How to Run Your Salon Business on a Budget (Without Sacrificing Quality)

Nobody likes to feel that they have to cut costs, but how can we reduce what we're spending, increase our profits, but not compromise on our levels of service? Hello, hello, hello my salon friends. Phil Jackson here, your queen of salons. Coming in your eyes and ears again with another dose of Wise Owl Wisdom. Remember, remember the 5th of November. Here we are, storming towards the end of the year and right in the thick of what I think is the most exciting marketing quarter. I love the feel of the marketing this time of year. I love that things get cozier and warmer and more intimate. I love the colours, particularly in the hair salons. I love that we're bringing out those warmer browns and beautiful copper and russet tones. And I love the fact that there's plenty of money to be made between October, November and December. If you can't make at least one of those a nice profitable month, then, well, perhaps we're just not in the right game at all. I'm pretty sure that there's plenty to be made either through Christmas or Black Friday, or perhaps you had an excellent October. If you did, reach out and let me know. I'm hearing some good things from my coaching clients. The reason I'm putting this one together, though, we're talking about budgeting today because we've just had the autumn budget here in the UK. So the Chancellor has set out their financial plans for the coming few months. And I'm deliberately recording this episode before the budget so that I don't get political and I don't start ranting or I don't start expressing my disappointment and rolling my eyes at some of the measures that have been brought into play. But what I want to talk about is how we can reduce the amount that we're spending, but without compromising on levels of service. Because I don't think there's much to be gained by serving a nasty cup of coffee or compromising on the quality of your products. I don't think that's the way that we can be cutting costs and increasing your profits. But ultimately, in a very competitive market and the salon industry is a very competitive market in most areas, at least. But in a very competitive market, profit margins are tight and there is a limit to what we can what we feel we can do as far as pricing is concerned. And the only way that those costs can be funded, of course, is through your profit margin. So to increase our profits, we want to be able to reduce costs. And it's something that I do in my business very regularly. What I tend to find over the year is that costs start to escalate.

They start to spiral. People are having their price increases. My suppliers are having their price increases. And also, to be blunt, I get a bit lazy. There's a few subscriptions that I've taken out during the year that are suddenly adding on to my fixed and variable costs. And there's a few things that perhaps I haven't been monitoring the spend on quite as much and things I've got a bit bit lax as money's come in through the year. So at least once a year, but preferably twice, I tend to go through a round of cost cutting and I will set myself a target of, say, 5% that I'm going to reduce my costs by. I don't always get there. Sometimes it's actually really hard even to save 1% or 2%. But bear in mind, 1% saved on your costs is 1% added to your profit margin. And that's a pretty good place to be now, isn't it? So where can we reduce costs? Where can we save money? And so I'm going to be very clear from the start. I have not put anything in here that is customer facing. I don't want you cutting corners on your services. Like I've said, serving a cheap, nasty cup of coffee. I don't want you doing any of those things. I want you to remain at the top of your game as far as providing service is concerned. And neither will you hear me in this podcast tell you to swap out all of your light bulbs for energy savers. I'm not looking for those little tiny wins. I'm looking for stuff that's actually fundamentally changing the way that we do business. And I'm going to start with marketing. It's a very famous quote in marketing from he was an entrepreneur in America at the beginning of the 20th century. And he said, 50% of what I spend on advertising is wasted. The trouble is, I don't know which 50%, which I think is a wonderful quote as far as marketing is concerned. The thing is, these days, we don't have that excuse anymore. We can monitor exactly what marketing is working for us very, very closely. So the first place I want you to save money or look at reducing your costs or at least have a budget is your marketing spend. I want you to concentrate and double down on the marketing that works for you. And I want you to double down on the marketing that doesn't cost as much. And firstly, top of my list, you know, I'm desperately in love with email marketing tends to be very low cost. I won't call it free because anything that takes your time should not be classed as free. But it tends to be very competitive as far as marketing pillars are concerned.

And the potential gains from email marketing are enormous. So I really want you to look at whether you're using email marketing to its full capacity in your business. For the rest of your marketing, to be honest, there is a time and money balance going on. Let me explain. Explain yourself, Uncle Phil. Give us some clarity, please. Basically, you can either spend an awful lot of time engaging and organically building, for example, your social media channels or you can throw money at it. You can bypass that process with sponsored posts by putting adverts out, say, on Facebook and Instagram and the other platforms, too. You can either invest an awful lot of time into SEO for your website and making sure that your Google My Business profile is fantastic. Or you can throw money at Google and skip straight to the top of the charts as far as the rankings are concerned. So in most marketing, we either need to spend a lot of time or a lot of money. And what I'm not saying is to cut the amount that you're spending so that you end up spending more and more and more time marketing because your time has a value to it as well. But we could be looking at outsourcing some of those tasks. And you know that I'm a big fan of outsourcing and delegation, too. So have a look at what marketing is working. Double down on the stuff that's working. Get rid of the stuff that's costing you time or money that isn't contributing to the business. That said, there is a delay to the harvest. What do I mean by that? Well, the results that you're seeing in the business this month are not always the result of the marketing effort that you're putting in this month. The marketing effort that you're putting in this month might be closing the sale, but it's all on seeds that have been sown over the last few months. So be very careful when you're reducing your marketing spend that you're not just thinking in the short term. Because some of the sales that are coming in today are a result of your social media marketing, your search engine optimization, your recommend a friend program that you were running months and months and months ago. So do bear in mind, we don't want to cut back so far that we're not actually sowing seeds for future growth. So let's leave marketing behind. And I want to talk a little bit now about our buildings and our utility bills.

And I know I said I wasn't going to talk to you about swapping out your light bulbs for energy savers. I don't think there's enough to be gained there. But one thing that I noticed when I was on my last visit to Spain, I'm very lucky. Actually, I'm not lucky. We've got a house in Spain, which sounds very grand, but I promise you it's an absolute wreck of a place and not somewhere that you would definitely want to add to your property portfolio at all. But it's all mine and there's no mortgage on it. So I'm a happy boy with that. Anyway, to cut a long story, medium length. I was out in Spain last time and I was out at the beginning of the summer and I noticed that there were lots of people changing their opening hours. And this is something we see on the continent an awful lot, particularly in warmer climes. The thing is, because of climate change, our weather is becoming much more variable as well. And I think we could be saving a lot of energy by looking at our opening hours. And I think there's something to be said for having summer opening hours and winter opening hours. What that means is that we can reduce our energy costs in the summer. We don't need to air condition 24-7. If we reduce your opening hours, we're only cooling the building for a smaller amount of time. Or what about shifting your opening hours? Perhaps opening a little bit earlier in the morning. Maybe even going for a Spanish style siesta. Who knows? Perhaps a little nap in the afternoon is what we all need in the summer. Or maybe looking at opening later into the evenings when the weather is cooler, so that we don't have to invest so much money in keeping our buildings cool. The flip side of that, of course, in the winter is we don't want to be opening and expanding our opening hours because we're going to have to heat our buildings for much, much longer. So reducing our opening hours in winter might make sense. Or perhaps clustering your team members together a little bit more rather than having some people working early in the morning, some people middle of the day, some people evening. Perhaps if we reduce things down, have everyone working at the same time, then everyone can enjoy the benefit of the heating over a shorter time period. There's actually a lot to be gained by, you know, even simply as looking at our hot water. So in my salon, we have a hot water system. As long as there are clients coming through the door, the hot water system needs to be switched on. It's continually producing hot water. Just switching that off for a couple of hours a day across a week, across a month, across a season, that's going to save you an awful lot more than an energy saving light bulb.

Test it. The wonderful thing with being a small business is that you get to try things out. It's one of the few benefits we have as small businesses. It's firstly our knowledge of our customers. Secondly, our ability to pivot and change quickly. So test it out. Test it out this winter. Have winter opening hours. Reduce your opening hours. Heat the building for a smaller amount of time. See how your clients respond. If they really don't like it and you feel that you're losing clientele, guess what you get to do? You get to change again. And you get to change again and again until we hit on something that works. And particularly if you've called them your winter opening hours. No one's expecting that to be your permanent policy anyway. But why not? Why not? I can't think of a reason why you wouldn't want to give that a go. And explain to your customers why you're doing it. You could say that it's to make sure that you're reducing costs so you don't have to pass those costs on to them. Or perhaps you're doing it for environmental reasons. I think actually a lot of customers would be quite switched on by that marketing message. Next thing I want to talk about is training. And I've said I don't want you reducing your standards. I don't want you doing anything that's going to impact the level of service that you're offering your incredible customers. That said, I do think there's an argument for trying to get a bit more bang for your buck as far as training is concerned. And what I'm not talking about is shopping around and finding the cheapest online course for a service that you can possibly find. I think good quality training should be paying for itself very quickly. On that note, I think you should have a clear idea of what we call the payback period before you book the training. So if you're going to invest, let's say, £1,000 on a hair extensions course, I want you to have a really clear idea about how quickly you can recoup that £1,000. Now, I'm not talking about £1,000 of turnover. I'm talking about when are you going to be able to generate an extra £1,000 in profit because it's the profit that paid for the training in the first place. So do your calculations, figure out your marketing plan, figure out what you think is likely to happen as far as that service is concerned. If it's going to take you nine months to recoup that £1,000, well, you've got a decision to make as to whether you're willing to tie up £1,000 for nine months in your business or not. In my business, that would not be acceptable. I would want that training to be recouped in three months maximum, 90 days maximum. So go into training with an open mind, but also go into it with a closed wallet. Make sure that you know you're going to be able to recoup your training costs as quickly as possible.

Also, we've talked about investing in good quality training. That means monitoring the quality of your training. So if I was going to book a team member onto a training course, an external training course, then I would want to know that that training course was good value for money. And how we do that is I assess the team member before they go on the course. I would see how competent and confident they are in carrying out that service. And I would assess them again at the end of the training. And if I haven't seen a noticeable improvement in their competence and confidence, then I'd be onto that training provider like a bag of bricks asking for my money back or asking for them to retrain that team member free of charge. And what you'll build over time is a little catalogue of training courses that you know deliver specific outcomes for team members. So we're not wasting our money on training that's not going to deliver the results. Finally, I want to talk about our supplies and suppliers. And anytime you have a supplier who is the only provider of a particular product so that you can carry out a service, I promise you're going to be overpaying, OK? If they've got the patent on something, if they're the only people that can provide something, you're going to be paying through the nose. Bear that in mind when you're bringing products into the salon. But I really want to talk about the things that, you know, the sundries, the things that we burn through, the cotton wool pads, the couch rolls, the spatulas, things like that. And what I'm seeing a trend towards in salons over the last three or four years is people getting very last minute with those kind of orders. And lots of businesses using Amazon to deliver those orders too. And I think that's a mistake. Generally, Amazon is not the cheapest way to buy something. And usually people are jumping on Amazon because they've forgotten to order something and they need it next day. So I want you to start getting much more organised. Start forecasting what you're going to need in terms of those sundries so that you can place an order that might well take a bit longer to arrive to you. And it might well mean that you've got to store a little bit more stock, perhaps even tying up a bit of your money in stock as well, which I know we don't want to tie up more money. But if it means overall each service becomes more profitable, I think there's something to be gained there too. So start looking at your stock control for your sundries. Start looking at where you're ordering these things from and really try and avoid suppliers that have the monopoly on a particular product for a service. So what have I missed? What are you doing in your business that means that you can set a budget,

cut back on your spending without compromising on levels of service? I'm sure you've got lots and lots of ideas to share with me. If you have, my email address is at the bottom of the screen, phil at buildyoursalon.com. You know, I love hearing from my salon owner friends anyway. And I really do. I love hearing your success stories. I love helping with your struggles too. So reach out. Also reach out if you would like to be a guest on a future episode of the Build Your Salon podcast. 2025, we're going to start having some guests back in the chair again for a bit of a grilling and try and tap into some other people's wise old owl wisdom. Just seven short days until I'm coming in your eyes and ears again with another episode of the Build Your Salon podcast. And until then, take care.