Posted on: August 15, 2018 by Joel Paterson | Tags: Salon & Spa Tips
Being able to identify a new client at a glance, provides a tremendous opportunity for salon owners/managers.
This enables you to customize the experience for the new client, and increase your chances of building loyalty.
The average hair salon has a retention rate of just 30%. This means, they are only seeing 3 out 10 first-time visitors, a second time. Increasing this number even slightly can have a massive impact on your profits.
So, why the off-colour cape?
Like I said above, being able to identify a first-time client provides tremendous opportunity…. and a cape that sticks out like a sore-thumb, does just that.
So, what do we do, once a new client is wearing this off-colour cape? That’s where things get fun…. You may be skeptical, but stay with me.
Let’s run through a scenario.
- Our new client, let’s just call her Cindy, sits in the stylist’s chair, and is wrapped in the off-colour cape.
- The stylist performs the consultation, as they normally would, being sure to ask Cindy what problems/struggles she may be experiencing with her hair.
- Cindy stresses her frustration to her stylist, how the summer humidity wreaks havoc on her hair.
- The stylist than briefly discusses what humidity does to the hair, and a product the salon carries, to help with that concern.
- During the appointment, the owner (or manager) makes their way over to Cindy, to introduce themselves, and ask the stylist how the appointment is progressing.
- The stylist relays Cindy’s “humidity” concern to the owner/manager, and again mentions the product they recommended.
- The owner/manager retrieves this product from the retail shelf, and provides it to Cindy, free of charge, and simply states something along the lines of “let us know how it works for you, on your next visit”.
That’s it! Now, all the stylist needs to do, is re-book Cindy when she’s finished… Which Cindy is much more likely to do, than she otherwise would have been, without this interaction with the owner/manager.
Let’s address the “concerns”.
- You just gave a product away for free.
- You’re not in the business of “losing money”.
Here’s where nerdy numbers come into play, but I’ll keep it short and avoid those. If only 30% of all first-time clients ever return, we need to exceed expectations, if we want to boost that number.
If we can get Cindy to return for a 2nd visit, and a 3rd, and a 4th, we’re now building a strong relationship. That’s where a key statistic called “Lifetime Value” comes into play. We won’t get into the math behind it, so let’s just make it simple.
The product you gave away to Cindy, probably cost you anywhere from $12-$20… but we’re drastically increasingly the likelihood that she will return. Personally, I would pay up to 4x that amount, to obtain a new, loyal client.
If you’re interested in the math/numbers behind this process, and the results you can expect from it, don’t hesitate contact us. We’d love to help!
Like I continue to stress over and over again, the hair salon industry is a “numbers game”, and knowing how to capitalize and maximize on key numbers is where big profits are made.
Until next time!
Posted on: August 13, 2018 by Joel Paterson | Tags: Salon & Spa Tips
In every small business, knowing your break-even point is imperative for a variety of reasons. From identifying areas where you might be overspending, to knowing exactly where profitability starts.
The problem is, it’s not always easy to calculate your break-even point in your hair salon… Until now.
In the hair salon industry, there are 12 main expenditures, and each of these expenses should not tie up more than a specific percentage of your total sales. For example, your rent should be no higher than 7% of your total sales, and utilities should cost no more than 2.5%.
Our “Break Even” point formula helps in two ways. The first way helps you identify what your “Break Even” point SHOULD be, and the second one being, it can quickly inform you if you’re overspending.
Try this simple calculation.
(Monthly Rent + Monthly Long Term Debt Payment) x 7 = Break Even Point
*Note * Long Term Debt Payment is any/all business loan payments you have. Do not include credit card payments. If you don’t have any long term debt, simply perform the formula as Monthly Rent multiplied by 7.
Here’s a scenario.
Monthly Rent = $1,500
Monthly Loan Payment(s) = $500
($1,500 + $500) x 7 = $14,000
This means, your monthly “Break Even” point should be $14,000. This includes everything needed to run your hair salon, including the wages associated with generating that $14,000 in sales.
Perform this calculation for your business. If the number seems too low, chances are you have a spending problem in your hair salon that is chewing through your profits.
Curious why we use the multiple of 7? Contact us today, and let us show how we break down even the most complicated numbers to simple calculations, to help you better understand your business.
Posted on: August 13, 2018 by Joel Paterson | Tags: Salon & Spa Tips
Ahhh, the wonderful topic of hair salon retail.
If you’re like many hair salon owners, the topic might make you cringe just a little. That’s because most salons don’t sell enough retail, and managing inventory can be a nightmare.
Today, that changes. We’re going to share a little insight, and some tips/tricks to help you not only sell more retail, but also the ability to better manage your inventory.
We call it the 90-Day Retail Rule.
See, statistics show that any product that has been on your shelves for more than 90 days, has only a 10% chance of selling at full/regular price. Yes, that number is a little scary. So… what can we do, do minimize that risk? It’s not as hard as you think.
Everything starts with one fundamental principle.
Your product shelves are an investment portfolio.
Now, let me elaborate on what this means. Every time you order retail for your shelves, you’re putting up money, in hopes of getting more money in return, once that product sells. If you invest wisely, you’ll sell that product quickly and you’ll see a healthy return on your investment. If you don’t invest wisely, you either get stuck taking less of a return (by discounting), or worse, with a complete loss (unsold product).
The easiest way to minimize the risk of “dead/unsold product”, is to identify Top Sellers and Slow Movers, and put measures in place to weed out the Slow Movers. That’s because our “Top Sellers” are the most profitable, and the Slow Movers are a liability with every passing day.
I won’t get into the in-depth details of replenishment strategies like “Min/Max Rates” and “Inventory Turnover”, etc, that’s for a different day. All we want to do here is, find an easy to way to visualize the aging process of our inventory. From the day it hits the shelves, until the dreaded 90 day mark.
Sure, your software can spit out reports and tell you all of this, but in my experience, that’s not how owners want to see it. They simply don’t have the time or desire to pour through nerdy numbers.
So instead, we use colour-coded stickers… Green, Yellow and Red stickers.
- Green stickers – Each new stock item that hits your shelf gets a green sticker. This represents a product that has been on the shelf 1-30 days.
- Yellow stickers – Yellow stickers get put over the green sticker on your next monthly “manual audit”. This identifies that a product has now been on the shelf for 31 days.
- Red stickers – Red stickers get put over the yellow sticker on the your next monthly “manual audit”. This identifies that a product has now been on the shelf for 61 days.
I think you see where we’re going here. Seems too simple… almost juvenile. But remember, this is to quickly identify which products simply aren’t moving, without having to pour over boring reports.
The final step in this process offers a little flexibility. Because on your next “manual audit”, we have no further sticker to place over a red sticker, that means it’s been on the shelf for 90 days. Ideally, we’ll now clear these products out, with a heavy discount, to protect our investment. And by “clearing out”, I mean CLEARING OUT. Set the new price at 10% over your cost… and do not re-order.
Reserve that new/empty shelf space for a product that doesn’t make you sweat for 90 days. Keep repeating this process for as long as it takes, until you stop seeing red stickers. It’s as simple as that!
If you’re interested in learning a little bit more of the ins-and-outs of this process, don’t hesitate to contact us. Explaining all of the details in this post would have simply made it far too long.
Just remember. Retail = Investment. Maximize your return on investment/profits, by ensuring your shelves are full of Top Sellers, not Slow Movers.
Posted on: August 13, 2018 by Joel Paterson | Tags: Salon & Spa Tips
Things move very quickly in a hair salon, and it’s not always easy to identify potential problems with your colour room.
Sure, your software may be able to tell you what you’ve used, and how much you have on hand. And your physical audits of stock, can do the same. But the problem is, the software is only as accurate as the information that was entered, and physical audits are not only time consuming, but also prone to miscounting.
At Primary Target Media, we like to simplify these tasks for our hair salon clients, with quick ways to get an “overview” of their colour-room performance. After that, if a waste/shrinkage problem is suspected, we can help them implement new tracking systems to help them prevent future waste.
First things first. “Colour-Waste” isn’t just a matter of mixing too much colour, and leaving it unused. It can also be that you (or your stylists) simply aren’t charging clients for extra-product, when additional colour is used. Or, and I hate to say it, but you may have colour walking out the back door.
When push comes to shove, all of these things affect your colour “usage” in your salon. And that means, all of these things affect your profits. So, it’s important to know where you stand, in terms of colour usage in your salon.
The trick below, helps you get an overview of what you’re currently spending on colour. Then, if a problem is suspected, there are numerous ways to diagnose the cause of the problem, and fix it. We can help with that.
Ready for the quick trick?
First of all, let’s assume that your colour-ordering process consists of simply replenishing the colour used, since your last order. If you’re a little more “relaxed” with your colour orders, this trick may not be the most accurate… which means you’re simply leaving cost-measuring to chance!
The amount you spend on colour should generally be no higher than 5% of your total hair service sales, for any given time frame…. and no lower than 3%. If it’s lower than 3%, that simply means you’re not doing enough colour services in your salon (when compared to hair cuts, etc). So, with that in mind, getting an idea of your current spending, can be done pretty easily.
So, let’s dive right in.
Identify your last colour order date (example: 10 days ago).
When you’re ready to place your next colour order, fill in your order sheet, and estimate your total cost. Set this number aside. We’ll simply use it for comparison.
Now, add up your Total Hair Service Sales dollars since your last order date. (Example: $15,000 in hair services in past 10 days).
Now multiply this total by 0.05 (0.05 represents 5%).
Example: $15,000 x 0.05 = $750
This $750 represents approximately how much colour you should have used in your salon, in the past 10 days (since your last colour order). Which means, if we’re simply replenishing what we’ve used in this time frame, today’s new colour order should be in the ballpark of $750.
If today’s order amount seems quite a bit higher than expected, you may have a waste/shrinkage problem. (Shrinkage simply means “loss”).
Try this simple and easy trick, next time you’re getting ready to place a colour order. It gives you a quick “on-the-fly” overview on how your colour-room is performing. If you’re satisfied with the answer you get, keep pressing on!
If you don’t like what you see, contact us today… we can help!
In any salon & spa, the front desk staff plays an integral role in the success of the business. Not only are they responsible for reception duties including booking appointments and answering telephones, they also develop a relationship of their own with the clients, as they’re often the first ones to greet each client upon arrival.
With that being said, traditionally the “Front Desk” has been considered an expense, rather than a revenue generating source for the salon & spa. This doesn’t have to be the case.
Transforming your front desk into another Profit Center provides you with the ability to utilize existing resources, to increase sales and profits.
So, how can this be done? The concept is simple.
Educate the Front Desk Staff on Growth Indicators
You may think that in order to transform your Front Desk into a Profit Center, you must teach them about “sales”… let me stop you right there. This approach rarely works, as the reality is they need to learn how to generate more sales, within the duties they’re already performing each day. Teaching your Front Desk staff about “growth indicators” is critical to achieving a profitable Front Desk. Once your Front Desk staff is familiar with a few key growth indicators, they’re able to help drastically increase your salon & spa revenue.
Here are a few “must know” growth indicators, which can help your Front Desk create and perform actionable tasks, that turn administrative responsibilities into profits.
First, they should not only learn what each of these represent, but also your your salon & spa’s metrics for each one.
- Frequency of Visit
- Average Ticket
- New Clients per Month
- Client Retention
- Staff Productivity
So, how can these growth indicators help your Front Desk become a “Profit Center”?
It’s rather simple actually. Once your Front Desk staff is familiar with the above indicators, and the existing numbers associated with them, they now have the ability to put measures in place, to assist in growing these numbers, while performing their daily tasks.
Let’s take a look at just a couple examples.
Frequency of Visit
“Frequency of Visit” represents how often each of your clients, visits your salon & spa. By finding ways to decrease the time between each visit, you’re able to not only keep a fuller, more consistent schedule, but also increase the annual revenue you generate from each client.
Here’s our example: Let’s say your average client visits every 8 weeks, and they spend an average of $75 per visit. That would mean that we’ll see them approx. 6.5 times per year, which will generate $487.50 in revenue (6.5 visits x $75).
If we can bring the “Frequency of Visit” down to 6 weeks, instead of every 8, we can expect to see them 8.5 times per year, and generate an additional $150/year from each client.
Multiply $150 by your number of clients, and you can see how beneficial this can be.
Your Front Desk staff can play an integral role in this process, by measuring the time between visits, and reaching out to clients who have exceeded the average “Frequency of Visit” time, and attempt to get them back on track, to a more consistent visit schedule. Don’t underestimate the value of this process, as the potential is staggering!
Your salon & spa’s “Average Ticket” is probably one of the most valuable metrics in your business. Knowing how much the average client spends each visit, is critical in the success and growth of your business.
Even a slight increase in this number, can result in significant sales/profit growth throughout your salon & spa. So, what role can the Front Desk staff play, in growing this number?
Here’s our example: If you’re like most salon & spa companies, your Front Desk staff may also be responsible for inventory control and tracking. This means, they will know which products are selling, and which ones they have to dust every week, because they aren’t moving so well.
So, if you’re sitting on some retail inventory that hasn’t been selling well, try bundling your top selling products, with your worst selling products. Believe it or not, this is a powerful way to move the slow selling inventory, and increase product awareness, while also growing the amount your clients are spending during their stay… This means, an increase to your “Average Ticket”.
Your Front Desk staff are a valuable resource inside your salon & spa. Tying “Growth Indicators” to duties previously considered an expense, such as confirmation calls, and inventory tracking is an efficient way to generate increased revenues in a new, profitable manner.
Improving your “Growth Indicator” numbers doesn’t have to be rocket-science. You can use your imagination for the most part, to help your Front Desk staff make the most out of the tasks they’re already performing, by simply adding a “growth” element to it. Virtually every task your front desk staff is currently performing day in and day out, can go a long way in growing your revenues inside your salon & spa. Provide them with the ability to identify how each task can be associated with specific growth indicators, and watch how well it serves you. You’ll be glad you did.
If you’re looking for more ways on how to transform your front desk into a Profit Center, contact us today, and let us help.
When things are slow, and the appointment book is looking a little thin, many salon & spa owners turn to special offers and promotions, to try and fill the schedule. Although it’s a common practice, believe me when I tell you, it can be doing more harm than good.
You see, there are a couple things to consider, before discounting your services, your for the sake of a busier schedule. Both of which are crucial to the long term success of your salon & spa.
Imagine for a moment that your salon & spa has been busy all month. You’re maintaining a healthy looking schedule, the bills are being paid, and the salon & spa is making money… Let’s say for argument’s sake, your average client ticket is $85.
However, you notice that next week (the final week of the month), the schedule is looking pretty bleak. So, you decide to run a simple 25% OFF promotion. Seemingly harmless, no?
Let’s take a look at what this does to the numbers. First of all, let’s assume you fill up the schedule with this new promotion, and the week progresses the same as the previous three weeks did. Except one critical and painful reality. Instead of your average client ticket being $85, it’s now only $63.75… because you discounted your services by 25%.
It may seem like no big deal, until of course you understand what that actually means for your bottom line. We won’t get into the nitty-gritty about profit margins, etc., however with “Average Client Ticket” being a very important metric for your business, it’s easy to see how this one week of discounts, has diluted your average client ticket for the month.
After a week of “devaluing” your services by 25% in order to fill your book, you actually devalued your entire month by 10%. So, in the bigger picture, you’ve performed every service this month, for 10% less money.
Don’t get me wrong, sometimes promotions are important… However, they should be carefully calculated, and implemented. Otherwise, you’ll find yourself performing discounted services for the sake of a full schedule, when in reality, you would have been better off performing less services, at full price.
If promotions are always at the forefront of your business, you will absolutely, without question, 10/10 times draw in the tire-kickers, and the one-off clients.
These are the clients who only visit when a specific promotion suits their needs. Unwilling to pay full price for the service, means no loyalty; and client retention and loyalty is one of the biggest factors in the success of ANY salon & spa.
Don’t get me wrong, systematically choosing the right services or products to discount, can prove extremely valuable when trying to build loyalty and retention. However, if you’re developing promotions “from the hip” or on a whim, you’ll quickly be recognized as a “special offer” salon & spa that lacks consistency in revenues, client loyalty, and a favorable profit margin.
A great tip for any salon & spa owner who is looking to increase client loyalty, is to reward loyal clients, rather than rewarding the first-timers.
So, when it comes to monthly promotions, or “schedule fillers”, approach with caution. Make sure you take the time to properly plan your promotions, and choose the right services to discount… Otherwise, you’ll find yourself in a game that you’d rather not be playing, I can assure you that!
Often times in hair salons, the color room is where a lot of money is lost. Many hair salon owners/managers simply know what they need, and when they need it. Ask them if they’re wasting color, and they cannot tell you… The fact is, they don’t know.
In all fairness, it can seem very complicated. Having a wide variety of partial tubes, and performing inventory counts, while other tubes are constantly being opened and utilized, coming up with an iron-clad system can be daunting!
To get a quick idea of whether or not your hair salon has a color waste problem, or worse yet, if color seems to be walking out the door; you can perform what we call a quick audit, to see how your process measures up.
This quick audit will not only give you an idea of your potential color waste problem, but also determine if your inventory and re-order process needs some work.
Here’s the scenario. Let’s assume you currently re-order color every two weeks. If you order weekly or monthly, simply take that into account while performing the quick audit below. (Note: Every salon should have a planned re-order schedule.)
Today is the day you are going to place your color order. You’ve performed your inventory count, or whichever method you use, to determine which colors need to be re-ordered.
Now, total up your costs for this new order. For example, you’re re-ordering 100 tubes, at $7.50/tube…. Your color order is $750.
Again, assuming you place your order every two weeks, take a look back at your total hair service sales, for the past two weeks. Your new color order ($750 shown above), should be somewhere around 5% or less, of your total hair service sales from the past two weeks.
Run down: According to the color tubes that need to be replaced, your color order is $750. Your total hair service sales from the previous 2 weeks is $16,480… Congratulations, you’re sitting around 4.5%.
($750 divided by $16,480) x 100 = 4.55 (approx. 4.5%)
If your percentage is slightly higher than 5%, you may want to take a deeper look. You may need to tweak your process or have a quick refresher with your stylists, so you can iron out the potential waste issue. If your percentage is significantly higher than 5%, chances are you have color walking out the door.
If you’re interested in learning more in regards to measuring key factors in your business, be sure to check out our Salon & Spa Suite. It’s an extremely informative service that helps salon & spa owners like yourself, paint a clear picture of your business, without complicated numbers or spreadsheets.
Have a topic you’d like us to discuss in the future? Contact us today, and let us know!
It’s often said, we avoid certain areas of our businesses, to avoid potentially harsh realities. We tend to steer clear of these things out of fear of failure, ego, and rejection; and for those reasons, we somehow find some sort of comfort in the avoidance.
The things we fear the most about our businesses, are the very things that are holding us back, in achieving the success we’ve always dreamed of. And although you have goals for your business, in order to get where you want to be, you have to first know where you are.
Will this article bruise your ego? Maybe. Will it show you that your business is currently “less than perfect”? Probably. But, what it absolutely will do, is help you gain a new perspective on how to truly learn the ins-and-outs of your Salon & Spa, and show you that “not knowing” is never better than “knowing”, when it comes to your business. No business is ever perfect, but all we can try and do, is make our business the best version of “imperfect” as we can.
So, let’s get to it. These 5 questions will give you an idea of just how well you know (or don’t know) the inner-workings of your business. Don’t fret, if you don’t know any of the answers, we can help you with that… After all, that’s our business.
1. What is my Break-Even Point?
This one is pretty straight forward, however many salon & spa owners are also service providers first and foremost. The reality is, they became a salon & spa owner because of the passion they have for the industry, not the number crunching. If this is you, you’re definitely not alone. However, if you can’t even ballpark your break-even point, now is the time to learn. Ask us how, and don’t worry, we’re not going to try and turn you into an accountant.
2. What is my Services vs. Retail Sales Ratio?
This one is pretty big, yet often overlooked. It’s a big one, for nothing but profit potential alone. Knowing the breakdown of your revenue not only helps you get an idea of profit forecasts, but also provides you with the ability to set clear goals. A strong retail presence in your salon & spa is the ticket to significant profit growth. Think of it this way. Let’s say your total revenue sales were $100k. 80% of those sales came from services, and the remaining 20% from retail. Did you know that generally speaking (industry averages), you earn just as much profit, if not more from the $20k in retail, that you earn from $80k in services? Learn your revenue breakdown. Grow your profits.
3. What is my Client Retention Rate?
Your clients are literally the lifeblood of your business, and it’s imperative to measure the loyalty of these clients. How often are they returning? And why aren’t some returning at all? Without getting too heavily into the math, the importance of this is simple. When you lose a client, you must replace them. And each time you need to replace a client, there is a cost associated with acquiring that new client. Cost-Per-Acquisition is a common marketing term that outlines how much it costs your salon & spa to bring in a new paying client… So, the more clients you need to “replace”, the more money you need to spend. Once again, the math here gets a little tricky, but we make that part simple, with our Salon & Spa Suite, so make sure you check it out.
4. What is my Average Client Ticket?
Once you have a few basics under your belt, your Average Service Ticket helps serve as one of those “Go-to” stats you can use, to monitor the growth of your business on the fly. This is because, once you know the overall picture of your business, the simplest way to grow your salon & spa, is to grow your Average Client Ticket. Keeping an eye on this number, and putting measures in place to grow it, will ensure your business revenues continue to grow. Learn this one, and remember it!
5. Are my Prices Properly Set?
This one is a little deeper, but the concept is simple. Too many salon & spa owners set their pricing, based solely on what their competitors charge. The only thing this accomplishes, is letting everyone know that you see yourself as no better than the salon & spa down the street. Should you consider your competitors pricing? Absolutely. Should you set pricing based on multiple other factors as well? Most definitely. An important factor when setting your pricing should be “schedule availability”. The fuller your book, the less “supply” you have to offer, therefore the more valuable your time. Supply and demand isn’t just a saying, it’s a reality, and your pricing should reflect that. Do your homework, and set your pricing accordingly.
Hopefully, this post has been helpful, and if you’re struggling with how to determine some of these metrics, don’t hesitate to contact us. We can absolutely help!