Your Numbers Don't Lie (Even When You Do)

The unluckiest thing you can do this Friday the 13th is to ignore your numbers. You might tell a few fibs about how your business is doing, your numbers won't. Let's dive in, shall we? Hello, hello, hello my salon friends. Phil Jackson here, your queen of salons, coming all over the internet with a big dose of my Wise Owl wisdom. How on earth are you? Achingly well, I hope. As we head towards almost exactly the middle of February. Are you all geared up for Valentine's tomorrow? Have you bought to your loved one something special? Are you hoping to get laid this weekend? I jolly well hope so. But today, we're talking about numbers, and I know that lots of people in the salon industry get the ick when we start talking about numbers. Either you're not comfortable with sums, maybe you're telling yourself that numbers aren't your thing. Actually, what you're probably telling yourself is that you don't want to know, or perhaps you just run your business, you know, as long as there's money in the bank, things must be going okay. Well, that's fine, of course, until there isn't any money in the bank. We need to dive a little bit deeper into the numbers to tell the story of actually what's going on in your business. And today, we're going to go through four specific measures. Now, we've talked about performance measures for your business before. We've certainly talked about performance measures for your team members before. But I don't want to look at the numbers that we're monitoring week on week, month or month. I want this to be a set of numbers that you might dive into perhaps once a quarter. And then you will use the feedback from those numbers and certainly the trends in those numbers to figure out your strategy. What this is going to do is show you what needs fixing. And if you're one of those salon owners that doesn't quite know what you're supposed to be working on, this is the episode for you. Because these numbers are going to show you the areas in your business that need attention. That will help you set your goals for the next three months, show you what you need to be working on. I know you're not a lazy bunny, but sometimes we work on the wrong stuff or sometimes we end up not working terribly hard. Not because we don't want to do anything, but because we don't know what to do next. So this is going to bring you some clarity. I hope anyway. If it does, please reach out and let me know. This can be a lonely business doing a podcast, you know. If you're not emailing me your questions or a bit of feedback, sometimes it feels that I'm just shouting into a void. So I always love hearing from my salon owner friends. So reach out and let me know how you're doing business wise. February has been a bumpy start for lots of people. And I hope that we're starting to see the end of February a bit more positively.

Certainly March looks like it's going to be a good month in my coaching groups. I'm getting a little bit tired of the industry groups on Facebook, though. Another post yesterday about, oh, is anybody else quiet at the moment? And 15 people validating shitty performance by saying, yeah, it's quiet for me, too. How is that helpful? How does that inspire or motivate anyone to do a better job? Ultimately, if you're just wringing your hands in an industry group, what's the point? And I've actually taken myself out of one this week. So what are these measures, Uncle Phil? How are you going to inform our strategy? What do we need to be working on? Well, the first one is your net profit margin. This is what's left after you've paid everything and everybody, including yourself. So we're not measuring revenue. It's an important measure, of course, cash flow wise. We're not measuring money in the bank. We're measuring profit. And we want it as a percentage. So I want your net profit, what's left after everyone's been paid, divided by your revenue, multiplied by 100. That gives you a percentage, a profit margin percentage. And then we need to keep an eye on that. We need to keep an eye on the trend on that. And we need to figure out whether you've got a good number or not. So what is a good number? Well, like all of these measures, I'm afraid it depends. For a salon-based business, so I'm not talking about a home-based business, but for a salon-based business, if you've got a profit margin somewhere around the 10% to 15% mark, that's probably as low as you want to go. Ideally, we want to be in the 15% to 20% net profit margin. 20%, you'd be doing some good business. There's not many businesses I've come across that have premises. There's not many businesses that I've come across that have a net profit margin above 20%. Below 10%, this is when we start hearing some pretty strong alarm bells in a business. Below 5%, or if it's a negative number, you're basically working for free. You're paying for the privilege of wearing yourself out. But a lot of people will kind of let themselves off. They'll say, well, my net profit margin is low because I'm reinvesting everything in the business. Well, that's not working because if we're reinvesting, we should be seeing growth, which means that the net profit margin starts to go up again. If you can't make 10% profit while paying yourself properly, something's fundamentally broken. And what that means is that either your pricing's too low,

and we've talked about pricing and raising your pricing a lot on the Build Your Salon podcast, or your costs are too high, or both. Basically, we either need to get the prices up or cut your costs or a little bit of both. That will increase the profit margin. What's not going to fix this is just working harder and harder and harder. That's just putting more money in the bank with the same profit margin. So that's not going to work. So what I want you to do this week is calculate your net profit margin. Have a look at January. We've got those figures. We should have those figures in by now. Make sure you include what you're paying yourself or what you should be paying yourself. And if it's below 10%, we need an intervention, darlings. We need to get a strategy in place right now. Measure number two, revenue per client. Sometimes we call this average bill. Poor bill. It's always average. What is it? Well, it's the total revenue. So all the money that went in the till divided by the number of client visits. And what that gives us is how much the average client spends per visit. And it includes service and retail. So it's all lumped together. And we want to see growth in this over time. We particularly want to see a bump in the average bill when prices go up. So if your retail prices or your service prices have increased, make sure there's a corresponding bump in your average bill. And we want to see a healthy number. Now, what does a healthy number look like? Well, it depends. It depends on whether you're a hair business or a beauty business or an aesthetics business. Generally, beauty and aesthetics would be a much higher average bill than hair. But it depends on your area, depends on your positioning. Are you a luxury salon, a budget salon? But I generally want to see when I'm looking at these figures with a coaching client, when I'm on my clarity mission with a coaching client, I want to see a number which is higher than your most popular service. Because that means that you're doing plenty of upselling. It means you're doing plenty of moving people onto those most expensive services. It means you're doing plenty of retailing. If the number's at the most popular service or below, well, you're filling your diary with less profitable stuff or you're not upselling at all. Generally, finger in the wind, I want to see a hair salon average bill, which is higher than your cut and finish price. A beauty, it depends what services you offer, but I certainly don't want to see something

hovering around your nail prices. That's much too tight on the profit margin. Aesthetics, just pick your most popular injectable probably and work from there. You can't make a decent profit if your average spend is too low. It means that you might end up being very busy, but also very poor. And I want to see growth. I want to see a nice high average bill, even if that starts to stifle demand. But ultimately, would you rather carry out 100 clients at 30 quid each making £3,000? Or would you rather do less clients at, you know, half as many, 50 clients at 60 quid each and generate the same amount? So same hours, but more profit and certainly less exhausting. So what this number's looking at is your pricing structure. Your retail conversion, whether you're actually profitable or just really, really busy. If your average bill's low, we need to dive into some of those reports and figure out why. Maybe it's a pricing equation. Perhaps it's the not recommendation thing. Perhaps we're doing too many of those quick lower price services. Measure number three, rather, is client retention rate. We've talked about client retention on a recent episode of the Build Your Salon podcast. If you haven't heard that one, go back a little bit. There's a whole library. Do you know we're over 250 episodes into this podcast now? Go back a little bit. There's some gold in them there, Hills. So client retention rate, the number of clients who return within an expected time frame. Now, I'm going to be really honest. Retention reports on most salon software are really confusing. But basically what we're looking at is the number of people that appeared in your calendar in a period of time. How many of them are still coming back? How many of them are still returning? If your retention reports don't make sense, do it manually. Run a report which gives you everybody who came in, let's say, last January, and then basically everyone who came in this January and get AI to compare the two lists. Who's still there? Who's still coming in? As far as retention, as far as healthy numbers for retention are concerned, well, it depends. But also I want to point out there is a big difference between the retention of new clients and the retention of existing regular clients. So if you've got a number that feels a bit low, but you've been doing lots and lots of new client marketing recently, that's probably why. But over time, really, we want a retention rate, I would say, 70% minimum. Below 50%, it means that you're churning an awful lot of clients. It means that you've got lots of new clients coming in, but just as quickly, you're losing

a whole bunch of clients as well. If you've got your retention rate above 80%, you're getting stuff right. People are loyal. They're coming back. They're rebooking. But be careful, if your retention rate's very high, that means you've probably got very few new clients coming through the door. You've probably got quite a stagnant pool of clients, and that's not always healthy either. We want some new clients coming into the business because that's the lifeblood. That's your future profits. It's important to measure because keeping new clients coming through the door is a really expensive way of running a business. If you're constantly chasing new clients, it's a lot of marketing effort. It's a lot of marketing bandwidth being spent and you're bleeding existing clients. I think it was the last episode we talked about retention. So if your retention's low, go back, have a listen. And what's basically being exposed is whether we've got service quality issues, whether we've got pricing issues, so your target market isn't quite matching the pricing structure that you put in place, or perhaps it's something around the team. Perhaps clients are loyal to a person who's left. So calculate your retention rate. I would look at the last six months. If it's under 60%, we've got a lot of work to do. And then finally, I want you to look at your utilisation rate. How much of the available appointment time is actually booked up with paying clients? And most salon software systems will give you this number. Sometimes it's not called utilisation. It's called something different. And what would be a healthy number around here? Ideally, I want to see somewhere between around 85%, 85% to 90%. If it's dropping below 70%, we've got a lot of white space. You're not busy. There's too much availability in there. We need to look at the staffing. We need to look at where that capacity is being wasted. Perhaps we're open on hours that our clients just don't want. Perhaps we need to renegotiate some of those contracts and get people into the busy popular times rather than the afternoon on a Tuesday when nobody wants to come in. If it's above 90%, and actually most salon owners want to see utilisation at 100%, but it's not a healthy place to be. Yes, of course, there are times of the year, perhaps on the run-up to Christmas, when we want to be maxed out. We want that buzz. We want everyone stretched. We want to be stuffing people into columns wherever we can get them. But if you're maxed out, it means that you can't grow without adding capacity. It means there's no elasticity left in the business model. What that means is that if you've got a therapist who starts to run behind on their column, they're going to be running behind all day.

It means if somebody calls in sick, you've got nowhere to put those clients. There's no space in anyone else's columns. So a little tiny bit of white space here and there is actually a good thing. Also, if you've got continual utilisation above 90%, 95%, it means that there's too much demand there. It means there's definitely some work we can do on pricing. We can probably increase prices, reduce demand a little bit, suppress demand through increasing our prices and put a few gaps in our diary. So we want to look at that utilisation over a period of time. Don't just take a small snapshot. But this is a really good one that you can measure across your entire salon business, across individual team members and across time as well. So if we've got utilisation very high, but profit is low, we've got a pricing problem. If your utilisation is low, you've probably got a retention problem or a marketing problem. So there we have it, the four measures. And like I've said, I don't want you to necessarily measure these every week or every month, but certainly every quarter. These are the numbers that are going to show you the direction that you could steer your business in over the next three months. No more making excuses, no more blaming the economy, no more saying, is everybody else quiet at the moment? These numbers are the facts about your business. And if they're bad, you've got two choices. We can fix the business model or you can keep pretending until you run out of money. If you want some help with this, of course, that's what Ultimate Clarity is all about. Head over to the link in the description. Head over to buildyoursalon.com. I'd love to be helping you improve these measures in your business, bring you ultimate clarity. Next episode, we're going to be talking recruitment again. I've had lots of questions about staffing just recently. Just a few short days until I'm coming all over the internet again. In the meantime, if you have a question for me, if you've got a topic that you would like me to cover, if you'd like to be a guest on a future episode of the Build Your Salon podcast, my email address now scrolling at the bottom of the screen. I'd love to be speaking to you soon. Phil at buildyoursalon.com. And until next time, please take care.