5 steps to creating a budget for your salon

When it comes to budgeting, it can sometimes be difficult to know where to start and what to include. There are crucial elements of your budget, including set costs such as rent and business rates, plus variable ones such as stock, which you will spend more on the busier you get. But there are also hidden costs to be aware of.

A budget is essential to ensure year-on-year growth and create a long-term strategy. It should be drawn up on a yearly basis but be monitored monthly. To create the most efficient plan, however, you need to look into the hidden costs as well as the obvious expenses.

1. Staffing costs

The biggest cost of all, staffing can become a financial hole if you’re not careful. Some salons take on self-employed therapists to avoid paying National Insurance (NI) and have less commitment, and also because recruitment is a difficult task nowadays. However, this can have a huge impact on building loyal clients, not to mention the trust element.

A healthy budget can include a combination of both permanent and self-employed staff. Having a strong core team complemented by mobile therapists is usually a positive mix.

Hidden costs can arise if your rota is not managed efficiently – having too many people on a quiet day is not healthy, but neither is finding yourself unable to capitalise on busy times due to a shortage of staff.

Your payroll should not be higher than 35% of your total costs. Some will argue that 31% is a good figure to aim for but this depends on several factors. You might not pay yourself a wage to start with, you might be active in treatments, and so on.

2. Stock control

The highest hidden cost of them all is use of professional products. Unless managed properly, it can have a huge impact on your budget. Your team may be using far too much product per treatment, blissfully unaware of the impact this has on your bottom line.This should become your priority before anything else. Ask the brands you use for “cost per treatment” sheets. This will let you calculate the exact amount of product you need to use in each treatment.

Ensure your senior therapist goes through every single treatment protocol and is happy with the amounts suggested. Then train the team on exactly what to do. You should get to the stage where you know that one bottle of toning lotion, for example, will last for X number of facials.

Your stock loss (breakages, using retail stock for professional use, and so on) should all be accounted for by registering it both daily and via a monthly stock take. Calculate your stock loss, which should be no more than 2%. Any more and you might have an issue with theft, too much used in treatment or too many breakages.

 

Budgeting

3. Have a marketing stratgey 

Marketing is something we never really budget for. It’s important to have a marketing strategy and work out how much your promotional activities are costing you as well as the revenue they generate. This costing can be worked out as a monthly average.

If you don’t budget for it, you will find it hard to create the sort of activities you want and that appeal to potential new clients. Don’t underestimate your marketing budget - even if it’s a small amount, it needs to be accounted for.

4. Account for towels and uniforms 

This is another potentially huge cost. The amount you spend on towels and uniforms can significantly impact on the brand. For example, if you don’t replace them frequently enough they will look scruffy and unprofessional.

So, it’s crucial to budget for them throughout the year by allocating a monthly figure. Do not underestimate the cost of cleaning; this mounts up really quickly, especially when you get busy.

5. The cost of training courses 

Although most product houses offer training for free, there is a cost involved for you in travel and potentially accommodation too. You also need to factor in that your staff member is not bringing in any money while they are training. Training courses can really help to motivate your team, so budgeting for these is important to ensure they are happening throughout the year.

If you control all these hidden costs, your budget will be built on strong foundations. To me, the budget sheet tells a story. By creating a new budget, or analysing an existing one, you as the manager or owner know what you need to focus on and how to generate stronger foundations for your business.

By understanding all the hidden costs, you’ll have a clearer idea of where savings could be made. Your budget tells your story; make it count.

Source: Professional Beauty UK