainable cash flow model that ensures you’re never caught short when it’s time to reorder. This method of dynamic pricing—where variable costs are isolated and covered—will dramatically improve your salon's financial health, allowing you to focus on growing your business rather than just surviving month to month.

📳Technology - Why Use It? 

In today’s fast-paced salon environment, embracing technology is more important than ever. Salon owners often find themselves buried under piles of printed reports, trying to manually analyze data to make crucial business decisions. But in reality, the role of a salon owner should mirror that of a CEO, focusing on high-level strategic decisions rather than getting bogged down in day-to-day operations. This is where technology comes in. By leveraging the right tools, salon owners can streamline operations, improve profitability, and maintain a clear focus on their business objectives.

However, it’s easy to get caught up in the excitement of new technology. The key is to focus on one tool at a time, and ensuring it's fully integrated before moving on to the next. Prioritizing tools that directly impact profit and cash flow, like SalonScale, can provide immediate financial benefits, which can then be reinvested into other areas of the business.

SalonScale in particular, offers transparency—a critical component for building trust within your team and your clientele. By clearly showing the cost of every product used, SalonScale helps eliminate the mystery behind pricing decisions and fosters an inclusive atmosphere where everyone understands the financial aspects of the business. This transparency not only closes the gap between salon owners and their teams but also empowers staff by involving them in the financial success of the salon. When teams understand the real costs and see evidence-based decisions, it leads to greater buy-in and less resistance to change.

Conclusion

Boosting your salon's profits by the end of 2024 is entirely achievable with the right strategies in place. From tightening up cash flow and adjusting pricing to accurately accounting for product costs and embracing technology like SalonScale, each of these proven approaches can significantly impact your bottom line. By focusing on profit first, regularly adjusting prices, separating service and product costs, and leveraging technology to streamline operations, you'll create a stable foundation for growth. These strategies not only help you stay profitable but also empower your team and ensure your salon thrives in the long run.