As a business owner, not seeing a profit can be frustrating and certainly concerning. Several factors may contribute to a business not seeing a profit. The two main factors to consider are revenue and expenses. Watch my video to see what I mean.
The first step is to sit back and determine what areas are not working. The best tool to use is your P&L Statements. Now, if you’re not familiar with P&Ls, they are your business' profit and loss financial statements, and it’s crucial to your businesses success. It summarizes your revenue and your expenses; these reports are organized by incoming revenues, fixed expenses like rent, operating expenses, and cost of goods.
Many business owners either hire a company to compile their P&Ls or, if you’re a smaller business, you might find it more economical to compile your own. There are several user-friendly P&L software available that can help if you choose to create them on your own. (We've also put together a package of editable forms to help.)
It’s not enough to have a P&L; you must take the time to analyze it and understand what your numbers are telling you. Maybe you need to increase your revenue by increasing your client count, increase your service prices, or increase your average ticket. Or maybe your expenses are too high. Remember, fixed expenses we often cannot control such as rent. However, we can control things like our professional back bar products, or beverage service that we offer to customers. Are you wasting product at your back bar? What if you canceled your beverage service and replaced it with a beautiful carafe and filled it with fresh water and fresh lemons? These types of operating expenses can easily be adjusted and make a huge I impact on your bottom-line.
The easiest profit formula I can share with you is your Revenue – Expenses = Profit.
As I said earlier, it's often not one contributing factor. You might need to increase your revenue and minimize some of your expenses to see the profit you’re looking for by the end of the year. By taking the time to get comfortable and know your numbers is a great place to take control of your business make necessary adjustments and see a profit.
Photo: El Roce
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Patti Wanamaker brings 21 years of experience to the Milady team where she currently serves as an Implementation and Training Specialist. Her intimate understanding of the salon, school, and beauty industry comes from 18 years of hands-on experience as a multi-faceted training specialist, including 8 years of salon and spa ownership of 3 salons with annual sales of $5 million. Her experience in all 3 areas of our industry allows her to think outside the box and develop innovative training that inspires and empowers beauty industry professionals.
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