How to Set Salon Targets That Actually Make a Profit

Let me guess. Your team's hitting their targets, but you're still not making any money. How does that happen? It's because your targets were never built on profit in the first place today. Let me show you how to fix that. All on build your Salon. Hello my salon friends, Phil Jackson here, your Queen of salons coming over the internet with another dose of my Wise Owl wisdom. How on earth are you achingly well, I hope. Oh my gosh, here we are stilling towards the second week of July. The year's just running away with me. I know I said this in the last episode as well. I can't believe we're here halfway through the year past. Can you believe the days are getting shorter? Anyway, what are we talking about today? We're going back to one of my favourite topics. We're talking about profit, and I think I am uniquely placed in the salon industry because I don't care about talking about money. It's not very British, is it, to talk about money and then we wonder why we haven't got any? If you're phobic of the topic, it's no wonder, but I went through university, took my degree in banking and finance, so money doesn't freak me out at all. So your uncle Phil's here to have those strong conversations with you. And the reason I'm recording this episode is I had a coaching call this week that I want to tell you about because the problem this owner had is one that I see again and again, and this is someone who's been with me for quite a long time as well. This salon owner had individual targets for everyone on her team, sensible enough, and she had commission targets, which the team were hitting, but no money in the bank. And after a little bit of excavating, we realised when we added all of those individual targets together, they didn't come anywhere near what the salon actually needed. The salon's overall target, the numbers just didn't reconcile. They didn't add up properly. So everyone was hitting their personal number, everyone's earning nice commission, but the salon's falling short. And the worst bit is none of that was tied to a profit target. The targets were nice, big round numbers that sounded about right, picked from the air. This is what we did last month, so I reckon we could do this this month or this is going to be a bit of a quiet month. So we're going to drop the target a little bit today. I'm going to show you how to set targets that actually work because we're starting with the profit that you want and working backwards. So every number on the board is actually doing its job. The mistake that everybody makes is you start chasing turnover and then fingers crossed hope the profit turns up in the end and it never does. So if you've had your best month ever, but there's still no money in the bank, this is why. So we're going to flip it around. Lots of people are thinking about sales minus expenses equals profit. Whatever's left over, what I want you to do is decide on the profit first and work backwards. So the profit isn't the leftover, it's the bit that dictates the whole strategy of the business. It's the bit that pays you properly, it's the bit that builds the security in the business and ultimately gives you the freedom that you started the business for. So before we start setting any targets for turnover, I want you to answer how much profit do you want to make in your business in the next three months? Not more, a proper real number. And don't move on until you've got that number in mind. Now you need to bear in mind that that profit number needs to reward you as the salon owner for all the risks that you take and all those wonderful sleepless nights we have to endure. But also there needs to be some profit retained in the business. We need to be building reserves. We need to put money aside for refurbishment, for investment in extra training for any equipment that you want to buy into the business as well. And then once you've got that profit number, we need to find out your profit margin because that will tell you the turnover that you need to produce it. Let's work a little example, because I know how much my salon owner friends hate numbers. So let's say that you want your salon to make 15,000 pounds of profit this quarter and your net margin runs at about 15%, or most salons sit somewhere between 10 and 20 if they do well. So pick the number that's true for you. 15,000 divided by 0.15 is a hundred thousand. So if we want 15,000, we're on 15% profit margin, we need to generate a hundred grand in turnover in order to generate that profit. So it's not a number that I've plucked out of thin air, it's the exact turnover that delivers the 15,000 pounds in profit you've decided you wanted. So you are steering the business with your profit number. Now if your profit margin is tighter, which is very often what I see, let's say it's 10% to generate 15,000, you are going to have to turn over 150,000 in turnover. And that's why knowing your real profit margin matters if you're guessing your profit margin, the whole thing is built on very shaky foundations. So once we've got our turnover target, let's say we're going to have our hundred thousand pound turnover target, that can feel like a bit of a wall over a quarter. So we've got to break it down a little bit more. And what we don't do is just divide by three because in a quarter, in only three months in the salon, normally there's one really busy month. There's normally one month which is going to be a bit tough and one that falls somewhere in the middle. And you'll know this from looking at previous years, or you'll know this by looking at your previous sales reports. So let's say we're looking at August, September, October. In my salon, October will be average. September will be a storming month and August will be really, really tough. So I've got a management decision then on how I break that a hundred thousand pounds down. What I wouldn't do is 33 and a third in every month. I might say in August we're going to do 25, in September we can afford to do 45, and then the remainder's going to come from October. So you've got to make a management call on how that's going to be broken down. And then the next step is to take your month target. Let's say August is going to be my 25,000 month. Then we decide who's going to put what in the till knowing what's going on in the business. So let's say you've got Betty working for you and Betty's on holiday for three weeks in August. We're not just going to give her the same target as we always do, but other people are going to have to pick up the slack because what we can't have is the salon not performing because Betty's on holiday for those three weeks. So you go through the team members and you say, you are going to put eight grand in the till, you are going to put seven in the till and you two are going to put five each. That adds up to 25K, which is what my salon needs. I don't care what their commission target is, that's not what we're coaching them towards. So don't just split it evenly. Bear in mind who's on holiday, who's not. How many hours does this person do? How much experience has this person got? What services does this person do, which mean that we can make their target a little bit higher? Perhaps you've got one person carrying out nails, the other one carrying out laser hair removal. It will be crazy to give those two the same target. And then we start coaching your team members on how to hit the target that we're setting. I know it's a lot, but this cascade is all coming from you deciding the profit that you need in your business and that has to be non-negotiable. So here's your job this week. Decide the profit that you want over the next three months. Divide it by your margin to get your turnover and break that down into the month. I personally don't break it down into the week, but you can do as well. And then decide who's going to put what money through the till, you included, to make sure you hit that number. How does that feel? Why not reach out and let me know if you are breaking out into a cold sweat at the thought of all that? Maybe this is the month that you need to start getting to grips with the money in your business. This is where the real work lies. If you are making a profit but you want to keep more of the profit in your business, that's what my 10 minute money fix is all about, nine pounds. And I'll walk you through five strategies to improve the profits in your business. It's not going to rescue your business if you're losing money, but if you're making profit and want to keep more of the money that you're making, 10 minutemoneyfix.com. I'll put that link in the description for you as well, sort your profit first and build the salon business you actually wanted. Just a few short days until I'm coming all over the internet again with another dose of my Wise Owl wisdom. And until then, take care.