Knowing your Numbers
I remember the day when I first got computerized at the front desk – the amazing feeling of control and order all those reports gave me. The problem was that like so many salon owners I didn’t know what do with all the information except look at it.
The challenge for many salon owners is twofold: first, knowing which are the important numbers to track and, second, knowing how to drive those numbers in the right direction.
The problem is that there isn't a right set of numbers everyone should focus on; it really depends on your individual business model.
So, at a salon level if there were just three numbers to focus on, what would they be?
- Total weekly revenue for products and services
- Weekly break-even point
- Employee costs as a percentage of total revenue
Your total weekly revenue in products and services is easy to find out; your Shortcuts system will give you a 100% accurate weekly summary of all transactions and break it down in many ways. Finding your weekly break-even figure is a little more difficult and won’t be as exact.
To find an exact weekly break-even figure for a previous financial year, all you need do is get your Profit and Loss report for that year and divide the total expenses by 52 (weeks in the year).
Using that figure as a benchmark, go through your current expenses line by line and adjust up or down where necessary depending on changes that have happened or are anticipated, such as staff numbers, rent increases etc. to come up with a best guess for total expenses for the current year. Again, divide that figure by 52 to get a current estimated weekly break-even figure.
Remember this weekly break-even figure doesn’t include profit; hitting it means you are surviving – just.
My third most important figure is employee costs as a percentage of total revenue. This is the one number you absolutely must control; if you get it wrong it will sink your boat, and fast.
Typically, employee costs will average somewhere around the 50% mark. If you mess this up and end up overstaffed for your level of productivity, you will immediately be eating up the portion of your takings that should have been profit. Get it horribly wrong – over 60% – and you will not survive.
Knowing your numbers is the first step to controlling them. Make the most of your Shortcuts software and use it to produce information that allows you to market, manage and control every area of your business.