Will you make enough money this month? Did you realize that earning money can be planned? Why leave it to fate on whether you sink or swim financially! It doesn’t matter if you are a chair/booth renter or the owner of a big salon. In the end, the formula is the same for all of us. Let’s talk about it!
Step 1. Add up your costs from the last twelve months. That includes your rent, utilities, phones, software, back bar and professional costs, retail product costs, professional or association fees, banking fees, cleaning expenses, etc. and ANY debt that you are paying off.
Step 2. Determine how much money you brought in. Include every documented transaction as well as the cash you may have earned through tipping.
Step 3. Determine how many clients you saw over the period of the year. If you are using your Vagaro Salon Software, these numbers are easily attainable.
Step 4. Subtract your costs from the revenues determined in step 2. This will tell you what you actually made last year.
For example, say you averaged $350 per day and worked 4 days a week. Your average monthly revenues would be approximately $5600. If your rent is $1000 per month and your expenses are $400 per month and you’re paying $250 in debt, your monthly commitments are $1650 per month. This leaves you with earnings of $3950 per month. Please do not stop there! The taxman cometh! Put aside the amount you need for taxes, and put aside 10% for your savings account. (More on this later!) After giving 20% to taxes and the 10% to your future, this leaves you with $2765.
Step 5. Determine what your average ticket price is. This is the average amount that every client spends with you. It is determined by dividing your revenues by the number of clients you saw. In this scenario we’ll say you saw an average of 5 clients a day, which would translate into 20 clients per week and 80 clients per month. Divide your $5600 in total revenue by the 80 clients and you get an average ticket price of $70.00.
If you decide you need an extra $1000 per month, you will need to generate another $1300 in revenues (don’t forget the tax and savings). You can either increase your average ticket price to $86 or add 15 new client visits per month (3.5 per week). With these figures in mind, you now know exactly what you need to grow your business. The best approach is to do a little of both. Make sure your pricing is current, offer add-on services to every client, and ask for referrals to target new clients. You might surprise yourself how easy it is when you have a goal in mind.