How do I make my business profitable? (Without having to devote all of my free time)

The formula below should be considered as the cornerstone of pricing. You obviously have no control over the value added tax rate, but otherwise the success of the pricing is largely up to the entrepreneur.

PRICE OF THE SERVICE YOU PROVIDE =

Expenses (such as rent, electricity, materials, equipment, etc.)

+ VAT

+ Your own salary

Fixed costs

In terms of fixed costs, you should minimise those that don't add value for your customer, while it is possible and even desirable to spend money on value-added costs. In other words, more expensive rent, more expensive products and equipment, or even a beautifully decorated office space are not a problem from a pricing point of view, as long as the customer is willing to pay more for them. However, to the extent that your customers don't care whether your location is central, or the perceived added value of your services is not based on specific products, you should keep these costs to a minimum.

Salary

You should approach your own salary with the logic familiar from the business world: employees with the highest perceived added value have higher salaries on average. As you have sought to maximise the added value for your customer, your pricing should also reflect this added value.

In other words, the price of your services is based on the value you deliver, not on what others charge for their work. Consider how difficult, time-consuming and expensive it would be to replace you if your customer wanted to have the same experience in some other place. Your own wages are naturally reflected in the price, and a price based on value may seem expensive to those to whom your services aren't intended. This is a good thing, because it helps your salon to attract the clients you can best serve. 

Clear pricing also helps you to calculate how many clients you need to have to make your salon run profitable. Budget what this means on a monthly, weekly and daily basis, and develop your customer acquisition & marketing based on your budget.

The meaning of products and product sales

You’ve probably heard this about a trillion times, but product sales are absolutely crucial in running a profitable salon. In this next section, you’ll learn exactly why this is. 

Product sales are where you make profit. Period.  The profit of the services you provide is always very little. Essentially the price your customer pays barely covers the expenses and the employee's (which might be yourself) salary.

Product sales are practically the only way you can create a financial buffer to develop your salon, invest and increase your income in the long term. In order to buy new equipment and accessories for your salon, decorate or renovate, you need to sell products.

When you choose the products and brands you want to  sell, always remember to negotiate with dealers. Often there is room for bargains in the direction of the wholesalers. Also note that you can often get a starter kit cheaply, but it costs a ton to fill it. Don't be blinded by a low starter price, but find out how much the product will cost in thelong run.

Facebook's marketplaces for salon entrepreneurs are also a good way to start looking for products. You can find good deals from there. Although stuff tends to come in large packages, and you tend to get something you don't need.

Also note that many raw materials don't need to be expensive branded products. For example, the hydrogen peroxide used by hairdressers is really cheap and doesn't have to be a specific type. You can easily bulk buy it even from a pharmacy.

Be sure to stress the importance of product sales to everyone working in the salon. To put it bluntly, product sales are more important to business than the services. Treatments are done to sell products, because product sales make the actual profit.

In order to maximise your sales, your products need to be so good, that your customers will fall in love with them. You need to feel good about recommending them to your customers and trust that they will be satisfied. 

It's also worth putting in a bit of an effort and actively researching and looking for products yourself. There are quality brands on the market that might be unfamiliar in the UK, from which you can get good deals out of.

Business development – don't be left alone with this one

Profitable business doesn't happen by accident. A salon entrepreneur also needs to think about the business side of running a salon. Entrepreneurs need to make room in their calendar for business development - otherwise you'll find yourself doing this late into the night when you should be enjoying your free time. Even though business planning isn't client work (no one pays you to do it), you can see the benefits it brings to a well-run, profitable business.

If at all possible, you should get a partner who can focus solely on developing your business. This person could be your life partner, or even a shareholder. This will definitely pay itself back, and you can focus on what you do best.

Sometimes it can feel like your business isn't developing the way you want it to, or that you're stuck in some way. In these situations it might help to bounce ideas around with someone reliable and ask for advice. Network at industry events and get to know your colleagues. Also getting a mentor is a good idea. Even though you can learn from your mistakes, not everything has to be learned the hard way.

Get yourself a good accountant. You'll save yourself from a lot of hassle and a sleepless nights, when you can trust your accountant to do things on time and with proper care. Here you can tap into your networks and ask for tips on good accountants.

It's also worth getting a system for your salon that handles all the reporting and receipts automatically. We recommend using Book Salon for this.

Learn more about Book Salon and the great features it can provide for your business