5 Ways to Manage Your Salon Inventory for Success

Let’s cut to the chase! How you currently manage your inventory might be one reason your business isn’t where you want it to be. How much time do you spend in the back bar or at the front counting how much inventory you have? Or regretted ordering a certain product again because it just didn’t leave the shelf? We’re here to help keep your inventory organized and remove any uncertainty you feel when it comes to your inventory management.

What is inventory management?

Inventory management is the act of tracking the number of products you currently have in stock. The goal is to reduce the cost of holding inventory, when it’s time to order more, and how much.

Why is it important?

Inventory management helps your salon to meet the demand for retail products or products used for services. Having control of your inventory helps meet the demand for retail products and back bar services. It also helps you manage your expenses better, which can help generate more profit to your bottom line.

Managing your inventory can improve your business’ cash flow, increase your profits, reduce your order stock, eliminate guesswork for ordering, and save you time! If you don’t accurately manage your inventory your business can lose money due to overstocking or wasting money on products that don’t get used or purchased

Here are our 5 tips to help you optimize salon inventory management

1. ORDER ON A BUDGET:

It can be overwhelming sometimes to look at your budget, but it’s crucial; analyze your numbers, and get a strong understanding of what is happening in your business financially.

Start by going through your books and understanding how much you spend monthly and yearly; on both your back bar and retail. It’s recommended that you spend 5-10% of your service income. Ordering based on your percentage of sales helps you to stick within the allocated range. Another way to ensure you’re not ordering over your allocated percentage is to order off of last months usage!

Tip: Avoid purchasing impulsively, as this can leave you short-changed on the products that you may need.

A great way to combat this is to divide your inventory budget into two parts. Roughly allocate 20% of your products budget to retail and another 5-10% towards your back bar products. Having a portion of it for retail products and one portion for service products. This helps you to have a better idea of where your expenses are in your business. Combining them into one spreadsheet can make it difficult to identify how much money you’re spending on retail vs. service products. This can cause confusion as to which products you’re profiting from and which ones are costing your business money.

Note: ensure that you are setting away time to go over your budget each month to ensure that you are not going over, and if you are consecutively going over, you may want to re-evaluate it!

2. AUDIT YOUR INVENTORY:

It can be overwhelming to look at your budget, but it’s crucial to look at it, analyze your numbers, and get a strong understanding of what is happening in your business financially.

Start by going through your books and understanding how much you spend monthly and yearly; on both your back bar and retail. It’s recommended that you spend 5-10% of your service income. Ordering based on your percentage of sales helps you to stick within the allocated range and not stray from your budget. Another way to ensure you’re not ordering over your allocated percentage is to order off of last months usage!

Tip: Avoid purchasing impulsively, as this can leave you short-changed on the products that you may need.

A great way to combat this is to divide your inventory budget into two parts. Roughly allocate 20% of your products budget to retail and another 5-10% towards your back bar products. Having a portion of it for retail products and one portion for service products. This helps you to have a better idea of where your expenses are in your business. Combining them into one spreadsheet can make it difficult to identify how much money you’re spending on retail vs. service products, and cause confusion as to which products you’re profiting from and which ones are costing your business money.

Note: ensure that you are setting away time to go over your budget each month to ensure that you are not going over, and if you are consecutively going over, you may want to reevaluate it!

3. AVOID SPOILAGE AND SHRINKAGE:

Like foods and make-up; products you keep in your back bar also have an expiry date. The average shelf life of color products is 1-2 years after being opened, and 3 years if unopened. And sometimes brands update their product ingredients… you would hate to be using old products.

Loss of inventory, or shrinkage, is also a loss of profit to your salon. This can include expired products, damaged products, and wastage. When inventory isn’t moving off of your shelf – it’s not an opportunity for potential sales, it’s a loss of income.

4. MORE ISN'T ALWAYS BETTER:

Don’t overstock just because or just in case. Overstocking can cause your business to bleed money. Because the products that don’t get used can tie up your cash flow, which doesn’t allow you to put money into other parts of your business. Money that could be spent investing in salon software, having an emergency fund, trying a new product line, or growing your salon. Overstocking can also take extra time to count your inventory and it wastes space too.

Remember, money spent on extra inventory is money not spent on growing your business.

5. USE A SYSTEM THAT CENTRALIZES ALL OF YOUR INFORMATION:

Using a Salon Inventory Management Software can greatly benefit your salon. A benefit of using SalonScale is that the product in your bowl is accounted for in real-time, it tells you the exact amount left in the same with the amount of product used from your inventory. You can see how much of your inventory has been used, and how much is still sitting on your shelf, and what it’s costing you. SalonScale software also creates order forms for you to download based on the products that you have used in your salon, saving you time and accurate ordering.

Want to learn more? Check out our Free Back Bar Business Building class with guest host, Steve Gomez!