Money

Could you sell your business?

When you open a business very few people are thinking of the day they will sell it. The reality is that most businesses in the hairdressing industry aren’t sold, they just fade away and eventually close their doors.

I read a statistic recently that said that – “80% of all businesses that are put up for sale never sell!” So the odds of succeeding are stacked against you.

But think about it. There was a day where you thought, ‘I’ll open a business!’ And then you did! Congratulations! You should be proud of that achievement.

You saved up X amount of money. You called in all sorts of favours from friends and maybe family. You probably borrowed X amount of money from the bank or other investors. You probably leveraged every penny you could on credit cards etc. 

And then you probably worked really hard for years, and have taken enormous risks along the way. And in some cases, the business has never made a profit. And in many instances, you were paying some of your team more than you paid yourself and took less holiday along the way…

So whether you opened up your business 1 year ago, or 5 or 10 or 20 or 50 years ago. Hopefully, there will be a day where you think, ‘I want to sell my business!’

Now, if you are like me, and are one of the 20% that managed to sell their business it gives you a great sense of achievement. For some, it can be a feeling of relief, as if a weight has been lifted from their shoulders.

And sometimes, selling it is also coupled with a sense of loss because so much of your personal identity is entwined with the business identity. 

So, why would you sell your business?

For some salon owners, it’s because they have simply fallen out of love with being a salon owner. For others it because they are thinking of retirement. For some, it’s because they want the freedom to pursue other challenges. And for others, it’s because the business simply isn’t working anymore.

So could you sell your business? And if so, what do you think it’s worth? Who could you sell it to? What’s the best way to sell it? What should you do to make your business more saleable? And if you were able to sell it would it give you the windfall you might have dreamed about as being the ‘Pay Day’ that you deserve?

Lot’s of questions, and not always simple answers to any of them. But the day will come where every salon owner will ask themselves, “Should I sell my business?”. And those that prepared for that day, often years in advance are the ones most likely to succeed.

Will you choose to bounce back?

Will you choose to bounce back?

I meet many salon owners all over the world, some are doing really well. Some are pretending to do well… and some, to use boxing terminology, are ‘on the ropes’

Life isn’t static. Being in business, ‘sure as hell’ isn’t static. It’s full of many twists and turns, every decision, setback or victory is part of a bigger picture. 

Sometimes events or people will take you completely by surprise and ‘knock you off your feet’. And sometimes things just simply don’t go as planned.

It’s in those moments that you ask yourself the big questions. Questions like, “What do I do now?” “How can I bounce back from this?” “Do I even want to bounce back from this?” “Have I got it in me for one last spin on the merry go round?”

It’s easy to say, “Dust yourself and get back in there, better and wiser for the experience and go at it again”. And without doubt sometimes that is exactly what you have to do. Because sometimes it’s just another test as to how bad do you really want it, whatever ‘it’ is. Remember, ‘the more important the goal, the more resistance there is towards its achievement’.

It’s like watching a Rocky movie where the good guy gets back in there battered and bruised, but eventually comes out victorious. Sometimes being in business is like that. And sometimes it’s not.

Sometimes when you ask those questions of yourself, “How can I bounce back from this?” And “Do I even want to bounce back from this?” Sometimes the answer is, “I’m done!”

But that doesn’t mean you have failed, it doesn’t mean you lost. It just means that this is where you want to get off the ride. Maybe you don’t have the energy or enthusiasm or desire to do it again.

Maybe there is another game you want to play. Maybe you need a fresh challenge, new mountains to climb. Sometimes knowing when to change direction is winning in itself.

Either way, whatever your decision, it takes courage. There are no guarantees, I suppose that’s what courage is.

There is a great sentence in Oprah Winfrey's book that says, “The true meaning of courage is to be afraid – and then with your knees knocking and your heart racing, take the leap anyway. Ready. Set. Go! I love that. 

So whatever the challenges are that you face in business today. Remember these words…”With your knees knocking and your heart racing , take the leap anyway!”

Good luck.

Thank you for watching…

Have a great week! 

No more discounts!

I went to the dentist last week, and I didn’t get a discount!

While I was at the dentist I had the car cleaned and when it was time to pay, again no discount!

After the dentist I got a coffee at Starbucks, no discount there either!

Then I went to the bookshop and bought a book still no discount…

When I got home I went online and booked a flight and a train …still no discount!

I’m sure you can see where I am going with this…

Why do salons discount?

In my role as a salon coach the subject of discounts frequently comes up and for whatever the reason hairdressers often feel guilty about charging people the right price and want to give them a discount!

In many cases it’s now out of control, the salon profits gone and in some cases the viability of the business is under threat!

One salon owner I work with who was suffering from what I call “Discount creep” got all the staff to give her a list of all the clients who were getting a discount and why they thought they should get it.

The end result was that many of them were getting a discount for all the wrong reasons so they were stopped, predictably it made an instant and significant difference to her bottom line and profitability of the salon.

Are there exceptions?

Yes sometimes there might be for example you might be doing a specific promotional offer on a particular stylist or product or service, that’s different.

You might have specific situations like a regular client I once had who said she wouldn’t be in for a while because she had lost her job so I offered her a discount until she got back on her feet.

We also offered a lower price on Monday or Tuesday with a new stylist in order to build them up on quiet days. And I once had a blow-dry client who said she would come in twice a week if I gave her a modest discount so I did.

I didn’t offer discounts because he or she’s was a local, or because they worked in a shop down the road [unless they’re is some specific cross promotion involved]

I didn’t offer discounts because he or she said they’d refer people, if that’s the case I would give the client a referral card so they’d get a proper discount when a new client they have referred comes in!

And I definitely didn’t offer discounts because I thought they couldn’t afford it or because they’re my friend…

One rule should be that any discount should be authorised by the owner, it cannot be left up to the team to determine the price.

It’s the owners job to set the prices for the salon services based on what it costs to cover all the business overheads and to make a realistic profit.

It’s up to the owner to decide on the price point of services in order to attract the target market.

It’s up to the owner to decide on what you're worth and you need to be confident about charging that price!

It’s up to the client to decide if you’re worth it and if they can afford it!

Have a great week!

What’s your average bill?

What’s your average bill?

I’ve often said “That I don’t trust most industry statistics”… but I continue by saying “But ask yourself, what if it is true?”

Recently I heard a statistic from a reliable source that said that the average bill in hair salons in the US was only $41.00!

We often hear about celebrity hairdressers that charge $100 $200 $500 1,000 and more for a haircut. But they are not your average hairdressers, and can I suggest that the people that are watching this video are not the average hairdressers.

But think about it for a moment, all over America or Canada or the UK or Australia or wherever you are watching this there are thousands upon thousands of salons that charge $20-$30 for a haircut, so I can believe that the average bill, not the average haircut the average bill is $41 which would be about the equivalent of $50 Canadian or Australian dollars or £30. in the UK.

If you are not sure how to work out your average bill it’s the amount of money generated divided by the amount of clients you did in the same time frame and it includes everything from kids haircuts, blow-drys, mens haircuts, colours, everything… So say you did did $1,500 and 23 clients it’s 1,500 divided by 23 = an average bill of $65.

Let’s get optimistic…

Let’s use the US example and assume it’s factual, that the average bill is $41 and then lets get wildly optimistic and say that the average hairdresser is doing 30 clients a week.

30 Clients a week multiplied by and average bill of $41 equals  $1,230 a week in total services. And that’s being optimistic!

Where does it go?

Now lets use some industry averages and say that half of that $1,230 which equals $615 is meant to cover the gross weekly wages of the employee who did the hair, plus it’s also meant to cover any pension fund, medical insurance, holiday pay, and sick leave etc if you are lucky enough to work in a country that offers that and it’s also meant to make a contribution towards the wage of any support staff like assistants or receptionist.

Now the other half is meant to cover Accountant, Advertising & Promotion, Book keeper, Bank fees, Cleaning, Credit card fees, Computer, Couriers, Donations, Drinking water, Electricity, I.T. support, Insurance, Coffee/tea/milk/sugar,  Laundry powder, Legal, Magazines/Newspapers, Maintenance, Music Performing rights license, Petty cash, Postage, Reference books, Registration fees, Staff amenities, Staff training, Stationary, Sundries, Telephone, Towels, Trade subscriptions,Travel, Uniforms, Washing machine dryer lease, Water rates… and rent and all product costs… and this little thing called profit!

It isn’t enough!

Hopefully you can see the problem… $1,230 simply isn't enough money being generated to meet all these overheads plus have well paid staff let alone for the business to make a profit.

So that’s the problem, how do you grow the $41 average bill so that you in turn grow the total weekly sales of $1,230 so that you can run a viable business, pay your team well and, meet all your overheads and make a profit?

What’s the solution?

There is no single answer, and obviously there are many salons out there where the individuals who work in them have average bills of $80, $90 or $100 and more and they are paid accordingly. Plus the salons meet all their overhead and make a good profit but as an industry unfortunately that’s not the norm.

So what is your average bill, and what are you doing to grow yourself, your team and your business?

If you are a salon owner your success revolves around your ability to grow the individuals on your team into busy productive stylists …I call them Super Stylist because they are the people that refuse to be average, they take ownership of their productivity and as a result they are paid accordingly.

Thank you for watching…

Have a great week! 

What 3 numbers should a stylist focus on?

“What are the 3 most important numbers for a stylist to focus on?”

Productivity matters, that’s the harsh reality, and it’s by measuring and tracking your productivity that you get to see how you are performing as an individual and to make comparisons and be able to set goals for future growth.

As a hairdresser, there are many different systems that will determine what you earn and depending on the country you are in there may or may not be a guaranteed minimum wage. But the most common system by which hairdressers are paid is a combination of a guaranteed weekly minimum wage and then a commission over and above a certain figure.

The bottom line is, ‘the more you do the more you get’, so if you’re a hairdresser working for someone else what are the most important figures to focus on?

My number 1 figure a hairdresser should monitor is

1. Total weekly sales in products and services

What you generate in sales each day or week is ultimately what determines how much you get paid, so knowing the total revenue figure should be important to you.

How that total revenue figure is achieved will vary enormously from individual to individual and will be influenced by several variables, from the price your products and services are charged out at, to the range of services you offer, the amount of clients you service and the amount of time you allocate for an appointment.

Tracking the progressive totals of the revenue you generate on a daily and weekly basis, and understanding what it is made up of, and knowing what your targets are will keep you focused on your results and the opportunities that every client presents.

The second most important figure a hairdresser should monitor is

2. Average bill

The average bill is the figure that comes from dividing your total sales by the total number of clients serviced over the same time period. For example, if you achieved a total weekly revenue of $2,000 and had a total of 40 clients thats $2,000 divided by 40 which equals an average bill of $50.

The higher your average bill is the better, as it’s an indicator that your clients are buying multiple products and services.

The lower your average bill the more clients you have to do to arrive at the same weekly revenue. Conversely the higher the average bill the less clients you have to do to arrive at the same figure, so having a high average bill is usually a sign of someone working smarter not harder!

The 3rd most important figure for the hairdresser to know is the

3. Returning client percentage

If you’re in a situation where you are churning through clients and producing high weekly revenue, on the surface that may be impressive. But if there is a low percentage of them returning that’s a problem [unless you are working in a holiday resort].

A good hairdresser will not only have a high weekly revenue figure but also have a high percentage each week of returning clients and new clients that have been recommended.

Having goals in each category and being aware of your numbers on a daily and weekly basis gives you a focus on what you are doing and highlights your ability to influence the outcome.

Using a good software system you can easily access instant reports in numeric and graph form allowing you to see at a glance how you are performing at any point in time.

If you are using a salon software system you will get numeric real time, daily and weekly reports. I also like to use graphs to depict what the numbers are saying, I find that, ‘as hairdressers’ we are very visual in how we take in and process information, a graph is simply a picture of what the numbers are saying.

I know that for a lot of hairdressers numbers can be boring and confusing but understanding them is important as it shows what you are doing well and where you need help.

If you need help with your numbers and improving your productivity I suggest you might want to start by reading or listening to ‘GROW 1 Super Stylist,’ I promise you it’s full of practical common sense ideas that work.

If there were just 3 numbers to focus on…

If there were just ‘3 numbers’ to focus on what would they be?

I remember the day when I first got computerised at the salon front desk, ohh the sense of control and order that all those reports gave me. The problem was, that being completely honest that like so many salon owners I didn’t know what to do with all the information except look at it!

Like so many salon owners I was in a state of ‘information overload’ and that leads to the inevitable analysis paralysis, “What did it all mean and what was I meant to do with it?”

The danger is that ‘you do nothing with it’ and therefore render your shiny new  point of sale system to be nothing more than a glorified cash register. Huge mistake! Once you have the information in your hands that is just the beginning.

The challenge for many salon owners is two fold,

firstly knowing ‘what numbers are the important numbers to track' and secondly knowing how to drive those numbers in the right direction!

The problem is that there isn't a right set of numbers that everyone should focus on, it really depends on the business model you have. For example, if you are a fashionable boutique salon then ‘re-bookings’ are probably important to your business so tracking your ‘re-bookings’ at both a salon and individual level is important.

On the other hand if you were a budget salon in shopping mall that doesn’t work on fixed appointments then tracking re-bookings would probably be a waste of time.

If you have a barbershop then tracking colour percentage probably isn’t that important, but tracking client retention is, whereas if you had a salon in a hotel or resort then client retention may not be important.

So the first thing to do is decide what numbers are the most important numbers for you to focus on at both an individual and a salon level.

So, at a salon level if there were just 3 numbers to focus on what would they be? Well, I have settled on these 3

At number…

1. Total weekly revenue in products and services

2. Weekly break-even point

3. Employee costs as a percentage of total revenue

So let’s talk about each, one at a time.

The first number is

Your total weekly revenue in products and services and is easy to find out. Your ‘point of sale’ system will give you a 100% accurate summary of all transactions and break it down in many different ways.

As a salon owner you need to know that number and whether it’s going up, down or plateauing.    

However, the second number I chose

is your weekly ‘break-even’ figure and that is a little more difficult and probably won't be as exact.

Finding out an exact weekly break-even figure for a previous financial year is easy as you will have an exact set of historical numbers to work on, all you need do is get your ‘Profit and Loss report’ for the previous year and divide the total expenses by 52 [weeks in the year]. The answer will give you an exact average weekly break-even figure for the previous year.

If you were to plot that fixed weekly break-even figure as a line on a graph and were then to plot next to it week by week your total revenue you would see that some weeks you made a profit, some weeks you broke even and some weeks you may have made a loss.

If you want to find out a ‘break-even’ point for the current year, start by using the previous years Profit & Loss and the break-even figure as a benchmark go through the expenses line by line and adjust where necessary up or down [depending on changes that have happened or anticipated changes in your business, for example changing staff numbers, rent increases etc] to come up with a best guess total expenses figure for the current year. Again, divide that figure by 52 to get a new estimated weekly break-even figure for the current year.

Remember this weekly break-even figure isn’t allowing for profit, it is purely ‘break-even’ so hitting it means you are surviving …just. What you should do is factor in and add on an additional amount for profit as either a ‘set dollar amount’ or as a percentage, for example add another 10% on top after all expenses are paid and that is the projected profit.

My third most important number

to track as a salon owner is ‘Total Employee costs as a percentage of  revenue’. The reason this number is so important is that this is the ‘one number’ that you must control, it is the ‘one number’ that if you get it wrong it will sink your boat, and fast!

Typically, ‘Total Employee costs’ including the owners income, will average around the 50% mark and depending on the country you are in it will include, pensions, annual holiday pay, sick pay etc if you get it wrong and you are overstaffed for the level of productivity you will immediately be eating up the portion that should have been profit. Get it horribly wrong and you will not survive.

Knowing your numbers is the first step to controlling them. Don’t use your point of sale system as a glorified till, use it to produce information that allows you to market, manage, and control every area of your business.

If you need help with understanding your numbers and think that ‘one to one’ coaching might help you then email me at antony@growmysalonbusiness.com and we can discuss if coaching would be right for you.

Thank you for watching…

“Don’t mess with the money! Capeesh?”

Not on my shift!

This is going to polarise you. You’ll either read this and think, ‘Yeah that happens in my salon too’. Or you’ll think, ‘How on earth could any salon owner let that happen?’.

I’m the latter of the two, but I understand how it happens and I am amazed how prevalent it is. So what am I talking about? Two things…

First thing…

Salon staff discounting prices of services at a whim from what is displayed on the salon price list.

No, No, No! Not on my shift! That should never happen… but you would be amazed how often it does.

As a salon owner, hopefully you have worked out what you need to charge for the services you offer based on what it realistically costs to run your business and make a profit. [If you haven’t then we need to talk].

Then, I’m equally sure that you have assessed what the ‘going rate’ is in your city to ensure that you are market competitive and have then come up with a price list that you feel is going to allow you to run a profitable business and meet all of your operating costs at the same time.

Feeding the beast…

If you are like most salons out there, your salon is a finely tuned beast that is balanced between making a profit or running at a loss. Most salons survive on very small profit margins if any.

So here’s the thing, no one except the owner, or someone he/she designates responsibility to has the right to discount or alter the prices of the salon services.

Who do stylists think they are to discount or undercharge or over-service or throw in a freebie because they think it’s a good idea. Or they think that ‘their’ clients cant afford it or wouldn’t pay it. It’s not their business, they’re not paying the bills or servicing the loan or working 60+ hours a week!

How would they respond if you decided to discount their wages just because you felt like it. I think the response would be a resounding “No you don’t!” To put it mildly. 

Second thing…

The second thing is salon owners that let clients leave without paying on the basis that you can invoice them so they can pay online! No, No, and No again! Not on my watch.

Every salon owner I have ever met that lets clients pay on invoice ends up with another job of bookkeeping and chasing up clients who conveniently forget to pay until they are due back again. And then, if you are lucky they will pay or sometimes they will just go else where. It will reek havoc with your cashflow!

At best, salons are a low profit margin business, you don’t have the time or the resources to start invoicing and then chasing up clients for payment, and if you do it, you’re mad!

One of the best advantages of the salon business is that there is good cash flow. Take that away and you really are setting yourself up for a kicking!

Thank you for watching…

If one to one telephone coaching is something that interests you and would would like to find out more about what’s involved and how I could help you email me at antony@growmysalonbusiness.com and I will set up complimentary 15 minute phone call to see if we are a fit and to answer any questions you may have about how coaching works.

Have a great week!