There are many parts involved when running a salon, especially expenses. Often times it may be difficult to manage, which can lead to a ton of debt. Here are six budgeting tips that will help to get your salon on the right financial track for the upcoming year.
Feel free to post any of your own budgeting tips to Betty Dain’s Facebook Page.
Spending would naturally be at the top of this budgeting list as it is likely a big reason for debt and lack of savings. It is wise to record all salon expenses such as supplies, utilities, marketing, and any other area that money is being allocated. This includes the salon mortgage and credit cards as well. Write down every single expense the salon makes. Once that is complete, add a line for savings. Savings should also be treated like an expense. This way it won’t be so hard to establish and maintain. Note, this money shouldn’t stay in the salon. It should be deposited in an outside bank, money market, or mutual fund. After all, money can’t be spent if it’s not in your possession.
- Define expenses as percentages
Once you’ve listed the expenses in dollar amounts, it is a good idea to convert them to percentages. This is a good way to see how they relate to each other. For example, if your total expenses equal $5000 per month and your electricity is $500 per month, divide the 500 by 5000. Now you will see that 10% of your salon’s revenues go towards electricity. Some salons may exceed the 100% mark in expenses, but this provides an opportunity for changes like cutting back on unnecessary expenses.
- Prioritizing spending
Prioritize. Are all these expenses really important to the salon? Go through the list and identify which expenses are not important or semi-important. Now eliminate those unnecessary items from your day to day. Once the expense to revenue ratio is at a reasonable place, deposit that extra money into your salon’s savings account.
- Making the change
Find ways to cut back anyway you can. See if you are able to compromise on cost or compensation with your staff, suppliers, or even yourself. Make time to review the budget periodically in order to keep the expenses under control and maintain that savings account.
Coming face to face with your debt won’t be easy, but it’s very necessary, because debt can’t disappear on it’s own. However, not all debt is bad debt. There is such a thing as healthy debt, basically anything that will grow in value like a house or your education, and hopefully your salon. Unhealthy debt lies in expenses that won’t last; dinners, clothes, or your car. A car’s value depreciates as soon as it’s driven off the lot and in some cases depreciation on business equipment can provide a nice tax break, but that’s another discussion.
- Categorize / Prioritize payments
When you figure out which debt is healthy versus unhealthy, separate those expenses into sub groups of short-, intermediate-, and long-term. Then find out the interests rates for each. Tackle the high interest rate debts first as well as the ones with non tax-deductible interest rates. Try to keep your credit card balance as low as possible. With that being said, think about your interest and try to pay more than the minimum for your credit card bill.
- Curb those impulses
Don’t fall for the impulse buys. A good rule of thumb is to wait 24 hours before making a purchase that you don’t need. Chances are, the emotions, that play such a huge role in impulse buys, will pass.
Coping with debt
Do you still feel like you’re losing the battle with debt? Seek help. Check online or in your local business listings. There are organizations out there, such as nonprofit credit counselors that can assist you.