Every entrepreneur makes mistakes because we are all human and are learning as we go along. So it sure can help to learn from others mistakes to save yourself some headache and money.
Our goal as entrepreneurs is to make fewer mistakes than we do successes! Or at least make our successes bigger than the damage our mistakes create!
In my business consulting practice I have worked with salon owners who have made these types of deadly financial deadly mistakes listed below. They did not realize how detrimental these mistakes were to their salon business until it was too late and they were forced to close their salon and gone out of business.
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These mistakes are listed in order of detriment to your business survival salon survival:
Lack of cash flow management.
Money is the lifeblood of all businesses especially cash ones such as salons. The number one reason salon’s fail is because there is lack of attention, no education and poor management of their cash flow. If you want to succeed as a salon owner you must understand and manage your cash flow properly and regularly.
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Cash flow is the process of money coming into your business and going out to pay for supplies, rent, and salaries. Since not every bill comes due on the exact day that you receive money from clients, you need to manage the inflow and outflow of money from your salon business. Too often I see salon owners focus entirely on income while ignoring expenses and cash flow to their demise.
You must track your regular and irregular monthly expenses. I recommend salon owners use their accounting software to prepare cash flow statements and review them monthly, or even weekly during, to know when bills were due and cash income will be received.
If you are more of the creative type and do not feel comfortable with accounting reports find a bookkeeper who will guide you and help you to manage this vital aspect of your role as the salon owner.
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Not ignoring trendy big-money beauty treatments
Just as electronic technology evolves so does beauty technology and with it comes new treatments and new products which are fads that come and go. Many beauty supply distributors and professional product vendors will tell you that if you do not offer these new services your salon will fall behind – do not believe them.
The majority of your salon revenue, based on national averages, will come from your basic treatments such as cuts, color, manicures, and waxing.
Your salon profit will be a calculation of the retail price minus supplies and labor thus keep an eye on the percentage of the cost of supplies. Many of these trendy products have very high-cost percentages upwards of 30%.
It would be worthwhile for you to track the number of different services you sell in a month and compare them regularly along with the cost of the supplies for those services. You may be surprised to find out that certain services are amongst your most profitable, since they have the lowest related supply costs, and those are the ones you should be promoting to build your salon business.
If you discover that there are some services which are not popular and supply cost expensive, then drop them. Yes you may lose a client or two but it will be better to keep your salon doors open.
Always being on sale
It is very easy to fall into the trap of offering specials to get new clients. However, you can quickly get caught in a cycle of always being on sale and being seen as the bargain salon in town. Also, the new customers that you capture with low prices will continually be bargain hunting clients who will not be either be loyal or profitable customers.
I’ve seen salons fall into this trap by using daily deal sites such as Groupon for special promotions. Try to avoid these as much as possible because in the long-run you make very little money and waste a lot of time and reputation in the process.
Marketing without measurement
It is great to be continually marketing your salon your services to your target audience but you need to be sure to be to also track the costs and benefits of each activity.
In the past, it was easy to place a local newspaper ad and know which of your new clients came directly from that newspaper ad. But in today’s multimedia economy that is no longer the case.
It is vital to measure all of your marketing activities including; telephone yellow pages, internet directory listings, social media ads and print ads dollars to dollars to be sure that they are performing their job of increasing salon sales. One of the most valuable and cost-efficient marketing methods today are quality websites and email marketing list.
Remember to calculate not just the first service purchased by your new clients but the lifetime value of that client to you as a salon. Learn about how to calculate the lifetime value of your salon customers here.
Overspending on high-priced salon brands
Every beauty trade show features many expensive and beautiful products and services which you can spend thousands of dollars to stock your salon. Don’t be fooled. The majority of these offers while beautiful and interesting are not moneymakers.
Between the cost of set up, displays and inventory, which often run into thousands of dollars, it will take years and many successful campaigns to just break even on that high investment cost.
Not investing in relationships
I see many of my salon clients working hard on bringing in new clients instead of focusing on increasing business from their existing clients. It costs less and is easier to sell to existing clients than to try to get new clients.
Get to know who your customers are and what they want. Also find out if they are going to other salons for services, such as massage or manicures, that you could be offering them yourself.
Remember you can always upsell a client once they’re in your chair with other services such as highlights, deep conditioning treatments, makeup applications and brow waxing.
Plus every customer should be shown retail products to maintain their hairstyle and hair health which will all add to your bottom line more quickly and more effectively than spending a lot of money to try to bring in new clients.
Many salon owners focus on getting treatment training and neglect client communication training. I suggest spending equally as much on communication and sales training for your staff and as treatment and styling classes. This training includes listening skills, how to ask the right questions and create a truly personalized experience for each client.
Your beauty therapists need to understand how to interact more effectively with your clients and feel more confident in doing so. This type of training will help them be more personable and as a result, you will get greater feedback, better online reviews, increased rebooking and sell more retail products.
Great salons are built on great client relationships and these need to be nurtured.