Your Bank Balance Isn't a Profit Plan | The Salon Owner's Mistake

Most salon owners have a rough idea of whether their business is making money. They've got a feeling, they've got a hunch. Maybe they take a quick look at the bank balance on a Friday afternoon, but a feeling isn't a profit plan and a hunch is not a strategy. My guest today is Braden Weinstock, founder of Pretty Data, and we're talking profit planning, what it really means, why most salons are flying blind without it, and how to finally start making decisions based on data rather than instinct. Let's get him on the show. Phil: Hey Braden, welcome back. Braden: Hey Phil, great to be here. Thanks so much for having me. Phil: You are one of the select few that's made it onto a second request for an interview on the Build Your Salon podcast. I think there's only about five people that have ever come back twice. Whether that's my choice or theirs is a matter for debate. So how are we doing? Braden: I'm doing wonderful. Phil: Things have moved on a lot with Pretty Data since we talked last time. Braden: Yes, yes. We keep building and improving and helping salon owners run profitable stores. Phil: Cool. Love it. So today we're talking about profit. Just one of my favorite topics. And I said in the intro that lots of salon owners think they know how profitable their business is, but they're not really working with decent data. A lot of the salon owners that I've come across tend to run their business from their bank account. If there's money in the bank account, they must be profitable. If there isn't, then things are going wrong. So how wrong is that and how wrong do they get it when we finally start bringing some data in? Braden: Yeah, a majority actually. When I was doing research, I started to find that almost more than 50% of either solo pros or independent salons are not always making a profit. And this is actually something that started with my own experience. I have run, I own and still run, a profitable salon for over 15 years in Los Angeles. So I know this from firsthand experience as well as talking to all of my friends in the industry. The number one thing is what you just said. So many people check their bank balance and they think that they're making a profit. Then they make decisions and spend money without knowing whether or not they actually have that profit. And then they get to the end of the year and they either owe taxes or they haven't paid some bills, and they find out, and sometimes it's right now during tax season, oh my God, I didn't make money last year. And that is absolutely terrifying because if you're not making money on every client, you're just working to go out of business faster. Phil: Yeah. Absolutely. I think the reverse of the coin also is when your accountant tells you that you're making a profit, but you're thinking where the hell is it then? Which is always a really interesting one too. And I think that comes from not having decent, timely data. It comes from that lag that we get through the reporting process being so much detached from what's actually going on in the business day to day. So what should people be doing then if they're not running their businesses from their bank accounts? How do they know whether they're making a profit or not? Braden: Yeah, well that's the great struggle. So maybe it'll help if I remind people about my story and how I ended up solving that because I am a business person by training. Did background in finance and management, consulting and operations, but I've owned the salon with my best friend and business partner for over 15 years. And he's just like most people, he went to beauty school, did hair, was really good at it and wanted to start a business. And so many of us went to beauty school, not business school. So we don't actually get the basics of how we're able to do financial management. And that's okay because we were trained to go do hair or nails or anything else and make sure it runs successfully. And so when you actually go and you look at your data, I personally have always found the problem is it's spread across all these different systems. So what happens, I end up looking at my booking system, but it doesn't have my expenses. Or I go and I look at my accounting system, but it's out of date and it's confusing and I don't understand accounting, so I'm waiting on my accountant to send me something, but that doesn't answer it. So I end up talking to pretty much every salon owner and they have a spreadsheet. And that really sucks. And I know you've run into this problem too. When you sit down to work with a client, one of the first things they need to do is gather all of their data. And I think that's the core of the problem, getting all the data from your marketing system, your accounting system, your booking system, and being able to put these types of things together in order to know, Hey, how many clients are coming in, how much revenue is that making? What are my expenses? And am I making money? And then from there, if I'm not making money, typically the question becomes which staff member is struggling and why. And so the key is getting all of that data together, and that's what I set out to do with Pretty Data because after over a decade of doing this in spreadsheets, I thought there's gotta be a better way. But there wasn't. And so I built it, and that's Pretty Data trying to help you quickly see with data from your booking system, how many clients did I do? What's the average bill per visit? And then we gather data from your accounting system and we put that together. So when you open the app, the first thing you see is, this is how much money I made from every visit, this is how much every visit costs me all your expenses without having to deal with the accounting mess. And then what's left over is profit. And that way, for example, you can say, I know every time a customer comes in, I make $20. Great. So if you wanna make $20,000, guess what you need to do. Phil: So this is bringing together the data from the booking system and from the accounting system and putting it into one place that actually we can understand and make decisions from. That's the key thing, making decisions. And I love the idea, and I know that we chatted about this beforehand, this idea of planning to make a profit rather than just planning to chase increased turnover. Do you want to show us the software and just give us a really quick demonstration of how it works? Braden: Yeah, absolutely. Can you see my screen? Phil: I can, yeah. Crystal clear. You're looking good. Braden: Awesome. So this is Pretty Data. It supports multi-unit owners as well as singular. So I'm gonna just jump in here and you'll see what I see as a salon owner. And you start right off in the health dashboard where you can see revenue, expenses and profit. So here's my real business, and you can see that I have a profit plan. We set this up beginning of the year, takes maybe 10 minutes, I'll show you in a second. And this tells me I'm a little bit off track, but below here you can see for this month I have a goal $50,000 in revenue, expenses need to be below $42,000. My profit targets $8,333. That's about a hundred grand a year. And the number of visits on the bottom here, so you can see the ring is almost closed but not fully because we have a gap. You can see how much we do per visit, you can see what our cost is. And so you can see we're making about $27, $28 per visit. And we can also see the number of new clients we have already this month, 10. If I wanted to adjust this and just look at how I'm doing this year, same kind of thing. Boom. We can see target's $600K, expenses should be under $500K, $100,000 and we're almost halfway there. So we might be missing some expenses that need to get into the accounting system. But it's connected and comes right through. And you can see we need to hit about 4,000 visits with at least, right now we're doing about two and a half frequency visits so far. So the basic metrics of revenue, expenses and profit and visits all right here. And then when you go down utilization, so just getting a look at utilization for the team, it looks a little low because we're looking at the whole year, but if I were to do this month, you can see Nikki's overbooked and then everybody else here. Phil: Okay. So let's just take a little step back. So where's this information coming from then? So you said this isn't a booking system, this is kind of something that sits over and above existing system, so where's this pulling information from? Braden: Yeah, so this is connected. So it's a great question. So we can come in here, I have these connectors and we can connect to different booking and accounting systems. So what we're doing is we're pulling a lot of data from our booking system and our accounting system, and then all of that gets combined in order for us to get those numbers. Phil: That's it. So as far as the revenue, the number of visits and all the rest of it that's coming from the booking system. And then the expense side of it is coming from the bookkeeping software that we've got the integration with as well. Braden: Yep. Xero or accounting and connect it. And then what we do, this is a great question if you come in here, is we build a profit plan. And this is like at the beginning of the year, how much money do I wanna make? And then what are my expenses? And because we have last year's numbers, it can already start to assume what that is and then do these calculations. And then that way we always know what's happening in the business in relation to the profit plan. And it becomes a really easy thing to come in here and manage. Phil: Great. This is the bit that gets me excited is when we're starting to plan to actually make some profit in the business rather than just chasing increased turnover just because we feel like that's the thing that we ought to do. Yeah. So you mentioned during our chat a little bit about pricing and pricing strategy and how Pretty Data can help with that. Do you want to just quickly show the guys that before we start to wrap things up? Braden: Yeah, sure. So maybe I come in here and I go, okay, here I'm a little off target. I'm looking at my visits and clients and everything, but I'm thinking, you know, I didn't make any adjustments because of inflation. Right now oil prices are high, all these things are going up and stuff. So there are a few things we can do. We can come in here to pricing. We can come in here to pricing and we can say, okay, how much are highlights in my area? Okay, $165. Good to know. All right. And then I can see what my services are and I might come in here and say, I want to adjust my prices. So what I have here are three scenarios where I said, what happens if I just adjust all my prices by 10%, that would make more money? And I can actually say, well, let's do this. What would've happened last year? So if I adjusted 10%, I'd make about 17%, which would be about $82,000. So all you have to do is come in here, it already has all of your historical data, everybody's prices, what you did. And you just say, okay, what happens if I adjust for inflation from January, 2025? It'll go around everything. It'll do the calculation and show you how much more money you would make. Maybe I adjust it by a flat percentage or an hourly rate. That's it. And then once you do that calculation, let's do 6%, oh, I need a name. It will just automatically create all those prices, all the price list tell you how much more money you would make. And if you just click this button, boom, it changes all your prices. Phil: Fantastic. So what we're really looking at, and there's a huge part of strategy and planning in any business is playing these what if games, you know, what if we did this? What if we took a different path? What if we increase prices by 7%, not 6%? What impact does that have on the business and our profitability before we finally lock a strategy in? And if we compare and contrast that to what most salon owners are actually doing, which is basically adding 5% because they feel like that's what they ought to do and don't really know what impact that's gonna have on the business and what they're actually chasing as far as profit plans concerned, it's just chalk and cheese. It really is. It's putting such a powerful tool in people's hands. Braden: Yeah. And you can do it, you know, you can say, well, what, you know, my business partner will say, what if I changed the balayage by $3 and this by $5? And so it just allows you to do all of that stuff and get an answer back instead of just changing prices blindly. And we even have competitor data too. So if you end up saying, well I really wanna know about these competitors, right? So we follow these competitors in our local neighborhood and then if they change their prices, we actually get notified and we can see what is gonna be like when they change prices. All of these different types of things will come through and that way we can actually change our prices to position ourselves to either be cheaper than somebody we compete with, higher than somebody we can compete with or right on par. That way we're not leaving money on the table. So you can really bring these things together and say, what do I gotta do to make a profit? Here's my plan. Do I need to raise prices? How much do I have to raise them? Where does that put me in comparison to my key competitors on target, above or below? And boom, you can do all of this and have it done in less than an hour and get back to work. Phil: Wonderful, wonderful. I love it. And thank you so much for taking us through the software, also thank you so much for keeping that brief. 'Cause I know that you could spend days telling us about all the wonderful things that Pretty Data can do. So I really appreciate you keeping that really concise. I think what we're gonna do is get you back on the show perhaps later in the year when I really want to talk about recruitment. And we can look at how Pretty Data can help us with the recruitment picture as well. 'Cause I know that's such a big issue in so many salons too. Braden: Huge. Yeah. So thank you again Braden and it's always a pleasure talking to you. Braden: Same. Thanks Phil. Phil: So there we have it, A quick walkthrough of just a couple of the features of Pretty Data. All of Braden's details are gonna be in the show notes underneath this. Thanks for sticking with us YouTube viewers. And until next time, take care.