It’s Time for Your Mid-Year Checkup!

mid-year financial assessment for spas and salons

The year is half-over. Do you know if you’re meeting your salon or spa’s business goals?

Parents often use summer downtime to schedule dentist and doctor checkups for their kids, but summer is also the perfect time to give your business a checkup as well. You probably started the year with an idea of what you want your business to achieve in 2014; you may have even created target budgets, revenue forecasts, and action plans for putting systems and protocols in place with your management team.

Of course, just making a list of goals doesn’t mean that you’ve accomplished them all yet, and follow-up and accountability are two areas that spa and salon businesses often struggle with. Even though the recession is technically over, revenue can still be difficult to predict. One month’s total may exceed expectations, and the next month falls short of them. The crucial thing is that you are able to accurately assess how your spa or salon has performed so far this year, and make a plan for any changes that are required in the remaining months to reach your targets.

An important area to start your checkup with is sales revenue. Are your totals what you expected, month by month, for the first half of the year? Look at your service sales and retail sales totals separately. If you’re missing or exceeding your goals, note by how much. For example, you may look at your total and realize your service sales are down by $31k. That sum sounds like a lot, but if you’re open six days a week, that’s only $200 per business day for the first half of the year—equivalent to 2 facials or 3 or 4 haircuts. With your team, investigate what may have caused this decline in performance. Perhaps you’re down a stylist or technician, or someone was out for an extended time period on maternity leave. Knowing why this might have happened is not the same thing as fixing the problem, but it can help point you to a solution.

In addition to service sales, you should also look at retail sales revenue. There’s often a correlation between service sales and retail sales, but in the last few years, there’ve been plenty of months where performance did not meet expectations. At times, clients eschewed services in favor or purchasing home-use products, and vice-versa. Take a look at your ratio of retail sales to service sales. If it doesn’t fall within your target range, consider a plan to pump up performance. Some options would be a promotion by brand or function, a take-home product priced into a treatment, or even a discount on retail along with service purchases of a particular level or on a certain day. Conversely, you might create a 2-3 week internal promotion amongst your staff to boost retail sales. Ask your vendors for help with the prizes!

Is your client or ticket count up or down? A decreased client count will lead to decreased sales unless your staff can raise their average ticket price substantially. Whether you’re attracting fewer clients than in the past, or just not enough, it’s time to look at your advertising and marketing strategies and assess which ones have been working and which ones you need to change up. It may be time to plan a back-to-school or other crowd-worthy fall event, or consider running a short-term advertising campaign that has proven effective in the past.

Diminished client counts or service sales can have a positive spin-off: a lower Cost of Goods for your professional products, not just in dollars, but also in percentage ratios. While business is slower, it’s a good time to revisit service protocols with your technical staff and ensure that product and supply usage are following guidelines. This is also a good time to gather recommendations from technicians on protocol or vendor adjustments that can yield advantageous results.

It’s also a good idea to review your balance sheet and see where you stand. Are your on-hand inventory levels up? If so, this is the time to clear out unneeded items with a summer sale. What about gift card liability? Is that going up, down, or remaining steady? To avoid a swelling liability in this area, create a marketing effort to attract holders of unredeemed gift cards. For example, you might offer them something extra for redeeming their gift card in the next six weeks, such as a free upgrade or take-home retail product (maybe one of those products you need to eliminate anyway).

Using this quieter time to assess your spa or salon’s performance so far this year will reinforce to your staff that you’re paying attention to the small details and expect them to do the same. Tightening up procedures now will create positive results, and hopefully a percentage point or two of extra profit, when the busy fall season begins.

Want even more mid-year planning tips? Watch our webinar, "Power Planning for Your Busy Season."

 

About the Author

Lisa Starr

Lisa Starr brings over 30 years of industry-specific experience as a consultant, educator and writer to Booker through GOtalk. Lisa also works for Wynne Business, a leading spa consulting and education company. Among other things, Lisa’s expertise lies in business operations and finances, sales and marketing, inventory management, human resource development, and business process improvement. She is a well-known speaker within the trade show circuit and is a frequent contributor to industry

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