Here is the article that the majority of the industry companies and so called Guru’s don’t want owners to know. For too many years Salon owners have been misled about the glory of owning a salon. Our industry has been plagued with too much vanity and not enough business savvy. The Salon Industry can be very rewarding but you must constantly mind your numbers. Numbers don’t lie, Egos do.
Let me break this down as to why the industry keeps you blind to the facts. The industry would have us all believe that we will get rich by owning a salon and selling their products. Let’s face it they market to our ego and not our pockets. It is time to put ego aside and if we are to survive we must put our business first. We are not going to be saved by buying the latest greatest products, we are going to be saved by business education. You must get educated and you must learn from someone that not only preaches it but has proven it. As Jerry Maguire said “Show me the money”. Do not jump on the hamster wheel that you have learned from another owner unless you see the numbers. Too many times I see owners just open without research. I hear them say I am paying 50 to 60 % commission and when I ask why the answer is always because that’s what my owner did. Sadly they are on course to go out of business.
We not only must mind our numbers but we must come up with new ways to generate new business and evolve the way we do business now. We must become marketing experts or make enough to hire those experts. Do not be afraid to hire outside help and if it seems like too big of an expense, because you are already in the hole than ask about pay for performance. We should also always be looking and researching new business trends such as Memberships (shameless plug LOL) and Product clubs with auto-ship. These are the ways of the future and it is time for us to get smart about business.
Now let’s talk about the numbers. I have included pie charts to make this easily followed. Let me first state some in industry figures so you get a quick education as to the business side of our trade. I suggest at the very least you research numbers once a year. You can easily check industry numbers in such places as the Salon Green Book published by American Salon. Once you do this you should compare them to your numbers and strive to do better by setting goals above the averages.
The average salon has 8 chairs of which only 6 are being utilized. The average stylist services 100 clients per month with an average ticket of $67.00. There are on average 3 salons and or suites per 1000 potential clients. The average stylist earns 10.82 per hour. The average client spends 1 hour with the Stylist. The average frequency of visit is 8 times per year. The majority of salons also have an owner/operator meaning the owner is also an employee.
From these numbers we can gain some insight such as; I have a lot of competition as 1000 clients divided by 3 salons is only a few hundred clients so I must outperform my competition. If I have 8 chairs and only 6 are full then I am loosing revenue on a minimum of 200 clients per month at an average ticket of $67.00 which means I lost at least $13,400.00. We also know that based on availability the above 6 stylists are only utilizing 100 service hours per month and that is resulting in 60 hours of lost service revenue or another $4,020.00 per stylist x 6 stylists equaling $24,120.00 per month. If you add that to the $13,400.00 the average salon loses $37,520.00 per month in potential revenue. If the average stylist makes $10.82 an hour than to raise their standard of living while keeping the salon profitable I must increase the volume of clients. There are only 2 ways to increase the volume and they are through increasing frequency of visit with rebooking and to get new clients by somehow positioning your salon to be unique. SALON OWNERS, IT IS TIME TO GET SERIOUS ABOUT BUSINESS
Now let’s talk about the pie charts I have included. The first chart shows what 90 percent of salons are making if you were to back out the earnings of a salon in which the owner is working behind a chair. In other words the owner bought themselves a job that costs them 5% to be able to maintain. Without their earnings the salon would be posting a loss and eventually have to close the doors. This is the sad hidden fact of the salon industry and must be corrected if we are to survive. Pie chart 2 shows the averages for the other 10 percent of the industry that turn a profit with the owner’s salary backed out. While this is not horrible as you are earning something from your business, you would have probably gotten a better income just investing your money in stocks. Pie chart 3 is where you really want to be and is the goal for our clients of SalonOps who we teach evolutionary ideas to such as memberships.
Please feel free to reference the charts and use them, however if you use them please give us the development credit. Here is a link to the chart
Derek Hull at SalonOps.