What services and products are your customers booking and buying, and what can you do with that data?
When you want to get a quick look at how your business is doing on any given day, it’s common to review your daily sales report. In a moment, you’ll be able to see your revenue for the day. You may go a step further and compare that number to the same time period of the previous year, or to your forecasts, and it’s always good news when it’s higher than projected.
But these kinds of comparisons aren’t the end-all, be-all of trend analysis. The knowledge we’re seeking is not just how much revenue our business is creating, but how our business is creating revenue. The numbers we collect tell complex stories that help us develop a deeper understanding of our results.
The most basic revenue analysis will involve breaking out service and retail totals. All salons and spas produce both, but the percentage of retail revenue will vary widely based on many factors, including your location, service mix, target audience, and brand vision. Across America, salons typically create 8-10% of their total revenue from retail sales; for spas, it’s usually between 15-25%.
Two quick notes:
- Retail sales are sometimes measured as a percentage of service sales, and sometimes as a percentage of total sales. Be sure to be consistent in what you’re analyzing!
- Gift certificate sales shouldn’t be included in your revenue totals, since they’re not your money yet!
Once you know your service and retail revenue totals, you can dive a little deeper to learn what is selling, and conversely, what isn’t. Look at your revenue by service categories including broad department breakdowns such as Massage & Body Care, Hair, Nails, and Skin & Waxing. You can always look deeper into categories should you need to, but keep your high-level reporting simple and straightforward so you can read it quickly. These departmental breakdowns should be reflected in both your service and retail sales reporting so that you can quickly compare your current stats to historical numbers or budget forecasts.
Knowing your numbers is great, but using them to optimize your offerings is even better. For example, let’s say you’ve got 4 treatment rooms and 2 pedicure stations. Reviewing your service sales totals for the past three months, you see that your skincare numbers are falling behind your forecast, but pedicures are up. Looking ahead at future bookings shows you that your pedicure demand continues to grow. Perhaps you see that, on weekdays, your skincare business is strong, but during the weekend, skincare treatments fall off and pedicures remain strong.
Using this data, you might consider offering pedicures in one of your facial rooms, or investing in a treatment table that has a pedicure sink built in, so you can offer either service in your rooms. As this pedicure area would be separate from the others, you can go a step further and create a VIP pedicure experience and charge a premium for it. Adjusting your room setup and service offerings will help you take advantage of your clientele’s demands and recoup your investment quickly—both good results.
With retail sales, drilling down into the above-mentioned categories will allow you to quickly determine which departments are pulling their weight in retail and which need attention. Esthetics and makeup are traditionally the biggest producers of retail sales, followed by hair and then nails. Beyond that, pay attention to which brands and even individual products are selling, and respond accordingly.
In retail, the 80-20 rule usually holds true: 20% of your SKUs will produce 80% of your sales volume. Examine your retail sales details by department and individual items sold over a 3-6 month period, and identify both the top and the bottom 20% by units sold. You may then decide whether it might make sense to eliminate the bottom 20% and invest that money back into the top 20%. At the very least, this strategy will ensure that you have less money tied up in inventory that isn’t moving, and may even create additional sales revenue.
As these examples show, paying attention to, and acting upon, the data you are compiling will undoubtedly bring better results to your top and bottom line.
Looking for a software system that collects revenue data and reports on it seamlessly? Booker can help.
About the Author
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 industryFollow on Google Plus Follow on Twitter More Content by Lisa Starr