5 Financial Mistakes Salons and Beauty Businesses Make
Hey Beauties! Whether you’re new artist or salon vet, here are some common financial mistakes salons and beauty business make. If you’re like most beauty entrepreneurs, you’ve already made these financial mistakes and that’s okay! Good thing is, bad habits and mistakes can easily be undone. Get your notebook and pen out ladies and gentlemen, you’re going to need it.
1. Mixing Business with Personal
Entrepreneurs tend to forget or just not see the point in separating their personal & business bank accounts. Regardless of if you’re making $6K/year or $60K/year, it’s best practice to keep your personal and business accounts separate to avoid tax penalties, errors, and spending business revenue on personal expenses.
2. Not Saving Enough
Not having sufficient savings will KILL a small business. It is known to be the downfall of many small businesses. Rainy days, slow days, and bad times will happen and having a cushion of money to fall on is the best and most practical way to get through them. The 2008 crash and recent COVID-19 pandemic has shown us that it PAYS to keep cash on hand in case of emergencies. At any given time, your business could slow down, or you may have to stop working. The last thing you want to worry about is how your business will survive through tough economic times. Saving at least 12-36 months of expenses should be a priority in your business.
3. Going it in Alone
When you’re just starting out it’s normal to go in a venture alone. However, once your business starts getting traction it’s important you immediately outsource help. Many salon owners think they can do everything themselves which only leads to tasks not being done correctly or being overwhelmed. No one is good at everything, so focus on being good at ONE thing, and delegate the rest. Hire and outsource bookkeeping, marketing, or customer service so that your business can scale.
4. Not Paying Taxes
Uncle Sam is one guy you don’t want to screw over. A lot of entrepreneurs know this but fail to get a bookkeeper or finance manager to make sure their books are accurate and that they’re paying the correct amount to the IRS. All it takes is ONE mistake and Uncle Sam will give you a hefty penalty fee. Trust me, it’s cheaper to pay a monthly retainer to a bookkeeper than pay a fine or penalty to the IRS.
5. Not Having a Budget
Sadly, this is the most common, even in successful small businesses. Every business needs a realistic budget so that their financial department has a model and set expectations. Budgets can help you save money, acquire funding, and increase revenue. Without a budget, your business will overspend money it doesn’t have or lose out on profits.
Read: How to Budget for Your Salon
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