How One Salon & Spa Uncovered $25,287 with a Few Quick Improvements

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Increase revenue, Raise the margin, Control the Spending, and Lead with Transparency. These were the four big initiatives for the Turnaround Project we led at one Salon & Spa. This business has it all - great owners, incredible staff, a unique space, and best in class service. They genuinely care about the wellbeing of their clients and treat them that way. However, the owners were having a hard time leading the business, keeping their pulse on the numbers, and driving the process improvements necessary for financial sustainability all while actively working in their business. In the Salon & Spa world it is not uncommon to find the owners working behind the chair and servicing clients throughout the entire day. They often feel the overwhelming pressure of having to work all day, then switch roles and play owner or manager after hours. How could we find a way to make improvements and ensure they could be sustained without adding additional staff or making the owners work around the clock? Let's Dig In....

1. Set the Financial Plans

First things first, we set the Revenue and expense plan for the business for the remainder of the year.  This is the starting place. I had a great business mentor who I respect very much tell me “You can’t know where you’re going unless you know where you’ve been and you understand and are honest about where you are right now.” After analyzing past financials, we were able to establish key metrics to track and pinpoint the strategies that would help move the needle in the upcoming months.  Our friends now had an understanding of what was impacting their margin as well as what their true cash breakeven point was.  To know more about True Cash Break Even Read “I Can’t Find My Money: 3 Steps to Keeping More Cash in Your Small Business.”

2. Verify Retail Pricing

Our Financial Deep Dive made it clear we needed to dig into the retail products.  Our client was averaging around 32% margin on retail sales. This could be contributed to two things. First, the pricing was not set up to take the cost of shipping into account. Second, Vendors had incrementally raised the wholesale prices on products for a couple years while our friends had not raised retail pricing therefore driving their margin down.  The takeaway here is that if you have front desk staff responsible for checking in product deliveries, make sure they are matching the wholesale price paid to the wholesale pricing set up in your system as well as making sure the correct quantities are received.  Its easy to focus on quantity, receive the Purchase Orders and move on not realizing your margin is being chipped away.

3. Implement Inventory Control and Purchasing Process

When we started with the project, our friends expressed major frustrations with constantly running out of important products and having to rush to buy them before appointments.  We introduced a simple cycle count process and within a couple of weeks the owners were in a position to trust the on hand inventory in the system.  This makes all the difference as you have to know what you have in order to know what you need.  Improper inventory control leads to major issues including bad purchasing decisions.  If you’ve ever had too much or too little of a product, or find that you’re out of stock on something you use frequently, the issue is inventory control.  You can either run around every week and try to figure out what you actually need to order costing yourself time and money, or you can shift a fraction of  that energy to maintaining inventory accuracy and then let the system work for you instead of the other way around. With inventory control in place, we moved to analyzing sales and usage and were able to set Safe Levels for all products.  Now our friends are able to show up on Monday, run a report of what to buy, turn the purchase orders into their vendors, and move on with their week. The best part? We monitor the spending amounts on a weekly basis and keep the owners informed if they are staying on track (or not) with our spending targets compared to revenue.

4. Set up Live Performance to Plan tools

As mentioned, we started with our financial plan.  Most small business owners gather their financial statements after the month is completed and have a “Financial Meeting” to see how it went.  This is great but my questions is always “What are you going to do about it if you don’t like what you see?” It’s too late.  This is to illustrate that it’s not enough to have a plan.  While it’s imperative to have a clear financial roadmap, we want our clients to have a way to stay connected to the performance of their company compared to the plans regularly throughout the month.  We’ve developed some simple templates and with our financial targets we set at the start, we’re able to review weekly and ensure we are staying on track when it comes to on hand inventory, margin, and spending levels for retail and professional product.  From a sales and retail % standpoint, this location uses our Quick View dashboard, which displays all their staff in one place, and shows key metrics for each service provider as well as total service and retail revenue in real time without having to run reports or dig through data.  This makes it easy on the owners as well as the team members to quickly check on their numbers vs. goals at the start of the day or in between clients.

We’re staying on board!

With the work completed and the new processes in place, we transitioned to a monthly support role for the owners.  We stay connected and provide a weekly expense review, validate purchasing decisions, perform pop up inventory audits, and facilitate monthly financial meetings with the owners. With these improvements in place, the business owners now have the freedom to focus on what they do best – providing an amazing atmosphere and service to existing and new clients.  As revenue grows moving forward they can rest easy knowing that they have a solid foundation and will scale responsibly.  This business remains one of our favorite places to visit. We love being there and the owners have become great friends of ours. The Salon & Spa industry was one of the hardest hit by Covid-19 in early 2020.  This business had taken the measures for financial sustainability early, made it through the business shutdowns, and is thriving. We can’t wait to see what’s next for this awesome group.

ABOUT NERCHER QUICK VIEW

Nercher Quick View is a leadership tool for Salon & Spa owners.  The platform plugs directly into the location’s point of sale system and features service and retail goal setting, incentive tracking, a live dashboard to show numbers and key metrics for all staff in one place, and a weekly automated report to the owners summarizing last week’s sales performance.

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