Increase Profits In 2024

Let’s begin by establishing an understanding of what’s informing profit creation in the Salon industry. We have the service portion of our salons, which is cuts and color with treatments, styling etc, which is the major component supported by the smaller high-end retail products portion.

We have several financial models for these portions, that establish the end price to the customer, all factoring in estimated or assumed costs. There are by-menu models, by-the-hour models, a la cart models, and bundling/packaging or by-look models.

Only recently has the industry introduced parts and labor or the hourly + parts method, which is the only model that backs out the variable costs. All of these have included a fixed operation expense, and this is where it has been going wrong.

Because just like a car with no fuel in the tank, a business with no profit margin cannot run.

Importance of profit

One of my first questions to any salon owner is always; when you established your prices, where was the profit added? Because for any salon to survive, they must be making a profit on every cut and every sale. And importantly, the two sides of the business must not be compensating for one another. They both must be viable and profitable businesses in themselves.

And even if these are profitable, we must achieve a good profit margin, because salons are expensive to continue running (stylists being one of the biggest expenses) and without it, they will slowly run out of fuel.

Our question becomes how can we make make more profit without hiring?

We need to look for untapped opportunities because profits give salon owners choices. They enable marketing ads, investments back into the business, food on the table, better services, less stress, living wages, and most importantly a business that lasts.

Profit issues in salons

The most serious issue is the lack of understanding of our numbers. For instance, inflation goes up every year by 2%. Most salons just increase their pricing overall thinking they are covering it but a lot of salons also pay commission on a service.

So for example, they use $10-$20 on an average color. Then 50% of the price will go to the stylist, and 7% to payroll and transaction fees, which leaves them with around $4-8 to pay for the inflated product cost and still try to turn a profit.

It just doesn’t work.

When we include products inside pricing and don’t inflate them or price them correctly, that’s like selling retail products off the shelf for cost. Would you just give a bottle of shampoo away? No, so why are we doing this with color and or variable parts? No one client uses the exact amount of supply and every year these products rise, so it’s just as important to run the backbar as you do your retail and your service.

Secondly, it comes from a lack of strategy. When you don’t have a strategy for your salon, not knowing where you’re going with it or how you’re going to build it, profit goals will often fall by the wayside. This means no retirement fund, no vacation time, and in reality, over time passion and energy will dim as the owners become burnt out.

I’ve been there, and this mindset is killing the salon industry, defeating so many of the talented artists I know.

Learn More: Why Salons Struggle To Turn A Profit

quick ways to add profit to your salon

1. Match inflation

Today, and every year now, you need to match inflation rises. Add it to your prices immediately. This is a great time to do it. Remember however to treat price increases for inflation and increased experience separately. They are not the same thing.

2. Work on your mindset

This may seem counterproductive, but you need to immediately move away from a scarcity mindset to being in control of what’s going on emotionally, financially, and physically in your business. SalonScale can help you with this by helping you to see and understand where the profit is in your business and help you to remove the emotional weight of charging what needs to be charged.

3. Find your Profit strategy

Lean into the facts and figures of your salon, and build your business on them. Choose the strategy that helps you execute your vision best. Focusing on ensuring profit management is a core part of that strategy. Knowledge truly is power, so empower yourself this year to cover not only your costs, but to grow your business in 2024.

4. Invest in yourself

Find a business/financial/life coach to help you run your business and benefit your life. You don’t have to be alone in this. Also make sure to book your yearly holidays at the beginning of the year, as well as decide what your personal goals are for you as a business owner in 2024. After you know these, you can dive into your business and choose your target goals for the business too.

5. Manage margin through mark-up

Immediately build a new revenue stream in your back bar. There is no shame in profit, or finding where the missing profit is. I advise you to add a 50% markup as a minimum to ensure all costs are covered with the ability to replenish the product. Ideally, you should have a 100% mark-up, because this enables cash flow, where the tube is already paid for. Resulting in a profitable back bar.

Learn More: What Is Mark Up?

6. An accurate backbar

Deploy an inventory stock system that tracks live usage immediately. Not only will you be able to see what product is sitting there on the shelf, but you will be able to accurately manage what needs to be ordered, and when. Solving both the issue of over-stocking and having profit wasting away on the backbar, as well as being able to have exactly what you need when you need it. SalonScale’s just-in-time ordering system will support this.

Learn More: How To Have An Efficient BackBar

SalonScale for a profitable 2024

Our goal is to be as beneficial to you, the salon owner, as much as possible. With each of you being unique, we’re focusing on empowering you when and as you need us to, of course with a little push from us to ask for more for yourself in terms of profit.

In 2024, we’re asking how we can give you everything you need to succeed because we know you’re not just the people who make people beautiful, but you’re also contributing to this economy and changing the way we do business in the world.

Here’s to your profitable 2024!