Why Your Salon Has No Profit (You Never Set a Target)

Some people aren't in business for the money. They're not my people. I don't get it. But if you are in it for the profit, well, don't be surprised if you haven't set a profit target and don't make any. Hello, hello, hello, my salon friends. Phil Jackson here, your queen of salons, coming all over the internet again with another dose of my wise owl wisdom. How on earth are you? Achingly well, I hope. Here we are, almost the middle of October. Nights are drawing in a bit, aren't they? But I don't mind. We'll get the lecky blanket on soon and everything will just be joyous again. So what are we talking about today? We're talking about money, honey. I'm not very British in that way. It doesn't bother me to talk about money. Also, it was very interesting that people don't like talking about money and then wonder why they haven't got any because they put up that kind of repellent energy around money. But I understand where it comes from, especially here in the UK. When I was being brought up, money was a vulgar subject. It's something you spoke about to your accountant and pretty much nobody else. It just wasn't discussed at all. So no wonder people get themselves in debt, get themselves in financial messes, end up with businesses that make them no profit. Profit and profit is our topic of the day. Most salon owners can't tell me what their profit target is. And I know this because it's one of the first questions I ask when I meet somebody for the first time for one to one coaching. Then people act surprised when they don't hit their profit target. Well, when the number at the end of the month is a bit disappointing or whatever's left over. Yeah, I can understand why smashing profit targets isn't front and centre. But not you, not anymore, my darlings, because by the end of this, I'm going to convince you to set yourself a profit target. And if there's nothing being aimed at, there's nothing to hit and nothing to miss either. And that's the central point of this episode. So why haven't we got these profit targets? Why are we not monitoring them? Why are we not making friends with our numbers? Well, I don't know is the short answer. I think it's because we've got into this mindset in the industry that if things aren't good financially, we can just work harder. We can just do some more service. We can get some more clients in. We can stay a bit later, start a bit earlier, and then everything will somehow be OK. And business doesn't work like that, I'm afraid, my darlings. But the only thing that will show you how it is working is when you get to grips with the numbers. And I get very frustrated. I mean, hands on my heart, my loves. I get frustrated with salon booking software anyway, mainly because it's shit. Those of them that do a good job tend to overcharge for it. I don't understand how in this era of software prices crashing to the floor, people are still spending 150, 200, 250, 300, 300 plus per location just on salon software. Absolute nonsense to me. No software is worth that in the salon industry. Sorry. But where I do get very frustrated is when those self-same people are spending all this money on salon software and never looking at the reports. I get that most of the reports are bullshit. I get that lots of them don't add up. I could never understand. On some of the most expensive salon software, you take your takings report, which is supposed to show all the money that comes in. Then you take your service report, add it to your retail report and your vouchers report. And they don't add up to the takings. How does that happen? I've got no idea. And I understand. I do feel a bit sorry for some of these salon software companies because I understand what happens. What happens is they come out with a good bit of software and then they get a little bit greedy and they want to sell it into a franchise or a group of salons. And that group says, oh, but our reports don't look like that. We work with reports that look like this. And so the salon software goes away, builds those reports and whacks it in. So you end up with page after page after page of reports. You don't know what you're looking at. You don't know what you're looking for. So what do we do? We just turn a blind eye. And I've seen this so many times where good businesses, solid businesses, businesses turning over hundreds of thousands of pounds a year aren't making friends with these reports. They're relying on information from your accountant. And that's OK, except the information from your accountant is old. The stuff on your salon software is today. And that's what we need if we're going to make good decisions in our businesses. Rant about software over. Actually, it's not. There's a bit more coming as well. If you're not going to use those reports, cancel your software. I know, controversial. But you can get a decent calendar app with online booking links for a tenth, maybe even a hundredth of the price of what you're paying right now. There are calendar apps with booking links that you can use for free. I mean, God, your Google calendar can give you booking links now. If you're not going to use those reports, don't bother. OK, I'm not saying you should do that. You should be paying for some software, maybe not as much as you are. And I think you should be using those reports. But if you're not going to use the reports, save the money, save the effort, save all the effort you've got to put into your business to wrap your head around it. Oh, my gosh, we are riled today, my darlings. It's money. Honestly, it brings out the best and worst in me. Next up, spending money on things that don't build your business. We're so easily swayed. And I think I understand why. I think it's because as an industry, we got busy. We became successful by people pleasing, by pleasing the people who were in your chair or on your bed. You built a column to the stage where you were confident enough to open your own business. And kudos snaps for you because you've done a brilliant job. I think the difficulty is when we're running our businesses, we keep that people pleasing mentality, which means we're very easy to sell to, darlings. And I think we end up with a lot of stuff which is not urgent or is a nice to have or worse than ever, it's what your manufacturers tell you you should be buying. We end up keeping stock that doesn't sell rather than what actually moves the business forward. And that pattern hides in plain sight when you're not tracking your spend, when you're not setting budgets, when you're not making friends with your numbers, a huge amount of money is wasted. Why is that a problem? Why are some of these small costs the things that actually really, really piss me off? I mean, you compare the price of some of these things to what we're paying out in rent and business rates and tax every month is a pittance. Well, it's because there is a true cost of every pound that goes into your business. And that's because of what we call our profit margin. So let's say you are operating in a business on a 20 percent profit margin and a 20 percent profit margin. And by the way, if you're a premises based business in our industry, 20 percent, you're doing OK in these days, especially if you're in hair. 20 percent is a very, very healthy margin. So I'm being generous, but I'm also making it round numbers because it's easier to work out. OK, 20 percent profit margin means to make a pound, you have to do five pounds of service is the only way you can put the money in the till to generate enough profit for what you're spending. So five pounds of service means one pound of profit. And all of these costs, the only place that can come from is your profit. So let's say you paid, I don't know, a couple of years ago for a website to be built and it's beautiful and it sparkles and it's sexy and it does everything you want it to do. And then the website builder put you onto a contract where your hosting is cost you sixty nine pounds a month. OK, this isn't unusual. They're not huge inflated figures. And maybe that included some updates once or twice a year. Rarely, to be honest with you. And we've been happily spending sixty nine pounds a month on our hosting ever since. Well, hosting, believe it or not, doesn't need to cost anywhere near that amount of money. I have eight websites. All of them are hosted on one virtual server for less than ten pounds a month. And you're paying sixty nine a month for one website and a very small website, too, in the great scheme of things. Or maybe you signed up for a local advertising package. We love those, don't we? Where they put you on some directory that you've never seen. Or they put you, it always makes me laugh when you see those posters in railway stations with the adverts all the way around it. And I understand why you'd want a taxi company on there or maybe a pizza place which is around the corner. I can never understand why you'd want a salon on there. You don't roll into a station and go, do you know what I could really use now? I could really use my bum being waxed. Just doesn't work. Anyway, let's say we've got this local advertising package and it costs you sixty nine pounds a month. Over a year, that's eight hundred and twenty eight pounds a year. That's bad enough. But to generate eight hundred and twenty eight pounds a year, that's four thousand one hundred and forty pounds of services you have to carry out. So you're doing four thousand pounds plus in services just to pay for your website hosting or just to pay for that advert in the railway station. If you charge forty pounds for a holiday, Hollywood wax, that's one hundred and three vaginas you've got to look at. If you charge fifteen quid for a kid's cut, that's two hundred and seventy six ugly children you've got to look at just to pay for your website hosting. It's a lot, isn't it? And on the ugly kids thing, honestly, I thought I never really liked children. I thought when I had children, I'd start liking children. Doesn't work that way at all. Still don't like them. I like mine a bit, though less and less as they've got older, if I'm really honest. But I don't like other people's kids at all. If you're selling software, by the way, heading back to my favourite topic to rant on, if you're selling software is two hundred pounds a month, that is two hundred and eighteen back sack and cracks that you've got to do in a year just to pay for that selling software. Even finding that many scrotums is a lot of marketing effort to take it from one who knows. So I don't want you to see getting to know your figures as an accounting chore. I want you to see it as the simple, highest leverage habit that you can build. So we need to set that profit target. It's not a formality. It's the thing that's actually going to turn your business into what it needs to be so that we're not just taking what's left out of our business. We're taking what we've decided our business is going to generate for us. We're in it for the profit. And how the hell are you going to know when you've done enough work if you don't have those targets set? Set the target. Are you going to get it right first time? Of course you're not. Of course you're not. I'm not getting it right after 25 plus years in business, but I get a little bit better at setting those targets every single year. So why don't you head over to queenofsalons.com and click the section that says links. I put together a little cheat sheet that takes you through the six figures that will actually tell you whether your salon is making money. You can download that with my love. It doesn't cost you anything and I hope it serves you well. What have I missed? How are you doing? How is the money being managed in your business? I'd love to hear from you. Why not reach out and let me know? My email address is scrolling at the bottom of the screen. Phil at buildyoursalon.com. Just a few short days until I'm coming all over the internet again with another dose of my wise owl wisdom. Hopefully one that's not going to get me quite so worked up. Frankly, at my age, I can't afford the blood pressure. And until then, my loves, please take care. Thank you.