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Six Ways to Control & Increase Salon/Spa Cash Flow


After months of anxiety over unemployment, PPP and EIDL loans, and figuring out reopening restrictions and protocols, salons and spas are finally seeing cash flowing in rather than just out.

So, is it finally time to breathe a sigh of relief? Unfortunately, not just yet.

In addition to safety protocols, many states have mandated social distancing and occupancy restrictions. Many states are 50% occupancy for salons. Vermont salons are limited to just 25%.

FACT: You cannot pay 100% of your payroll and operating expenses running at 50% or less capacity. Add sanitizing protocols, PPE and increased laundry costs, and your cash flow is tighter than ever.

From the onset of the COVID-19 crisis and shutting down of the economy, Strategies has been urging salon and spa owners to use this rare opportunity to get a handle on cash flow.

Here’s why:

  • Salons and spas have a history of weak profit and operating on the financial edge.

  • Industry understanding of Profit & Loss Statements, Balance Sheets and Statement of Cash Flows is weak at best.

  • Rather than making a decision from financial reports, many owners attempt to manage cash flow by checking online bank account balances.

  • Cash-Flow Planning and locking into spending budgets are business disciplines that most owners avoid rather than embrace.

The absolutely UNFORGIVING financial reality of the post COVID-19 crisis...

From the start of this crisis we’ve been saying, “If your salon/spa was struggling financially before this crisis began — it will struggle more post crisis.”

  • Operating costs will increase.

  • Clients will likely spread out service visits.

  • Controlling payroll costs and balancing productivity rates will be an ongoing challenge.

  • Service pricing MUST be based on cost-per-hour + profit — not guesswork, assumptions, fear and ego.

The single most potent fix for financial challenges is to embrace financial literacy and creating and living a Cash-Flow Plan.

Here are six strategies to control and build a cash flow:

  1. Gotta have a Cash-Flow Plan: You can analyze your Profit & Loss Statement and Balance Sheet all day long, but these reports, no matter how timely, are historical reports of what happened. Looking at these reports is like looking in the rear-view mirror to see where you’re going when all they can do is show what happened in the past. You need a Cash-Flow Plan (a projection for revenues and budget for expenses) that looks forward month by month into the future. KEY: Without a Cash-Flow Plan, you’re driving your company financially blind.

  2. Gotta live your plan: All diets work. All fitness programs get you into shape. The secret is 100% commitment and discipline. If you don’t commit 100% to building and living your Cash-Flow Plan, you compromised your leadership and the financial wellbeing of your company. Most cash-flow problems are the result of leader behavior and bad financial habits. KEY: Commit to changing your financial behavior and habits and it’s amazing how quickly a company can emerge from the financial fiery pit of hell. Becoming a debt-free company is absolutely doable.

  3. Gotta share your numbers: I’ve been a long-time believer in sharing company numbers. Some leaders fear that sharing numbers will be detrimental to the company because employees may misuse or misinterpret what the numbers mean. Other leaders are against sharing numbers because there are certain “questionable” expenses they don’t want anyone to know about. (Perhaps that’s the reason the company is cash starved.) KEY: Sharing numbers is a learning process that takes time. You don’t just hand financials to everyone. You share numbers in stages supported by financial literacy training. People need to know where the numbers come from and what strategies move numbers in the right direction. Jack Stack, the originator of “open-book management” says, “With every pair of hands you get a free brain.” Get more brains focused on creating positive cash flow. No compromise.

  4. Gotta have financial scoreboards: Business is a game and you can’t play the business game without a scoreboard. Scoreboards tell the team if they’re winning or losing that month. On the 15th of the month, the scoreboard should say, “We’re at 50% to goal — keep pushing.” Without a scoreboard, all the 15th of the month means is, “We’re halfway to we don’t know.” It’s not funny. It’s serious. KEY: The monthly service and retail goals you projected in your Cash-Flow Plan go into each month’s scoreboard. Start scoreboards and huddling every day.

  5. Gotta make tough decisions: The more critical your cash flow, the more difficult the financial decisions you need to make. KEY: In a worst-case scenario, owners may have to make adjustments to downsize their personal lifestyle. Don’t like that idea, then let any non-essential staff go. Don’t like that idea, then shut down the least profitable department in your company. Don’t like that idea, then start cutting employee benefits. I think you’ve got the message.

  6. Gotta stop making excuses: Strategies coaching clients that embraced financial literacy, engaged in Cash-Flow Planning and created three plus months of cash reserve, entered this crisis in good shape. They are reopening as financially healthy companies. KEY: Work on the gotta do’s and spend on the gotta haves. Avoid the nice to do’s and nice to haves. Entrepreneurs are notorious for justifying just about anything. Stop making excuses or ignoring your cash-flow reality. No compromise.

Here’s my challenge to you: There is NO reason for employee-based salons and spas to struggle financially.

There is no reason for salons and spas to be struggling with credit card debt, financing debt, and even worse, getting stuck in credit card receipts financing.

There is no reason why salons and spas can’t build three plus months of cash reserves.

Financial literacy and Cash-Flow Planning is no longer optional.

If you don’t have a Cash-Flow Plan, contact Strategies. We have a four-week coaching program where we build your complete plan for you...and teach you how to use it. AND...if you sign up before Thursday you can save $100!


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