Three Golden Rules for Managing Your Salon or Freelance Business Finances
For the latest instalment of our ‘Time to Improve’ series, we thought we’d look at the ways you can really get to grips with your businesses finances, streamline the amount of time you’re spending managing them and the options available when you’re looking to grow your business. So, whether you’re a salon owner, a freelancer or own a mobile business, these 3 golden rules may help you spend less time worrying about bills and more time focusing on the things that really matter - hair, nails and beauty, obviously.
1. First up: cashflow is queen!
The most important thing in running any successful business is managing your cashflow. To put that simply: the money coming in from your clients and the money going out paying staff, suppliers and other bills. Is there enough of the first to pay for the second?
Understanding your cashflow will help you avoid financial bumps in the road. The best place to start is to list all of your monthly expenses and compare that to your estimated income each month. The money left over after paying all of your expenses can then roll over to give you breathing room for unexpected bills, invest in training, furniture or other supplies to expand your services, up your marketing game to attract more customers, or to pay yourself and your staff a cheeky Christmas bonus.
Knowing your income and outgoings will then let you see exactly what your budget is, how much profit you’re making and let you make solid financial decisions. Can I afford to hire a new stylist? Can I kit out the salon with new furniture? How much ‘cash at hand’ will I have after I replenish my supplies? You are now the master of your financial destiny!
2. You must have #goals
You didn’t start your own business to coast. Amongst other things, you did it to be financially independent and make good money. Money can’t buy you happiness, but it can buy you Louis Vuitton. So, setting yourself financial goals should be high on your agenda.
The first question: how much do you want to make? The income on your cashflow forecast should be the minimum expectation, i.e. how much do we need to achieve in order to pay the bills. Your goal should be the one you’re striving towards, the one that excites you, the one that will fill you full of pride when you breeze past it with a month to spare.
The next step is figuring out where those riches will come from. How many clients would you need based on your average price? What percentage of your time would that be? If it’s more time that you possibly have, how many staff will you need? Should you expand your services through training or hiring in staff with new specialities? Should you think about a second location? These are all questions you should ask and answer to give you a clear strategy to achieve your #goals.
3. Be disciplined and organised but don’t be afraid to take some risks
It’s no good having clear cashflow plans, budgets and revenue goals if you don’t pay attention to them. That’s why being disciplined and organised are important.
This means good record keeping. Of course, the easiest way to achieve this is to hire an accountant to look after your books. Depending on the nature of your business you could expect to pay around £50 to £150 a month for a good accountant to keep your books up to date, record expenses, file your VAT returns and do your annual accounts. This might be the best option if you’re a larger salon and have multiple people recording expenses against the business.
However, if you’re keen to manage things yourself to save money and be closer to the numbers, there are a vast number of software providers online at a fairly low cost that will make life easy for you. Here are some of our favourites:
• Best for using on the go: Zoho Books
• Best for larger businesses: Xero
• Best free option: Wave Apps
• Simplest to use: Quickbooks
With that said, we don’t mean you shouldn’t ever take risks. When an opportunity arises, do your due-diligence, weigh up the pros and cons, the risk versus reward. Having a good idea of your cashflow and understanding how the rewards fit in to your goals will mean you know better than anyone whether a risk is worth taking that could catapult your business forward. When the right opportunity presents, grab it!
Tag us on social @capitalhair if you have any finance-related queries (or any topic we can help with - let’s face it, the social media team are hoping it’s about hair, nails or beauty rather than finance but they can’t have it their way all of the time).