8 Financial Planning Tips for Salon Owners

Owning a successful beauty salon is more than just handling clients. You must also understand how to run a business and know that part of it requires analyzing numbers and creating a salon financial plan.

You’ll have to make decisions about the cash flow, salon targets, and finances. But since you’re a salon owner, it means you have what it takes to handle the salon’s financial planning as well. 

Here’s what you need to know.

Why Do Owners Need Salon Financial Planning?

Your beauty salon financial planning is like a roadmap for your business’s finances. It’s all about crafting and overseeing a budget to handle essential costs, planning growth strategies, and making smart investments in areas such as marketing, renovations, and customer loyalty programs. 

The goal is to maintain financial stability or, better yet, to boost profits.

Salon financial planning also helps you forecast what you’ll spend and earn in the upcoming year based on what you’re spending now. 

Breaking down your budget into different business areas is also important.

Having a clear plan and budget is crucial because it shows you where your money comes from and where it goes. It keeps you focused on your goals and gives you a solid plan for reaching them.

This kind of strategy helps you manage your salon’s finances better. It covers the basic yet important parts like bills, rent, and staff salaries, but also the expenses related to marketing and various other small costs. 

What should you do when it comes to salon financial planning?

8 Financial Planning Tips for Salon Owners

1. Analyze financial reports

There’s no financial planning without looking at your salon numbers and analyzing them to see what works and what needs improvement.

To truly understand how well your business is doing, you need to dig deeper into your numbers. This means not only knowing your income and expenses but also analyzing them in various ways. For instance, you might want to break down your revenue by stylist, calculate revenue per appointment, evaluate appointment lengths, and track missed appointments and no-shows. These details offer valuable insights into the overall health of your business.

Do you know which stylists bring in the most money for your salon? What about the days of the week or times of the year when you expect to make the most revenue?

These are the types of insights you should be able to gather from your salon’s financial plan.

By understanding what’s helping you reach your salon’s financial goals and what’s not, you can make informed decisions to grow your business in the upcoming year.

💡Tip: Use Goldie’s reports feature to get a detailed breakdown by service or client.

2. Estimate the cash flow

While you might have plenty of money coming in during busy periods, you’ll also have slow days that won’t be so profitable. This is because beauty salons are subject to seasonal changes (compare the days before Christmas with January, for example).

Your financial analysis should provide insights into how much cash you need to have readily available to keep your business operating smoothly day in and day out. Each day, money comes in from clients, while expenses like bills, supplies, and payroll go out. 

This constant cycle is what we call cash flow.

Having a healthy cash flow doesn’t just mean more money coming in than going out; it’s also about timing (which is also important when you set your goals, and we’ll talk about that one, too). 

Accurately predicting your cash flow is important to avoid unpleasant surprises, such as not having enough funds when it’s time to cover essential expenses.

Here’s how to get a grip on your cash flow:

• List your monthly/essential expenses: rent, utilities, staff salaries, insurance, inventory purchases, loan payments, taxes, and other regular costs.
• List periodic expenses: Equipment purchases, annual training courses, or seasonal events like a holiday party.

If you notice your expenses start creeping up too high, it’s important to identify areas where you can cut back to maintain profitability.

💡Tip: Estimate your monthly income using Goldie’s forecasts and see if you have enough money to spend on other expenses besides the monthly ones.  

3. Forecast the spending for the next year

At the end of each financial year, calculate how much profit your salon made. This will help you have an idea about how much money you’ll make the next year.

This forecast is the part of your salon’s financial planning that helps you know how much money you’ll need to spend each month. Even if this year won’t be identical to the last one, you can still have an idea regarding your expenses. All you need to do is stick to the budget you’re allocating each month as closely as possible. 

When you’re putting extra money into things like boosting marketing efforts, launching new products, or expanding your team, it’s important to keep tabs on your return on investment.

4. Pay your monthly salon expenses first

So, we’ve talked about the cash flow. This is why you need to keep tabs on it across the year. Monthly expenses will always be there, and your salon can’t operate without those things that imply monthly expenses. Plan your cash flow in a way that’ll cover your bills every month. 

A good practice is to pay those bills every month on the same day, without postponing them.

Once you’ve paid them, you can think about other expenses that are not that vital, but they could improve your business.  

The same rules apply to your stock inventory. As appointment numbers fluctuate during the year, you can expect lower stock needs in certain months. So, plan ahead for what you’ll need and when. Remember to do a stock check at the start of each month and buy what’s necessary within your salon budget.

5. Accept multiple payment methods 

Sometimes, salons have to deal with no-shows. But what to do when you’ve already planned all your expenses according to the appointments you have in a month? 

You can avoid losing all the money from a no-show by using different payment methods and asking for deposits when appointments are made.

Here’s how Goldie can help you with this.

Goldie has a processing payments feature for accepting deposits for online bookings to prevent no-shows and collecting payments after appointments. Or if you’re dealing with a no-show, at least you have the deposit money, so you don’t lose all the money from that appointment. 

The processing payments feature ensures quick and secure transactions. Clients can pay via Payment Links, mobile phones, or contactless cards through Tap To Pay without the need for additional equipment. 

Additionally, Goldie’s integration with Stripe helps you monitor your earnings 24/7, providing real-time insights into your account balance and transaction history.

6. Keep track of your financial records

Being a salon owner comes with handling multiple responsibilities, but all of them are connected by the same end goal: to make your business grow. 

One of the most important things you need to pay attention to is your financial accounting records.

This is because, besides giving you a clear view of your business, you also need to pay your taxes every tax season. 

So, if you don’t want any surprises, you need to do a few things to be able to anticipate your tax obligations.

Here are five quick tips to help increase your efficiency when it comes to financial records.

• Simplify credit cards and bank accounts to streamline bookkeeping processes and lower service fees if outsourcing.
• Use point-of-sale software to track various sources of income and generate detailed sales reports.
• Separate business and personal finances to maintain clarity and avoid triggering audits.
• Consider outsourcing payroll to save time and ensure compliance with tax obligations.
• Implement comprehensive monthly accounting services to manage records, tax filing, financial statements, and tax strategies effectively.

7. Set your goals

As part of your financial planning, you should always aim for growth. One way to do that is to set goals that will add more revenue to your salon. 

This goal can be as simple as starting a loyalty program, improving your salon retail, or trying out new marketing strategies to make your salon more popular.

Set a budget for each new goal you add to the list, track any costs these incur, and keep an eye on what actually works.

8. Time your expenses 

First, you need to cover essential expenses like bills and salaries before focusing on other areas of your business.

When it comes to spending on marketing, remodeling, or gifts, it’s important to consider timing. Investing heavily in these areas without proper planning can lead to financial difficulties. For example, spending a lot on marketing before the holiday season might leave you short on funds for the slower months afterward.

Best practices for non-essential expenses

• Always have a backup budget for marketing, remodeling, and other secondary expenses. This type of spending can spiral out of control sometimes, so you should refrain from touching the budget reserved for essential expenses.
• Giving gifts to customers on special occasions can be a great way to build loyalty. However, it’s essential to be strategic about when you allocate funds for these gifts. Consider investing in gifts during busy months when you’re likely to attract new customers and reserve gifts for loyal customers during slower periods.

How to Streamline & Optimize Your Salon Financial Planning

Now that you have an idea of what to focus on for your salon financial planning, you must find a way to do all this without getting overwhelmed.

And there is a way.

Know your business better with Goldie reports. Our salon management app can help you through every step of this planning.

Here’s how you can use the reports feature, which comes packed with comprehensive information about your income, appointments, and clients, together with a forecast option:

• Use data-driven insights to make informed decisions about your pricing strategy, staffing, and marketing plans.
• Get a clear overview of your earnings, clients who came to your salon, and number of appointments.
• Optimize your salon’s scheduling and accommodate more clients during busy times while reducing slow hours during quiet periods.
• Predict future trends based on services or clients using Goldie’s forecasting features.
• Download comprehensive salon reports of your monthly or yearly income and get ready faster and easier for tax season.

Also, when considering salon accounting software, keep in mind the other apps you use, like the scheduling software or the POS system. 

You can have all of them in one place for maximum transparency on your numbers. Goldie is an appointment software that helps you build and manage your business with ease. The booking system integrates a payment option that helps you require a deposit when clients book online to protect yourself from no-shows.

Plan for Success

Effective financial planning is essential for salon owners to ensure the long-term success and growth of their businesses. With tools like Goldie’s reports feature and integrated payment options, salon owners can streamline their financial processes, make informed decisions, and ultimately achieve their business objectives. 

By prioritizing salon financial planning and adopting best practices, salon owners can create a solid foundation for sustained profitability in the competitive beauty industry.