BY STEPHEN GOMEZ
As a business coach, one common thing I see salon owners miss is using their retail profit to pay monthly bills. This is robbing Peter to pay Paul, as the expression goes.
To have your retail profit truly work for you, follow these important steps:
- Take retail sales to cover retail expenses only. Keep the rest in your savings account as true profit. The only money you take out of retail is to cover the following expenses: retail commission and the payroll tax associated with them, sales tax based on retail sales, retail inventory purchases and credit card processing fees associated to retail sales. That's it! What is left over is pure profit.
- If you are taking the rest of the money left over in Step One and paying other bills, you are eating away at your profit. If that’s the case, take a three month average of that number and set a goal to grow service sales by that number (be sure to add on your gross profit percentage to cover the hard costs of growing sales, such as commission, back bar, etc.). Once this is accomplished, you will then be in the position to keep your retail profit.
- As you begin to get that profit back in your hands, I recommend that every 90 days you take half out of the account to chunk down debts or credit cards, invest in marketing, education, etc. Leave the other half in the bank to cover any emergencies (like a water heater breaking or replacing equipment).
- As the money accumulates you will be able to take this profit each year and transfer it into an IRA to start saving for your retirement.
Keep in mind that the process I describe above may take you three to six months to achieve, so be patient and diligent. What’s important is to stay the course. You work way too hard not to keep your hard-earned profit and make that money work for you!
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ABOUT STEPHEN
Steve’s experience as a business coach and trainer spans over 29 years. He has coached over 500 salons, spas and clinics to accelerate growth & profits! He has delivered over 850 trainings and seminars to over 450,000 people in the United States and internationally in countries like Ireland, Russia, Canada, Italy, Mexico, Colombia and Puerto Rico to name a few. He has written two eBooks, Financial Fitness: Systems to Increase Profitability in Your Salon or Spa and Interdependent Leadership: Creating a Salon Culture of Inclusive Growth. His new book, The Service Cycle: How to Exceed Client Expectations & Drive Loyalty, comes out Spring of 2022. For more information about Steve please go to www.stephengomez.net or follow him on Instagram at @saloncoachSJG.