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How to understand what our computer systems are telling us

Quote  I remember opening my first salon with no computer system, many years ago now (I hasten to add), with just an inner feeling of what felt right and the belief that if I was out the front converting clients to higher services on the day, rebooking, and giving great consultations which included a plan, all my stylists would do the same.

Wrong!

Unfortunately, the reality is some stylists are quite happy to watch you do it but don’t see why they should do themselves.

After all why should they make loads of money for the salon owner?

Well, to begin with this is not about people making loads of money for the salon owner. Half the time it’s about the stylist being accountable for the wages they’re paid. If their wages are out of kilter with the revenue they bring into the salon, they’re slowly killing your salon business.

However, the fact is that most salons today do have computer systems in place. If you haven’t I would say that it’s the very next thing you need to address within your business. In this day and age a software system is an essential, not an optional extra.

The NHF has a helpful guide on how to choose a salon software system. Call them on 01234 831965 for details.

Even if you do already have salon software in place, we can get a bit complacent about it and we don’t really use it to our full advantage. So your computer is sitting there and all those figures are available for you to use.

But what does it actually all mean?

And when I’ve sorted out what it all means, how I can get that message across to the rest of the team in the most positive way, especially if it’s obvious there are a few performance issues with some team members.

Firstly we need to break the figures down into 2 main categories

  • Salon performance
  • Individual team member performance

EVERYTHING should be broken down weekly so you can use the information in appraisals and performance reviews. It’s much easier to understand and discuss weekly performances, rather than an overall monthly one, with a team member. Monthly figures just don’t seem to have the same impact, probably because people find them less easy to understand.

So I have the two categories, now what figures should be used?

Firstly if your company is VAT registered, you need to adjust your computer to give you all figures with VAT taken off first. All salon software systems have this facility.

Secondly, figures that should be used are known as Key Performance Indicators or KPIs. All businesses should have KPIs.
For hair and beauty businesses KPIs fall into six main categories.

For weekly salon performance you will need these:

  1. Total salon weekly revenue in services
  2. Total salon weekly revenue in retail
  3. Total Individual performance for services
  4. Total individual performance for retail
  5. Individual employee salary as a percentage of individual total revenue
  6. Total employee costs as a percentage of total revenue

For weekly individual performance you will need these 9 KPIs:

  1. Total revenue for services
  2. Total colour revenue and percentage to total revenue
  3. Total styling revenue and percentage to total revenue
  4. Total retail revenue and percentage to total revenue
  5. Total number of clients
  6. Total number of request clients and percentage to total clients
  7. Total number of new/salon clients and percentage to total client
  8. Average bill for services per client
  9. Salary as a percentage of total services revenue 

How does a salon owner know what the right figures are?

Benchmark figures for a stylist’s individual salary to individual salon revenue should run somewhere between 33% to 35%.

Total salon wage bill to total salon revenue should be stable at the 50% mark and should include pensions, annual holiday pay, sick pay, etc.

You must be aware that this is only a manageable level. If you allow yourself to become overstaffed for your level of productivity, you will immediately be eating up the portion of your takings that should have been profit. Ignore this benchmark at your peril – if it goes above 60% your business will not survive.

Retail KPI in the UK should be 10% of the total revenue. In other words, if a stylist makes £1000 per week in the salon they should have made £100 in retail sales. This equates to two £10 purchases a day in a 5 day working week.

Request KPI from established stylists should be aiming towards 80%. If this starts to dip, maybe it’s an indicator that there is a need for some motivational or fresh skills training. In other words, a boost to encourage increased creativity or customer care performance from the individual.

Running alongside your salon performance is your weekly break even.

Example of key expenditure in running a hair salon:

EXPENDITURE

  • TAX
  • VAT
  • RENT
  • BUSINESS RATES
  • BANK LOAN
  • WAGES
  • NI/
  • PENSIONS
  • ACCOUNTANT/BOOKKEEPER
  • GENERAL INSURANCE/MUSIC RIGHTS
  • COMPUTER/PHONE
  • UTILITIES
  • MAINTENANCE
  • MARKETING/PR
  • LAUNDRY
  • SALON PRODUCTS
  • WET STOCK
  • RETAIL
  • SALON SUNDRIES
  • STAFF TRAINING
  • SALARY

Remember weekly break-even figures don’t include profit; hitting break-even means you aren’t making a loss but your business isn’t going to survive unless you make a profit.

It came as a real shock to me in the first couple of years as a salon owner, although I was working my butt off I was actually taking home a wage which was lower than when I had been a stylist working for somebody else!

Sticking to benchmark figures and KPIs means you’re staying in business – but you’re certainly not making a ton of money.

Are you happy just staying in business?

Knowing your numbers is the first step to controlling them. Make the most of your salon software and use it to produce information that allows you to market, manage and control every area of your business.

Allowing your team to understand what it takes to run a business and how important it is to manage productivity will stop any of their “why should I" moments. With increased understanding, it will help to stabilise teams and bring about a happier working environment where everyone knows what needs to be done, why and how.

Want to know more about managing your team and increasing your profits?

The National Hairdressers Federation runs training courses for salon owners, run by people who are salon owners themselves and with lots of experience in the business. Like Penny, they’ve all been there, done it and got the T-shirt!

So why not book onto one of the NHF business courses:

Penny Etheridge runs the NHF event on:

  • How to use salon software reports to manage your team (1 day)

Richard Wallace and Chris Amos run the NHF events on:

  • How to make your salon more profitable (1 day)
  • How to deliver a great client experience (1 day)

The NHF also runs evening events on a variety of topics including:

  • What does pensions auto-enrolment mean for employers?
  • Allergy alert testing
  • Introduction to trichology

Go to www.nhf.info/events for details and to book a place online – don’t delay as most events sell out fast.

Managing your teams – support from the NHF

Most employers find managing their teams is the hardest part of running their business. The NHF provides you with 24/7 access to an employment law helpline, with expert HR and legal help at the end of the phone line.

It’s crucial that you have contracts in place with your employees which clearly sets out the terms and conditions of their employment. NEVER be tempted to run your business without watertight contracts – they’re there for your protection.

Employment contracts come free with your NHF membership. There are also Apprenticeship contracts and, if you have chair renters working in your salon, there are also chair renting agreements. And, if you’re thinking about chair renting, the NHF has published a guide on the advantages and disadvantages any salon owner needs to think about first.

Take a look at the NHF member benefits and join the NHF today!

Quote ETH to get £25 off your first year’s NHF membership

www.nhf.info/join

Penny Etheridge, Radiant Consultancy Quote left
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