$how Me The Money!

By Lisa Starr

Your Presenter

• Lisa M. Starr– 20+ years experience in

salon & spa industry– Senior Consultant,

Wynne Business– Community Ambassador,

Gramercy One– Consultant, educator,

writer, presenter

Wynne Business provides consulting and education, including live seminars and on-site team trainings, for the spa and salon industry

If you are an owner/operator, do you draw a commission or salary for your revenue producing work?

If you are an owner/manager, do you receive a salary for your contribution in managing the business?

What is Success?

Defining Profitability • Dictionary definition –

yielding advantageous returns or results

• What does it mean to you?• Do you know if your business

is profitable?

Set Goals FIRST• Earning a modest living while

waiting for your property to appreciate

• Financing a job for yourself/partner/friends

• Because you like to go to spas!• You enjoy having a LOT of

children

5 Crucial Performance Measures

• Departmental Breakdowns • Average Ticket• Client Retention• % payroll to revenue• Utilization rate

Departmental Details• Service Sales

– Massage/body– Hair– Skin– Nails– Makeup

• Retail Sales– Massage/Body– Hair– Skin– Nails– Makeup

Detail for Income StatementSkin Service SalesMassage Service SalesSkin Retail SalesMassage Retail SalesOther IncomeGift Certificate SalesTOTAL REVENUE

Skin Service Labor

Massage Service Labor

Skin Tx Supplies

Massage Tx SuppliesSkin Retail CommissionMassage Retail CommissionSkin Retail Products COGSMassage Retail Products COGS

Freight and packaging

Concierge Staff

Credit Card Fees

TOTAL COGSEXPENSESNET MARGIN

Income Statement General

Revenues Cost of Goods SoldSales Returns and Allowances (576.00)$ 0% COS - Concierges 157,581.87$ 7%Service Sales - Dental 7,226.88$ 0.4% COS - Esthetics 147,106.83$ 6%Service Sales - Esthetic 382,167.29$ 17% COS - Hair 134,205.28$ 6%Service Sales - Hair 359,510.50$ 16% COS - Makeup 9,702.68$ 0%Service Sales - Makeup 14,256.00$ 1% COS - Massage 164,003.28$ 7%Service Sales - Massage 506,761.50$ 22% COS - Medical 12,507.27$ 1%Service Sales - Medical 64,206.27$ 3% COS - Nail 93,978.99$ 4%Service Sales - Nail 284,970.60$ 12% Total Labor COGS 719,086.20$ 31%Total Service Sales 1,618,523.04$ 70%

Supplies - Esthetics 30,573.38$ 1%Retail - Boutique 120,203.66$ 5% Supplies - Hair 32,355.95$ 1%Retail - Esthetics 165,422.00$ 7% Supplies - Makeup 285.12$ 0%Retail - Hair 47,815.00$ 2% Supplies - Massage 15,202.85$ 1%Retail - Makeup 24,991.00$ 1% Supplies - Medical 46,002.11$ 2%Retail - Massage 18,396.00$ 1% Supplies - Nail 19,947.94$ 1%Retail - Nail 27,884.00$ 1% Supplies - Boutique 57,697.76$ 3%Total Retail Sales 404,711.66$ 18% Total Back Bar COGS 144,367.35$ 6%

Sales- Gift C. 267,129.83$ 12% Retail Prod Boutique 48,081.46$ 2%Events Income 5,892.84$ 0% Retail Prod Esthetics 66,168.80$ 3%Interest Income 0% Retail Prod Hair 23,907.50$ 1%Sales - Tax Discounts -$ 0% Retail Prod Makeup 7,497.30$ 0%Other Income 39.91$ 0% Retail Prod Massage 9,198.00$ 0%

Retail Prod Nails 13,942.00$ 1%Total Revenues 2,296,297.28$ 100 Total Retail COGS 168,795.06$ 7%

Total Cost of Sales 1,032,248.61$ 45%Gross Profit 1,264,048.67$ 55%

Income Statement Detailed

Tracking Revenue

• Hair - 10-15%• Skincare - 35-50 %• Massage/Body 1-5%• Nails - 5-15%• Cosmetics - 40-100%• Gift - 10-40%

• Hair - 5-10%• Skincare - 15-30%• Massage/Bdy - 0-5%• Nails - 0-10%• Cosmetics - 25-50%• Gift - 5-15%

Recommended Retail to Total Sales Ratios

Day Spa Resort Spa

Average Ticket• The quickest way to

grow sales• $ service sales + $ retail

sales / # of clients• Example: therapist has 6

clients who spend $360 in services and $60 in retail; average ticket $360+$60=$420/6= $70

Ways to Grow Average Ticket• Service menu presents a range of

pricing options– Not just $85 and $95– $85, $88, $92, $95

• Each department has micro tx available for small fee – NO additional time

• Add-ons that do take more time• Retailing

Average Ticket Benchmarks• Should be part of

advancement criteria• Higher expectations for

longer term of service• Slow, steady, upward

movement• Assists with increasing retail

ratios• Be aware when service menu

pulls it down (waxing)

Guest retention: a key to spa success

• Retention is the single biggest indicator of therapist and spa success

• If you get them to return, everything is possible

• If you don’t get them back, you need to find someone to replace them– Even if they come back,

they’ll come back later than they would if prescheduled

Retention is a Team Effort• Spa Has To:

– Meet or exceed expectations re facility & amenities

– Be clean and organized– Practice excellent customer

service at all times– Offer services, products &

pricing that meet needs of target audience

– Be friendly!– Prebook

Staff Impacts Retention By:• Building rapport with

client• Future-casting at each

visit• Social styles &

communication training• Performing consistently• Giving the client cues

Retention Benchmarks• Typically higher with high

frequency services (hair/nails)• Impacted by transient/tourist guest

population• Difference between retained by

therapist and facility• Slow, steady gains – be alert for

trends in the wrong direction

Payroll Breakdowns• Labor – Your Largest Expense

–Technical Staff

–Hourly Staff

–Management/Salaried Staff

–Taxes & Benefits

–Owner

Payroll continued

Service & Retail Revenue 100% - Management/Support 10-12% - Technicians Svc 33% - Technicians Retail 1.5%*

*10% of 15%

- Taxes +/- 4% - Benefits +/- 4%Total Payroll 54.5%

Payroll Benchmarks• Average day spa

overhead 40% of revenue

• So, payroll MUST be below 60% to see any profit

• % is focus for you, $ earnings should be focus for your staff

Utilization/Productivity Rates• What do you really sell?

– TIME!• # of appointment slots

sold/# of appointment slots available

• Example: open 9-6 with one hour appts – 9 slots. You book 5 slots, utilization rate 55%

Utilization/Productivity• Hitting high numbers is NOT a

function of your schedule, a function of your geography

• Can be improved by– Smart scheduling of clients– Optimized scheduling of staff– Opening hours that reflect

demand– Facility efficiencies

Performing a Business Evaluation• Identify under-performing

areas• Work on both revenue &

expenses• Develop an action plan• Pick a few key focus points• Involve the staff

Where to Start? • Is each workstation staffed for

maximum productivity?• Do operating hours reflect

demand?• Are you collecting detailed metrics

on client retention• Is your menu written to support

upselling and micro treatments?

Where to Start? • Are your ratios aligned with

benchmarks?

• Is your compensation plan costing too much?

• Are you maximizing your ability to sell all of your time slots?

• Are you tracking performance by department?

$how Me The Money!Thanks for your attention!

Questions? Lisa Starr at:

gotalkone@gmail.com

Gramercyone.com/blog

Facebook.com/GramercyOne