The Costs of Running a Salon
Are you set for success in your salon business, with a true picture of your costs? Hidden costs can be the enemy, eroding your profitability or even your viability.
The first step is knowing your break-even figure, or how much it will cost for your salon to run weekly or monthly. This will mean calculating all your expenses, including:
• Business Rates
• Lights / water / electricity
• Product costs
• Staff costs
• Your basic salary you need to live
• Loan repayments, bank charges etc
• Accounting fees
Once you have added all these up, divide them by the cost of your average service.
So if your salon’s costs are R25,000 per month and your average service costs R200, you are going to need to do 125 clients per month to break even. This will just cover your basic costs without any additional profit. To make profit, you will have to do more clients.
However when you are just starting out, you may find it is difficult to reach your target number of clients and this is why so many salons go out of business a few months after opening their doors. You will need to cover the shortfall in these costs, for as long as it takes you to build a sustainable client base so that you can be guaranteed of your target number of clients (or more) per month.
Every new client that comes through your doors is an opportunity for you to add a regular client to this target – this is why client retention is so important and why all clients must enjoy fabulous service, a comfortable, neat, clean and relaxing environment, good hairdressing and attention to detail. It’s often the smaller details that will make the difference between a client coming back to you, or deciding to go elsewhere as they were not happy with your service or did not feel it was good value.
Having a good accountant is really important as it will allow you to save on paying unnecessary tax, but ensure that you are up to date with the tax and VAT that you are required to pay. This will prevent problems down the line – getting into trouble with the tax man is stressful and time consuming and will cost your business more in the long run.