345 Where Does All the Money Go? The 10-Part Financial Framework for Salon Owners

[Music] Let me talk you through a scenario that, to be honest, is probably a lot more common than you might think. Imagine that your salon is busy, the style is columns are full and the team are working hard, clients are walking through the door every day and money is being taken at the till. So on the surface everything looks good, but behind the scenes it's a different story because for you the business owner, the financial situation the salon is in simply doesn't add up and inevitably that creates a huge amount of stress and pressure and anxiety because somehow no matter how hard you work or how busy the salon seems to be this just never quite enough money left. So the question is where does all the money go? I'm Anthony Whitaker and this is the grow my salon business podcast. Now if that picture I just painted sounds familiar well you're not alone in fact I'd go as far as to say that this is the normal experience for a lot of salon owners. They're busy but they're not as profitable as they know they need to be, they're working hard but they're not getting ahead. And here's the thing this isn't about how good you are at doing here. It's not about how hard you work because most of the people listen to this are working very hard. So the problem is in effort, the problem is structure particularly when it comes to the structure around the financial side of running a salon business. I think that one of the biggest misconceptions in our industry is that someone else is looking after the numbers that your accountant will tell you of something's wrong that if there's money in the bank that you must be doing okay but the real truth is that understanding the numbers in your business is not your accountant's job. It's yours. Your accountant is looking backwards at your business. They're reporting what's already happened in your business. They make sure that you're filing your taxes on time and let me be clear having a good accountant is an essential part of being in business but they're not there to run your business for you. That's your job as a salon owner and to do that successfully you need to understand from a financial perspective what's happening right now in your business so that you can make good financial decisions. Now before you switch off and think yeah but Anthony I'm just not a numbers person. Well let me say this clearly this is not about being good at maths. This is not about spreadsheets and accounting gibberish. This is about having a few simple systems that give you clarity and control in your business because especially when the economy isn't at its best and for many people that's how it feels right now. It feels like they're fighting a losing battle. The money comes in, the money goes out and you're left trying to make sense of what's left over. So what I want to do today is to give you a structure. It's not intended to be a deep dive and it's certainly not a finance lesson but it is a way of thinking, a way to start following the money trail because when you follow the money you start to see the reality of where you're making it and where you're losing it and hopefully you start to see what needs to change because if your business is operating in a state of disorganized chaos and your finances are a daily juggling act then sooner or later it's all going to end in tears. So let me walk you through this. There are 10 parts to it and as I go through them I want you to just ask yourself one question and that question is Am I actually doing this? So number one is clarity. Start by getting a clear picture of where you are right now and I don't mean a rough idea. I mean real numbers because the numbers are the facts and unfortunately most of them are known as a guessing and so they have some convoluted story to justify the numbers that just confuses everyone including themselves. I remember that someone once said to me that the reason you have spreadsheets is that the cells and the spreadsheet are purposefully small so that you can only write a number in them. There's not enough room to write a story. The numbers are the facts. They don't get me wrong. The stories might be relevant. In fact they are relevant but get clarity around the numbers, the facts first and then we can look at the story. Number two is you need a plan because once you have the facts you need to put a plan together that represents what you're proactively working towards. So the plan's going to include things like what are the revenue targets and where and who will that revenue come from and what are the profit goals and what is the realistic timeline in which to make these things happen. Your plan doesn't have to be perfect but at the very least any plan becomes a point of reference a map as to where and what you're working towards. But without a plan you don't know where you're going. You're simply relying on luck and sooner or later your luck always runs out so you need a plan. Number three is all about reports and reporting meaning the importance of having accurate systems that regularly show you what's happening over whatever time frame whether that's daily, weekly, monthly, yearly, whatever. But the important thing is that it's not just once a year when your account and tells you with information that's usually at least six to 18 months out of date. So you need a reporting system in place so that you can see how your business is performing in real time and therefore make good decisions accordingly. Number four is benchmarking and that very much relates to reports and knowing what good looks like with your numbers compared to a benchmark. Whether that benchmarks in industry average or compared to what you did last year or even a benchmark against the goal that you've set. But regardless of what it is without benchmarks meaning something to compare your results against you don't know if you're winning or losing at the game of business. Number five is all about identifying problems and opportunities and once again that follows on from benchmarks because once you have the numbers and a point of reference to compare them against together they start to tell a story. They show you where things are working and importantly where they're not working and need your focused attention. Hey, it's Anthony here. Before we go any further I wanted to take a quick moment to tell you about something that's happening this coming Monday the 11th of May and you are going to want to be there. I'm running a free live masterclass called Where Does All The Money Go. It's one hour specifically for Salon owners and I'm going to walk you through exactly why sometimes even when the Salon is busy the money still never seems to add up and more importantly what you can actually do about it. We're going to be talking about the numbers that matter why most Salon owners are flying blind when it comes to their finances and the first steps to changing that. It's completely free you just need to register. The link is in the show notes or go to growmysalonbusiness.com/financially-savvy it's in the show notes. I'd love to see you there. Register, grab your seat and I'll see you on Monday. Right, let's get back to the episode. Number six is the importance of budgets. Now Salon owners buy and large absolutely hate budgets. I think it's because they feel a budget is something or someone that's telling them what they can't do or have but having a budget is so much more than that and as unsexy as a budget might be working to a weekly and monthly budget is not just a great discipline. It's arguably the most important way to ensure that you're profitable every week in real time because the budget ensures that you're not just spending money as things come up and that's important because that's where the money and the profit disappears. And that leads us to number seven which is cash flow forecasting which is similar to the budget because it's showing you what's coming in and what's going out before it happens. Now I love working to a quarter of your 13 week rolling cash flow forecast because it means you're always looking 13 weeks ahead and so you generally don't get any big surprises. The roll in cash flow forecast really is where financial control starts. Number eight is pricing for profit. Charge your worth might be a nice mean for some but the market will decide what you're worth. It's not just about charging what feels right or what your competition charges. It's about charging based on what your business actually needs to do to cover your overheads and make a profit. And every soundowner should have a system in place to work that out. And somebody that I do with my one-to-one coaching clients and in our online money course. And again that feeds into number nine which is productivity-based pay. Meaning making sure that your team's performance is aligned with the financial health of the business. Whether that means that you're paying hourly, your commission or salary, your team base pay or a hybrid of all of them. Either way there needs to be a productivity component to it so that those on your team can earn more when they do more. And finally that brings us to number 10. Individual goals and coaching. Because numbers don't improve on their own. As a owner you need to set goals for the business. But I think of the business as being like the government. Because just like the government the business doesn't produce any money. It only spends money. It's the people working inside the business that produce the money. So as a soundowner when you set business goals you need to break those goals down and ask where or who is the money going to come from. And then as a business owner it's your responsibility to help the individuals on your team to reach their goals and become the best and most productive version of themselves. And if you do that the result is that the clients will win. The individuals on your team will win and the business wins. So that's the structure. That's what following the money trail looks like. So here's a big question. How many of those 10 points are you actually doing? Not just thinking about not meaning to get to do one day but actually doing consistently. Because in a successful business all these pieces are integrated and they all work together. But in most soundings this is where the real problems are. And as a soundowner this is why you can be busy but not making any money. This is why money comes in but never seems to be enough. And let's be honest right now it's certainly not getting any easier. Generally speaking costs are up, wages are under pressure, clients are being more selective, they're spreading out appointments even longer. Which simply means that you can't afford to guess anymore. You have to be on top of the numbers in your business. Over a long career I've had the privilege of working with lots of incredible salons all over the world. And the thing that the Salon owners all have in common is that when it comes to the financial side of their business they're organised and they have all the right systems in place and they take it seriously. They recognise it if you do understand your numbers. If you do have the right financial structure and the right systems in place then you're at a massive competitive advantage because most Salon owners don't. And so if you want a competitive advantage in what is a very competitive industry then you need to really get on top of the numbers. That's the shift from chaos to control. It's where you go from guessing and react into leading and taking control. Now obviously what I've covered in this podcast episode is just skimming the surface. It's the overview because each one of those ten points has a lot more depth to it. And you also need to adapt them so that you can successfully integrate them into your business and then learn to implement them properly. And that's an ongoing process that starts with the decision that you want to be in better shape financially. So if you're listening to this and you're thinking yeah I know that I need this. This is definitely where I'm at. Then the next step is simple. I'm running a free webinar and it's called Where Does All the Money Go. And in that we're going to take this a lot further. We're going to break this down. We're going to make it practical and I'll show you how to actually apply it in your Salon because this isn't just about more information. It's about creating a system that brings clarity and financial control to your business. So if that's something that you know that you need right now to register go to growmysalonbusiness.com forward slash financially hyphen savvy. Now I'll also put that link in the show notes of today's episode. And in the meantime just start by asking yourself that question again. Where does all the money go? Because once you start following the money then everything changes. I'm Anthony Whitaker and this is to grow my Salon Business Podcast. Until next week, bye for now.