Every business owner needs to be comfortable working with numbers. Your business is only as good as the numbers that it reflects. Whether or not your newly started nail salon will be successful or not will depend on the numbers it generates. Therefore, it is important to not only be comfortable in working with numbers but also comprehend the underlying message that those numbers communicate. The numbers will assist you in your decision on cash flow, finances and budgets. There are many ways to do it- manual or by deploying a nail salon management system. The latter will certainly make your life easier. Listed below are some of the best tips to keep in mind when starting a nail salon business
- Budgeting& Accounting
Budgeting and accounting are two different activities. A budget is an estimation of your expenses. On the other hand, accounting is keeping records of expenses incurred. If you’re wondering the purpose of a budget – simply put it is a tool that helps you keep your expenses below your revenue. With some effort, you can ensure that you have budgets for promotions, marketing, employee wages, fixed cost such as rent, and employee benefits etc. A good POS system will allow you to mention the budget for every category and prompt you when you’re nearing the budgeted limits.
- Formulate your pricing
Your pricing will determine your revenue. While it is not an easy skill to acquire, pricing your goods and services takes a bit of effort. If you try to undercut your pricing at the time of starting operations, you may find it extremely difficult to pass on hikes later. Therefore, figuring out the pricing needs some serious effort. Study the pricing patterns of your competitors, figure out your fixed and variable expenses to arrive at a break-even number of services that you must deliver inorder to cross the threshold. Compare your pricing with that of your competitors to find your niche.
- Prepare P&L Statement
A Profit & Loss Statement is a document that provides a snapshot of how your business will perform. It is a summary of all revenue-generating expenses and dead expenses such as rents. The summary provided by a P&L statement will encourage you to improve your metrics by executing cost control, generatingsales and increasing revenue. If preparing a P&L statement from scratch is tedious and time-consuming, you may use the Google Sheets profit and loss template.
- Understand your Cash Flow
Cash flow is a weekly or fortnightly statement of revenue and expenditure. It goes without saying that your business is healthy so long as your cash flow is consistently in the black. Inculcate disciplined expense habits by ensuring that you do not default on rental and statutory employee benefit payments. Since these are fixed monthly expenses you can multiply it by 12 and divide by 52, to estimate the funds that you need to set aside every month. The cash flow statement will also assist you in understanding how much of the funds can you reinvest in the business. A good POS system will help you generate error-free cash flow statements and also give a graphical representation of progress made over time.
- Comprehend your ratios
As a business owner and manager, you need to understand the basic business ratios such as ROI, Debt to Equity, client growth, profit margin etc. These are indicators of your business’s performance and health and give highly accurate information. Use the information provided by these ratios to engage in course correction, whenever necessary.
- Deploy a good payroll system
Your business is represented by your employees. Thus, it is important that your employees receive accurate compensation and the disbursal is done timely. Any failure to do so will result in disgruntled employees and will eventually show up on your business’s reputation. In the worst-case scenario, you will end up sending them hunting for better opportunities. Nowadays, nail salon management systems have in-built payroll and commission modules. Utilizing nail salon management software is highly recommended. Zenoti is a highly popular management system, which has many features including running payroll and commissions.
We hope that the above tips will help you be financially prudent and assist you in developing a healthy relationship with money.