Expense Management For Your Salon And Spa

If there’s one thing that can either keep a business on top of its finances or dread the business owners, it is their expense handling. For successfully running a business, tracking its expenses plays a vital role. Most small businesses sometimes neglect, or completely forgo the process of tracking their expenses and managing them, just because they find it an insignificant habit. But for a business to utilize its funds well and to keep its cash flow running efficiently, tracking expenses is a must.

For a Salon or a Spa, a lot of things come into the picture, such as expenses of equipment, machinery, products, basic utilities, etc. Therefore, it is important for a salon business owner to understand why these expenses matter and how they occur. By tracking all the outgoing transactions, a salon can prevent missing out on big-time savings.

In this article, we will cover everything about expenses that a salon business needs to take care of. We will understand basic financial planning for a salon or spa. Knowing the importance of tracking expenses, we will try to sort all the kinds of expenses that occur in a standard salon and spa. Moreover, we will also dig deep into the ways how a salon can track its expenses while figuring out methods to efficiently save wherever and whenever possible.

If you want to start your salon and spa but are unaware of the involved expenses, well, you have landed at the right place. Or if you are a salon and spa business owner, in that case as well, this article will be your perfect guide so that you can avoid any expense management mistakes in the future. We hope that by the end of this post, you get a clearer idea about how to manage your funds while setting up or maintaining a salon and spa business.

Did you know what the number one reason is for most salons’ failure? It is lacking a systemized budget planning. It is because the skillset that makes a successful cosmetologist is different from the one essential for running a business. Therefore, the reason behind the success and rapid growth of successful salon and spa chains is not just the quality of the services being offered but also the cost-effective measures and the expense tracking being done.

Needless to say, to create a solid budget plan for your beauty salon, you need to understand the salon business inside out. Crunching numbers, sometimes, is perceived as a boring chore. But the truth is that to maintain a system in your workplace, i.e your salon, you need to keep a track of all the expenses getting carried out.

A Salon business owner wears many hats to ensure that the business is booming. This includes hiring and managing the staff, offering all the available top-notch services, as well as taking care of all the supplies and finances. Well, understanding the financial numbers of your salon business won’t be hard anymore, as, in this guide, we help you to let you effectively manage it.

Later in this article, we will learn how to exactly plan a budget, what expenses to consider while planning one, as well as the types of expenses that your salon will have to incur.

Understanding the breakdown of your salon and spa expenses can help you figure out and plan your budgeting accordingly. Once you understand the need for financing to meet the cash flow needs, you will be able to find out ways to cut down the costs, making the salon more profitable.

We have divided expenses into two categories: Recurring Expenses and Occasional Expenses. We have tried our best to include all types of expenses that can possibly be broken down on paper, whether you have a small salon or own a large chain of spas. This extensive list of recurring and occasional expenses might vary a little depending on the growth scale and size of your salon and spa. Feel free to check these out and tally them as per your salon, if you are a salon and spa owner. Make sure to study a particular type of expense if you are missing out on planning it.

Recurring expenses contribute to a huge part of your salon’s total expenses. These are the expenses that will occur either monthly or annually. A great thing about recurring expenses is that a business can completely control its magnitude. You can usually plan for these costs as per your needs, eventually making it different from salon to salon. This helps to plan to save other funds by cutting down costs wherever possible. Let us take a look at some of the recurring beauty salon expenses that are often taken into the account.

Salon Space Rent:

One of the most significant monthly expenses will be the rent of your salon space. It will be a hefty amount to be paid at a time if you are planning to purchase retail space. Whereas, you will have monthly payments as rent for the space used to run your beauty salon. Sometimes an existing space would need a renovation, new flooring, or new plumbing alternatives. These expenses cannot be overlooked as updating and improving an existing space is a very crucial aspect of the overall decor of your space.

Equipment:

For your salon or spa to operate without many obstacles and without a hitch, the equipment being used needs to be right and of premium quality. From the equipment for your space’s decor to the equipment used to provide the services, everything needs to be of durable quality without any compromises. However, the costs of machinery can vary depending on the type and quality you would prefer. You can also lease the equipment by taking care of its monthly rent payments.

Licenses and Permits:

To open and operate a beauty salon and spa, your business needs to apply for a business license. It’s very important to do your due diligence as the licensing and permits differ according to the locations. Beauty salons and Spas are required to hold health and safety permits with a cosmetology license. Any additional services like nail care or facials will require relevant respective health permits. A resale permit is also needed if you are planning to sell beauty products like shampoos or conditioners. Failure to get a proper and legitimate license and permit can make you pay a hefty fee as fine. Moreover, these licenses and permits need renewal yearly, making it an annual recurring expense.

Payrolls and Wages:

Payroll is an essential item of the operating budget of your salon. Depending upon the strength of your staff, your payroll will vary. According to a report, around 62% of small businesses experience difficulties in maintaining a stable payroll. It is very essential to keep the payroll consistent without any check bounces or delays, as it creates a risk of losing your best stylists. Also, depending on your salon’s business structure, you would have to pay payroll taxes.

Technology:

Today, we witness advancements in technologies in every possible field and industry. For example, in the salon and spa industry, we see how cutting-edge technologies are used to develop tools like customer tracking systems and point-of-sale solutions. These modern and advanced tools might fetch some expenses that you need to keep in mind, such as hardware costs, installation fees, and purchase and subscription fees.

Cleaning Fees:

Sanitation and cleanliness play a huge role in the reputation of a professional salon. Proper hygiene adds up to the other Cleaning Fees: aspects like ambiance and overall vibe of a salon. Some amount of expense gets dedicated to the products getting used for the cleaning as well as to the cleaning staff.

Insurance:

Like how important our health and life insurance is, renters insurance is also a lifesaver of a business! In unanticipated events like a fire breakout, or an injury on the premises, renters insurance will help your business mitigate the costs. Most insurances charge an annual subscription amount, depending on the type of insurance you are going after, and the policies and coverage you select.

Utilities:

Expenses from basic utilities like electricity, gas, and water contribute a lot to recurring expenses. The larger the salon, the more the amount you pay for the space and the consumed utilities. If your salon comes with an extravagant ambiance, with halogen lights and televisions to entertain your customers, the utility bills are obviously going to increase.

Credit Card Processing Fees:

In today’s world, with the digitalization of payments and advanced payment technologies, most people prefer using their debit or credit cards to pay for their used services. This means that you will need to pay processing fees for every transaction taking place. Credit card processing fees cost anywhere between 1.5% - 3% of the total transaction. This might seem like a negligible amount in the beginning, but it does add up to a hefty amount over time.

Marketing:

Gone are the days, when word-of-mouth would be the only and the best mode of marketing. Nowadays, to build up a base of loyal clients, word of mouth is just not enough. A business needs to be marketed across a lot of online mediums, printing mediums like newspapers and magazines, and social media. Most young and new-age businesses rely on influencer marketing where a popular “influencer” or celebrity endorses and promotes a brand or a business.

Now that we have calculated most of the recurring expenses, let us see what kinds of expenses fall in the ‘occasional’ category. The occasional expenses, as per its name, include expenses that don’t occur very often but once in a blue moon. A salon and spa business should take care of such expenses and be ready with enough cash as these expenses differ from business to business. It is always a safer option to handle unexpected expenses to avoid a bad impression among the customers.

New Equipment:

To set up a new salon, you would require a lot of specialized equipment in the beginning. These expenses include items that aren’t purchased often such as chairs, commercial hair dryers, and washing basins. These types of equipment are either bought once while setting up or are upgraded occasionally when they wear out.

Signage:

To have an edge among pedestrians walking by your salon, your shop needs to have catchy, bold, and adequate-sized signs, banners, or boards. Though all that glitters is not always the gold, it is better to generate curiosity among your potential customers and make your salon noticeable and speak for itself.

Website:

As we mentioned before in this article, the world is going online across every corner of the globe. Every business needs to have a website of its own. Taking your business on the web can be a crucial move for your business’s success as it will increase your presence among customers. Here, the expenses can include the fees charged for setting up the website, and domain, and even for occasionally re-designing the customized homepage of your website. If you wish to have an application for your business as well, which is a powerful move, investing in building a robust application would cost you some fees. There will be some significant upfront costs but it will definitely take your business to the next level.

Well, if you own a salon or a spa and want to take it online, we, at DINGG, are here to help you. We understand how an online portal for customers to schedule a salon appointment, can be a game-changer move for your salon. So, if you want to make it all easy for your loyal customers by helping them flawlessly schedule spa or salon appointments, head over to DINGG and get started.

Beauty Products:

It will be the most obvious thing to mention, but you can’t run your salon without your accessories like scissors, combs, shampoos, conditioners, and all kinds of beauty supplies. These supplies are needed to be maintained in extra amounts as you don’t want to run out of these on a random day. Therefore, do not forget to include the inventory’s holding costs. At the same time, make sure you don’t stock up too much of your inventory space, but maintain the proper balance so that it doesn’t cost you more.

Miscellaneous Expenses:

Although we have tried to speculate and jot down all types of possible expenses, there are always some unexpected expenses that pop up all the time at a salon. This is why it is important to plan to have some extra amount of money reserved for miscellaneous expenses.

There is no denying that running a business, be it of any kind, involves basic and simple math. Tracking expenses for a salon and spa can seem pretty overwhelming for someone who’s just starting out with the business. Effective and well-thought-out financial planning always comes in handy during tough times. There are certain things that a salon needs to sort out to track down its expenses. This includes the following:

● Understanding your Cash Flow

● Avoiding Over-staffing

● Controlling your Inventory

● Deploying a Salon and Spa management software

● Creating an organized system with cost-effective measures

● Analyzing your numbers

● Setting budgets and goals

● Save! Save! Save!

● Managing slow seasons

Let us go through each one of these practices and try to understand how exactly it is done. We will also look into the importance as well as benefits of these practices.

Understand Your Cash Flow

For a salon or a spa, cash flow is the strongest pillar of their financial foundation. To understand your salon’s cash flow, you need to learn the entire business in and out. Keeping a track of all the money that’s coming in and going out of your salon constitutes its cash in-flow and cash out-flow.

There are a few things that drive the cash in-flow and out-flow of a salon business’ financials. For starters, you need to make sure that you are progressively reaching out to more of the target customers. Keeping new clients coming in is the key. It probably is the most time-consuming thing but god does it pay off! Another thing to take care of is repeatability. Make sure that a major chunk of the customers is repeating their visits. Customers that are repeating their visits often tend to spend more than what they did last time. They might as well try out other services if they liked the quality of services being offered.

Avoiding Over-Staffing

Over-staffing can be one of the most damaging ways to downgrade your expense management. Employing a lot of staff, especially without decent skills, for an amount of work that doesn’t even need that number of employees, is a sign of poor management. At the end of the day, despite their effective use, it is you who will have to pay the monthly income to them. Therefore, it is important to hire beauticians and stylists that are highly skilled and provide services that are worth their pay scales. Moreover, a customer’s experience depends a lot on the stylist or the beautician that gets their job done.

“Hire as much you require”, stick to this philosophy. At the same time, focus on both, the quantity as well as the quality! In other words, make sure that the hired stylists are experienced as well as professional in the workspace, instead of crowding up the salon with a lot of inexperienced stylists.

While reducing your staff, also make sure to automate some of the tasks. This will help you to lift off the tasks that were performed manually by the working staff and would help you avoid the problem of over-staffing in the first place. In this way, by automating tasks, you could save a lot of funds, eventually helping you utilize the same funds in other forms. To get better insights and to have better control over staff management, you can make use of various salon and spa management software available in the market.

Controlling Your Inventory

Inventory plays a very deciding role in deciding your budget. This is valid for all businesses that require some kind of supplies, machinery, or finished products to be stacked up and stored. For a salon, most of the inventory includes all the supplies required for providing its services. These supplies include products such as shampoos, conditioners, lotions, facewashes, scrubs, etc. The inventory also includes equipment such as hair dryers, scissors, and combs.

Now, this inventory, just like the other parameters varies as per the size of the salon and the services being provided. To cut additional costs and save some funds out of maintaining optimum inventory, the prime key is not to overstock. Another thing to be conscious of is the necessity of the products. Buy and store only those products that you essentially need or the products that customers demand the most. This can be figured out by extensive research while starting out the business. You can analyze your customer’s sales history and thus, get a brief idea of how to control your inventory. Collecting at least rough data about the products that are being consumed the most or the least can be of big help in managing your salon inventory.

Gathering this data at your fingertips isn’t rocket science but something that can be done within a few clicks. For this, your salon needs salon and spa management software that saves you enough time by keeping a track of your inventory for you. And that is our next point. Let us discuss it in detail.

Deploying a Salon & Spa Management Software

If you wish to have an all-around solution for all your salon management problems, investing in full-fledged and effective salon management software is all you need. A good salon and spa management software can streamline your work such as booking online appointments, tracking your inventory, and whatnot.

For example, to get clients to repeat their salon visits, a salon can create membership packages and begin rewarding its loyal clients with points or coins. This can guarantee future income and more business opportunities as the clients would prefer redeeming their reward points by making use of membership packages. If a salon wants to study and analyze what its customers feel about its offered services, it can get a real-time opinion of its clients through a feedback system of software. A lot of insights can be obtained through a feedback system of management software like DINGG, such as how people react, treat, and rate your salon online.

Not just this, but generally software has a built-in dashboard that shows how your salon is tracking overall. You can also get weekly/monthly reports and metrics that actively demonstrate sale volumes, eventually helping you define and track your expenses accurately. Without stressing you out, a good salon and spa management software brilliantly takes care of a bunch of things saving you a lot of time and making your business profitable.

Analyzing Your Numbers

They say, “Data is King”, and rightly so. Having the most accurate and large amounts of insights and information never fails to give your business a competitive advantage.

Good and efficient financial planning requires understanding your financials. Getting a handle on your numbers helps you know how your business is running. Without understanding its numbers, it is easy for a salon business to make poor decisions and go belly up. There are a lot of things about a business’s financial numbers that will offer you a lot of insights. Asking the right questions would lead you to the right answers. Try to find and know the answers to the questions like the following:

● What kinds of products are being used and sold the most/least?

● What time of the salon is the busiest/slowest?

● What kinds of services do most of the audience love to have?

● Which stylists among your entire team bring in the most revenue?

● How many clients come back again?

● How many clients are opting for the membership package, if any?

If you look closely, these questions are centered around your salon’s financials. Answers to these questions will fetch a lot of insights that will definitely be beneficial for your salon. It will allow you to modify and optimize the current working model of your beauty salon. Not only will it help you make the necessary adjustments to your salon’s offered services, but as well help you understand the ongoing practices that need betterment.

Setting Budgets & Goals

After you have speculated every requisite and organized everything that comes into the picture, it is time to set a budget. Based on the figures derived from your cash flow, you will get a basic rough idea of how much funds from your wallet are going to get used. This will help you create a budget and estimate your income for any particular period of time. A week, a month, or even an entire year.

While budgeting, you need to consider each and every cost that comes into the picture; such as the infrastructural costs, cost of wages, administrative expenses, utilities, payback loans, as well as the working capital on hand. Above in this article, we discussed all probable types of expenses that are essential to set up a beauty salon. For budgeting, there needs to be an accurate, if not, an average estimation of these expenses. Therefore, you can get a clear idea of the total investment that needs to be done.

In India, to set up a salon or spa, considering all the above-mentioned costs, it takes anywhere between 15 to 30 lakhs. Now, this is a very vague estimation. The total amount varies as per the factors such as the location and the size of the salon. Once you calculate all the contributing factors, depending on the numbers, you can draft a budget. It will give you a clearer idea about the amount that you can set aside every week or month as part of your savings. And once you have a budget, it will be easier for your salon to stay on top of its finances.

Creating An Organized System With Cost-Effective Measures

Be it any kind of business, an organized system where every little service and task is in order is essential. Not only does it maintain order but also creates a healthy and beneficial working atmosphere for important activities.

For a salon, to cut down costs in an efficient manner, it is very important to implement some strong and fool-proof cost-effective strategies. Maintaining healthy use of practices that add value and benefit the business can do wonders in long run. Making use of such techniques and strategies can help lessen costs as well as provide benefits to your salon and spa business. Let us walk through some of the cost-effective measures.

● Using management software to schedule appointments, billing, and a bunch of other purposes.

● Buying supplies in little abundant amounts from a salon distributor while managing the inventory space.

● Marketing your business through online mediums through powerful promotions and relevant content.

The measures mentioned above were just some of the major plans that you can implement and carry on within your workspace. There are many other ways as well to enhance the working culture so that everyone collectively works towards a similar goal. Such cost-effective measures, in a long run, will not just save your time, sanity, and money, but as well reap the financial stability benefits that their implementation can sow.

Save! Save! Save!

Let us assume you have understood the cash flow of your business, researched and analyzed the expenses, and implemented many cost-effective measures. There’s one thing that is common in all these practices and measures: Saving! To manage your beauty salon, spa, and wellness business, you need to save enough amount of funds for unexpected and unanticipated times. You also need to have a business emergency fund that will help you to cover your operations in unforeseen circumstances.

If you are thinking of saving little chunks of funds as some kind of rocket science, and are wondering how can it be done, then start making little goals. Just like how you did while budgeting and setting financial goals, you can set small and achievable savings goals. For example, from the daily sales of a salon, you can practice a habit of saving 5% to 10% of it. These funds will come in handy as you wouldn’t be needing large loans when your equipment and tools would need an upgrade. Another thing to remember is to have a separate bank account for your savings. This way, you will not get tempted to withdraw money from the savings account and will keep the funds intact.

Managing Slow Seasons

Customers have multiple reasons to walk up to a salon. Therefore, it won’t be like a dry season for a long duration where there will be no customers. Although salons aren’t something that works around only in particular seasons, they are pretty busier during specific times of the year.

For example, around the holidays, salons and spas are bound to be busier. During the festive seasons, customers from all age groups, who wish to groom themselves with a new look, turn to salons. During the summers, when most marriages in India take place, customers tend to visit salons, for pre-bridal grooming, facial treatments, hair care, and other beauty salon services. These seasons and events fetch a lot of customer base. But have you thought of the seasons when there are no special occasions when there is no special reason to get a salon treatment?

To tackle these times, with minimum cash in-flow reflecting on the balance sheets, a salon needs to be ready with a budget plan. In these times, when the salon’s funds have some extra profits to hold on to, there is hardly any strain on the pockets. These extra funds, during such slow seasons, help to invest more in marketing and promotions.

DINGG is one of the most powerful, efficient yet the most affordable Salon and Spa Management software out there. Designed and developed with a brilliant team of experts in the salon industry, this excellent software has got a lot of features that elevate your business. DINGG has its services available for all kinds of needs that come with maintaining a salon. We, at DINGG, operate towards a simple goal: To provide customized and beneficial solutions for salons and spas, by boosting their working model for faster growth and customer engagement. Following a SaaS distribution model, the software that we have built helps the salon to increase the efficiency of resources by automating day-to-day operations.

If you own a salon and are having trouble keeping a check on all properties in one place, DINGG can give your salon a competitive edge with its tools like billing, stock management, automatic payroll, sales reports, etc. The software enables you to do GST as well as Non-GST billing for the services you offer. To make appointment scheduling and invoicing easier, it sends an invoice to a client’s device via SMS and email. DINGG also generates reports for the day’s billing, walk-ins, and expenses, so that you get a hold of every little vital stat of what’s happening.

If you look for all the popular salon and spa management software available out there, you might come across a bunch of them. But what makes DINGG the best option for your salon is that it has no limits. There are a lot of things that you can perform with all the tools that DINGG offers. For example, adding as many employees, users, and clients, inquiry reminders, client wallets, reward points, etc. Moreover, the interface of the software is so simple and user-friendly, that it doesn’t stress out someone who’s new to handling management software.

If you wish to invest in advanced, powerful, and user-friendly Salon and Spa management software to increase customer experience, attract new consumers, and boost your revenue, DINGG is all you need.

For a salon where the owner has invested years of training, built a network of loyal clients, and created a strong business plan, failing on the finances part would be a huge misery. Irrespective of the scale of the salon and spa, it is essential for every salon business, small or large and established, to stay on top of their business.

But before concluding, let us just be honest and agree with the fact that operating a salon isn’t cheap. If you stayed along with us throughout the article, you must have realized all the types of expenses a salon requires. When you add up all these expenses that are needed to be considered, the total amount’s number rallies up. Moreover, the total varies depending on your location, size of the operation, clientele, etc. It is the implementation of the right cost-effective measures, tracking expenses, and saving habits that make a salon and spa profitable. Implementing the things, strategies, and techniques that we discussed in the article at your salon, can do wonders for your business in ways that you cannot imagine.

All this might be a little overwhelming for you if you have just started out or are someone to start a beauty salon business in the future. But, once you practice these strategies efficiently, it will be just a matter of time before your salon gains some attention. Once your salon reached a certain level of popularity and trust through its loyal clients, it becomes a little easier to sustain. You might as well plan to expand it or modify the working model in a more optimized way.

To succeed as a salon owner, you need to minimize all the above-mentioned expenses through careful planning, wherever possible. At the same time, the primary focus should be on generating new and expanding the older customer base through offering flawless services. If you wish to have more assistance from experts in the industry, feel free to check out DINGG.