I’ll be the first to admit that budgeting is hard. Really hard. Budgeting for your salon or beauty brand is especially hard because there are not many resources out there. Not to mention, budgeting gets such a bad rep that business owners don’t even try it.
They assume that budgeting for their salon or beauty business this big scary thing that sucks all the fun out of life. This couldn’t be further from the truth. Budgeting for your beauty business doesn’t restrict you from anything. Think of it as a guide to show you how to allocate your money to benefit you.
Have you ever budgeted for a vacation or expensive bag? It was simple right – you took your hard-earned money, and placed it into savings for a future, prearranged event. That’s simply all you’re doing when you make a salon budget – you’re allocating money for a prearranged spend.
The first step to budgeting for your salon or beauty business is the easiest – look at your previous spending.
Nope, I am not asking you to cut out Starbucks, fire your employees, or go cancelling your favorite subscriptions just yet. The first step, before restricting your spending, is identifying what you spend money on.
You cannot begin making decisions about what you should or should not be spending money on if you have not yet pinpointed where it all goes.
Take a look at your bank statements from the past 3-6 months. List out all your sources of income and expenses. There are two types of expenses in business. There are your direct costs and indirect costs.
Direct costs are the costs of goods. You may have heard the term “cost of goods sold” or COGS. Costs of goods sold is the total costs it took to produce that item.
For example, let’s say you sell a beauty product like a skin care serum. The cost of goods would be the product formulation, bottle, and packaging. These costs are absolutely necessary just to produce that item to the public.
Service providers have these costs too. If you’re a hair stylist this would be the shampoo and conditioner used on every client prior to the main service being complete. These costs are necessary just to provide this service to the public.
The other type of costs are indirect costs. Indirect costs are the operating expenses. These expenses are necessary to operate or run your business.
An example of these would be your software systems, marketing, rent and utilities. These costs are not necessary to produce the product or service but are crucial to running your business.
When you’re beginning to budget for your salon or beauty business, you have to identify your previous spending and the type of expenses you’re spending money on.
After you’ve laid out these costs, look at them from highest to lowest expenses then make the decision on where you can save. Start viewing the highest costs, first, to determine what expenses are necessary and which are just nice to have. By adjusting the highest costs first, you make the most impact.
For instance, paying rent on your salon studio is a necessary operating expense, however the money spent on the coffee and tea bar located inside your salon studio is just nice to have. This is not to say, “cut off all luxuries and nice things” from your business. It’s actually important that you don’t restrict yourself too much. At this stage, you should just point out what’s necessary and luxury, then you’ll have to make the decision on where to save.
Saving money doesn’t mean you’re cutting the item out of your life completely, just adjusting it to meet your financial situation.
These questions allow you to explore other options before cutting yourself off from it completely.
For example, software costs add up in your business. Most softwares has a subscription module, like Netflix. You pay a monthly fee to utilize their platform.
If you budgeted aggressively, you’d say “I’m going to cut all subscriptions to save money”.
But, if you are budgeting strategically, you’d ask yourself:
“Is there a way I can get the same exact product for a lower price?” Your brain will begin thinking of other options, then it hits you! You remember that this software offers a lower price if you pay in full for 12 months. You decide to pay in full, save 15% on cost every year and no longer have to worry about the monthly charge. All of that and you didn’t have to get rid of the software you love and is useful to you.
Budgeting for your salon or beauty business isn’t about restricting you from things. It’s about strategically spending your money to benefit YOU. Budgeting isn’t about taking things away or depriving yourself of luxuries. It’s simply allocating your money into the right places. Once you understand that basic concept and apply these simple steps, you’re ready to start budgeting.
Tip: Your budget should be tailored to your salon or beauty business needs and goals. Remember to be kind and empathetic with yourself. You’re still learning and growing.
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If you still help, contact us. We will work with you to craft you a budget that helps your salon organize and save more money.
June 6, 2022