If you’re passionate enough to get into the salon business, the exciting part might be the haircare and other services involved. As an entrepreneur, though, that can’t be the only thing you should master in your salon business.
While financial planning is unlikely to be fun, not being knowledgeable about your salon’s finances can be a disaster waiting to happen. Here are some approachable financial strategies to help you better manage your salon’s finances.
Financial Planning Strategies for Salon Entrepreneurs
#1. Monitor your income and expenses
You should create a system that makes recording how cash moves in your salon’s finances easier. Accuracy is crucial here because it will affect your forecasting and financial decision-making.
Examples of the income and expenses that you should track would be the following:
- Product Sales: If your salon offers different products, include that in your income.
- Service Costs: A salon is in the service industry, so service sales are a leading source of income.
- Inventory and Supplies: Even if you don’t sell products in your salon, you still use products for your clients. That’s why you should include your inventory and supplies expenses.
- Employee Expenses: This expense involves your employees’ salaries and other employee benefits.
- Marketing or Advertising: Any expenditures for promoting your salon should go here.
- Other Unexpected Costs: Sometimes, unexpected costs pop up. You may have decided to treat your employees on the company card. Maybe several hair dryers suddenly stopped working. If so, don’t forget to add them to your expenses.
While pen and paper could be a way to manage beauty salon expenses, they are too fragile to keep. Consider using online spreadsheets or even investing in bookkeeping software to ensure that your financial records always have a backup copy.
#2. Create a realistic budget
One reason you must learn to track expenses and income in your salon accurately is that it can help you make informed financial decisions based on historical trends of your finances. This lets you see your regular expenses and income and generate a realistic budget.
Your expenses budget should be based on your costs based on past regular expenses. With this informed decision, you can set a budget that isn’t strict but not too loose either. At the same time, this budget will better account for potential unexpected or variable costs.
Aside from basing your budget on expenses and income, you can also set it based on your goals. Maybe you’re interested in investing in employee training or expanding your salon space. If you have a set goal, it’s easier to know the limit of your monthly salon expense budget.
#3. Forecast the spending for the following year
A great habit to get into before closing off another financial year for your salon would be to calculate how much profit you made overall. Doing this step makes it easier to forecast your potential profit for next year and act accordingly. It’s also a great way to simplify what monthly budget you need to set.
Of course, your profits might fluctuate each year, but at least preparing yourself at the end of the year for the following year’s running of your salon this way can ensure that you still have an accurate budget.
Aside from that, forecasting your spending for the following year and then seeing how it pans out is excellent for figuring out whether some of your business investments have improved things. For example, is the new service you added letting you reach new markets enough to increase your salon’s profits at the end of the year?
Not only is it an excellent habit for budgeting reasons, but also for performance tracking.
#4. Consider Investing in professional financial guidance
Some of your salon’s financial management is beyond your expertise and abilities. There’s no shame in that. In this case, you might consider investing in professional financial guidance to help ease that burden.
A compelling example of when you might want to get professional financial experts is with debt management. Since debt can sometimes be overwhelming, financial experts can help you dial down and better manage your debt.
For example, you can consult debt professionals like in Money Max to help you figure out how you can better manage existing debt instead of feeling drowned in them. You can look through Money Max account reviews to know if they’re the right choice based on your debt situation.
Taxes are another part of business finance management that needs to be clarified. You can hire an accountant or tax professional who can better help with that.
#5. Classify your debt
If you have any debt, another financial move you can do for debt management would be to classify your debts.
Sweeping your debts under the rug or trying not to look too closely at them as you repay them isn’t the best way of dealing with them. Coping with debt straight on might not be as bad as you think. At the very least, you’ll better inform yourself of your loan terms, better repayment options, and so on.
The reason why you need to classify and categorize your debts is because not all debts are the same. Some debts can cause the most minor damage to your business’s finances the sooner you pay them off. Other, healthier debts, like staff upskilling or new equipment investments, are those you take on that help increase your business’s value.
By classifying debt, you can determine which to pay the most attention to and pay off faster. Some debts you take on because you’re planning on investing in something. A system of debt classifications is a great way to filter which debts are worth taking on.
#6. Prioritize paying off high-interest debt
You should focus more on some debts since they can be a huge burden the longer you have them. Usually, these are high-interest debts, like credit card debts, which have an interest pile until it’s even harder to pay off the initial debt in the first place.
That’s why, if possible, either avoid using credit cards all the time or keep your credit card payments as low as possible.
#7. Set a realistic pricing structure for your services
While raising the price of your services can increase your income, that can also make it harder to find paying customers. The key here is to know who your customer base is and understand what a reasonable pricing structure for your services is without serving poor quality or undervaluing yourself.
You want a healthy profit margin for your services and products. At the same time, you don’t want to deter customers from patronizing your salon because they can’t afford you.
#8. Set aside funds for a business emergency fund
Your business’s savings account should be separate from its emergency fund. An emergency fund is something that you don’t use at all for your business unless you have to.
Separating your savings from your emergency fund can ensure that you always have a financial cushion behind your salon’s finances.
Conclusion
These financial planning strategies require quite a bit of time and thinking to ensure that not only will they indeed be helpful to your business but also that it’s realistic enough that you can consistently do them.
However, once you follow through on these plans, your salon’s finances will be as clear as day, and you won’t have to feel like a fish out of water any time you have to confront your finances.