I know that’s a provocative start but it’s true, isn’t it?
Numbers are facts, not feelings. They have no ego, and they don’t feel the need to justify, they’re just results. They’re facts that are telling you something. The real question is are you listening to what those numbers are saying?
Let me give you an example. I live in the UK so I’ll use pounds to illustrate the example but whether you’re talking dollars or euros the percentages and formula is the same.
It’s not uncommon to have a salon in London where the rent will cost you £2,000 a week which is £104,000 a year. Now as a benchmark [assuming that you want to make a profit] you want your rent to be about the 10% mark preferably lower.
Now on that assumption that rent should be about 10% of annual revenue that means you need to generate 10 x the rental amount in total revenue each week.
So if the rent is £2,000 a week you need to be producing 10 x that amount. So 10 x £2,000 equals an average of £20,000 in weekly revenue or if you multiply that by 52 weeks in the year it means that you have to produce £1,040,000 a year in sales for the rent to be 10% of revenue.
That’s a lot of money! It will probably require 15-20 good money producing staff plus the support staff to generate that much in sales.
So are you doing that?
Whatever your rent is, ‘have you got it to 10% of total sales?’ If the answer is yes, then congratulations, you are one step closer to having a profitable business.
But if the answer is no, ask yourself these questions:
- First question. Do you, as the owner have the desire and the ability to employ, motivate and manage 15-20 stylists, each capable of producing an average of £1,500 a week?
- Second question. Is the location you have big enough and capable of attracting the volume of clients needed in your target market?
- Third question. Is the location big enough and are you capable of attracting, training and keeping 15-20 stylists and support staff? That’s not easy.
- Fourth and final question. Is it possible with your staff, your salon culture, your location, your employee expectations, the employee costs and the productivity levels… is it going to be possible to generate a weekly revenue of 10 x what you’re paying in rent?
If the answer is ‘no’ there is probably little chance that you are making a profit. In fact, you are working for the landlord paying off his or her investment.
On the other hand, if the answer is yes! Then go for it, make it happen!