How to turn profit into cash

February 11, 2013 by

cash_machineOne of the great mysteries in business is why profit isn’t cash. Well, it’s not really a mystery – profit is more like an abstraction that requires further interpretation to fully understand its meaning. We can all agree that creating profit is a good thing and that negative profit (loss) is a bad thing. However, the mind games begin when there is profit but no money in the checking account. And why don’t you go out of business when your profit and loss statements keep showing negative profit? The answer is simple: profit isn’t cash. Hmmm … perhaps it is a mystery after all.

The most important fact to remember about profit is that it has no connection to how much cash is in the bank. For example, you ring up a sale that’s paid for with a gift card. Your Profit & Loss Statement shows the sale, but the cash from the gift card purchase may be long gone. If you enter an invoice for $5,000, your Profit & Loss Statement shows the sale and resulting net profit, but there isn’t any cash until the invoice is paid. When you make a loan payment, only the interest portion of the payment appears on your Profit & Loss Statement while the principle portion of the transaction occurs on the Balance Sheet. In this case, a portion of profit was used to pay principle. [Read more...]

Filed Under: Business Builders, Financial Literacy, Leadership, Monday Morning Wake-Up, No-Compromise Leadership, Profitability Tagged With: , , , , , ,

Six critical lessons for creating profit

October 8, 2012 by

Profit is a strange little beast. Leaders fight for it – and obsess over it – but profit doesn’t mean cash in the bank. It’s like profit is some sort of sick mind game where you can be profitable and broke at the same time. Even crazier is that profit can be negative for extended periods and you’re still in business. And the ultimate body blow is when you have to pay taxes profit even though there’s little or no cash. Clearly it’s better to show a profit than a loss, but wouldn’t it be nice if you could get some control over that little beast?

The good news is that you can control that little beast if you follow these six no-compromise lessons: [Read more...]

Filed Under: Business Builders, Financial Literacy, Leadership, Monday Morning Wake-Up, No-Compromise Leadership, Profitability Tagged With: , , , , , , ,

Hurts so good: Overcoming the pain of positive change

September 28, 2012 by

John Cougar Mellencamp said it best: “Hurts so good. Come on baby make it hurt so good”.

Personally, I can think of a few times when that statement was actually true. One time was when I finished my first marathon in 95-degree weather. All the pain and commitment from months of training finally paid off as I crossed the finish line after 26.2 miles. Another was recently when I had to have physical therapy on my shoulder due to two dislocated ribs. As a stylist of 29 years, the pain in my shoulder had become almost unbearable when I would blow dry. My physical therapist pulled, twisted, massaged and made major adjustments that were down-right painful, but at the same time “hurt so good”. Now I’m on my way to a full recovery thanks to the pain I was willing to endure to get the end result.

Now let’s put a spin on this and relate it to running your salon or spa business. Do you have some painful areas that are clouding your vision for your company? Or perhaps there are some sore spots you need to address, such as people on your team that you would be better off without? Maybe you need to make some serious financial cuts that would be painful at first, but in the end would be more beneficial for the company and your financial future? The pain is worth the end result.

I have been on a five-year journey to change our company’s future, and have been working hard to become debt free. I have had to make serious cuts, such as closing a location, ending some toxic relationships within our company, changing our payroll structure and improving my leadership skills so that I am better prepared to address behaviors that are not in the best interest of our company. Change is painful, but today I have a fantastic culture, inspired teamwork, a highly-profitable company, benefits for my team members (like 6 weeks paid maternity or adoption leave), paid vacation and a strong education system. Yes it was often painful, but it was worth it in the end.

The time for change is now — stop putting it off. The pain is worth the end result.

YOUR TURN: What painful challenges have you overcome in your business, and how much better off are you now? What are some issues that are causing you pain? What’s holding you back from addressing them?

Filed Under: Leadership, Productivity, Profitability, Staff Retention Tagged With: , , , , , , , , , ,

Six ways to boost salon/spa promotions and events

August 2, 2012 by

Successful promotions and events play a pivotal role in every salon or spa’s bottom-line health. The added influx of service clients and retail/gift certificate sales — not to mention the often deeper-discounted purchasing opportunities presented by manufacturers and distributors — are simply a “no brainer” to take advantage of. The good news is, most salons and spas do offer promotions throughout the year. The bad news is, many of them are often poorly planned, and do not take full advantage of the opportunities presented to them.

But lets get back to the good news. Executing killer promotions in your salon or spa doesn’t have to be daunting. All it takes is some effective and creative planning.

Here are six ways to help you get the most out of your salon/spa promotions:

  • What’s your plan? It seems like every year, we’re hit with more and more promotional opportunities: Mother’s Day, Valentine’s Day, Breast Cancer Awareness Month, Back-to-School — these are just the tip of the iceberg. In order to make sure that you and your staff are ready for each promotion, it’s imperative that you get your plan down on paper. You need to define what supplies are needed, who does what and when it needs to be completed. All that information then needs to be transferred to a main promotional calendar that the entire business lives by. Better yet, enter the dates into your computer or smart phone so you get automated reminders!
  • Make a date out of it! Promotions don’t just have to be centered around holidays and distributor/manufacture deals — make them an event! Schedule special dates throughout the year that will appeal to different demographics within your client base. Ladies night, mom’s night, guys’ night, or even a Super Bowl night — get creative and get your staff involved in the planning.
  • Don’t forget to sweat the small stuff: Remember we mentioned how critically important it is to get everything you need for a successful promotion down on paper?  Dedicate a quick meeting with your team to brainstorm each and every item needed to ensure upcoming promotions or events are a success.
  • Budget, budget, budget! That last thing you want to do it is put time and effort into a promotion or event, only to find out that it actually lost money for your business. Yes, there are times when it does make sense to chalk one up as a “marketing expense”, but at the end of the day, the name of the game is driving increased revenue. With that said, the most critically-important step for any promotion is to plug it into your cash-flow plan to see if the business can afford it — and to forecast how much return you will get on your investment.
  • Who pays for it? Although it can be sore subject, it’s one that needs to be addressed beforehand. If you are on a commission-based compensation structure, your staff needs to be made aware how they are going to be compensated if the business is promoting discounted services. Will their commission be based on the standard full-price (thus costing the business even MORE money to run the promotion) or will they be expected to invest in the promotion by taking a percentage of the lower promotional price. Luckily, if you are using a Team-Based Pay or salary/hourly model, this is a moot point.
  • Get staff involved: One of the best ways to get your team members excited about upcoming promotions is to involve them in the planning process. They’re creative — use that resource!

Want to ensure your 2013 promotional and marketing plan is down on paper before January rolls around? Don’t miss Strategies Salon/Spa Game-Planning Retreat on September 30 – October 2, 2012 at the Strategies Business Academy in Centerbrook, CT. Learn more here.

What strategies have YOU used to make your salon/spa promotions and events a success? Share them with us in the comment box below.

Filed Under: Information Flow, Profitability, Teamwork Tagged With: , , , , , , , ,

Six strategies to control cash flow

July 9, 2012 by

You can lead a company that delivers extraordinary customer service, generates impressive sales, and from all outward appearances appears wildly successful – but if your company is fighting cash flow, it’s functioning under extreme financial stress. Cash is the fuel of business. If the business is starved for cash and running on fumes, it is officially in survival mode and begging for relief. It is the toughest position for any leader to be in because it is often unclear and complicated which path to take to lead the company back to daylight and fiscal stability.

Fact: Cash is king – but you knew that. Cash gives a company power and options that cash-starved companies just don’t have. Cash is “sleep good at night money” because it creates a sense of security. Cash is truly precious. So, with all the upsides to building cash reserves, why do so many leaders focus on driving everything but cash flow?

Here are six strategies to control and build 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 in reality 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. Without a cash-flow plan, you’re driving your company financially blind. If you don’t have a cash-flow plan, contact Strategies. We have a coaching program that builds your plan and teaches you how to use it.
  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 following and living your cash-flow plan, you’ve compromised your leadership and the financial wellbeing of your company. Most cash-flow problems are the result of the leader’s behavior and bad financial habits. Commit to changing your financial behavior and discover how quickly a company can emerge from the financial fiery pit of hell.
  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.) Fact: 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% – 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. Start scoreboarding and huddling every day.
  5. Gotta make tough decisions: The more critical your cash flow, the more difficult your financial decisions. 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, start cutting employee benefits. I think you’ve got the message.
  6. Gotta stop making excuses: Apple built a $100 billion cash reserve because its culture and leadership is disciplined to focus on what’s important and avoid distraction. Work on the gotta do’s and spend on the gotta haves. Avoid the nice to do’s and nice to haves. Entepreneurs are notorious for justifying just about anything. I know, I’m one of them. Stop making excuses or ignoring your cash-flow reality. No compromise.

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Filed Under: Financial Literacy, Monday Morning Wake-Up, No-Compromise Leadership, Profitability Tagged With: , , , , ,

How much is your company worth today?

June 4, 2012 by

If you were leading a publicly held company, your ultimate job responsibility would be to create value for the stockholders. Run an innovative, efficient, fiscally responsible, customer-service driven company with a strong brand identity, on a consistent manageable growth track, and the stockholders love you – and you get to keep your job. Wow, in one big sentence I just encapsulated the primary objective of a successful CEO who reports to the Board of Directors that represent the stockholders. At the end of the day, business and leadership is about growing the value of the company.

This whole concept of creating company value becomes a blur when you’re the owner, leader and primary stockholder. You’re doing work that you’re passionate about while pushing to grow sales, keep people productive, pay the bills, solve problems and generally keep things heading in the right direction. Yes, all your hard work has a direct impact on creating value for your company – but you probably have no idea what it’s worth. [Read more...]

Filed Under: Monday Morning Wake-Up, Profitability Tagged With: , , , , ,

How to keep clients coming back with pre-booking

May 24, 2012 by

Pre-booking is merely the practice of asking your guests for the permission to book their next appointments before they check out. It’s centered on maintaining and fulfilling their needs. Pre-booking increases productivity, drives revenue, helps with staff retention and improves customer loyalty.

Here’s your pre-booking to-do list: (Goal: Build a total “Client Experience System” that includes pre-booking.)

  1. Ensure your team understands:
    • What pre-booking is.
    • Why they need to do it.
    • How to do it. (More on that below.)
    • How it will be evaluated.
  2. Develop the process. It’s as simple as asking the client how she feels about her service. You’ve just opened the door to make the recommendation for the next visit, which may involve the same service and/or the addition of a complementary service.
  3. Have your team build scripts to successfully pre-book.
  4. Role-play using the scripts so that they feel natural. This will help your staff feel comfortable recommending pre-booking and dealing with different responses from customers.
  5. Be sure your front-desk/guest-services team has the scripts to successfully pre-book. The goal is that every guest is pre-booked. Everyone is responsible.
  6. Communicate the progress daily.
  7. Ask your staff: “What can I do to help you reach pre-book success?”

What should this the pre-book score look like?

  • 80-90% = No-Compromise Zone
  • 70-80% = Compromise Zone
  • 60-70% = Mediocrity Zone
  • Below 60% = Review your pre-booking procedures to ensure that they are clear and easy-to-implement. Individuals who continually fall below your standards need one-on-one coaching.

Why is pre-booking important?

  • Predictable productivity in the next 3-6 weeks.
  • Drives frequency of visit from 6 visits/year to possibly 7 or 8 visits.
  • Increases guest retention.
  • Creates avenues to communicate with the guests.
  • Drives revenue opportunities creating growth.

Mary Walker is a Certified Strategies Coach (CSC).

Filed Under: Customer Loyalty, Profitability Tagged With: , , , ,

How to harness the power of momentum

May 14, 2012 by

True forward momentum pushes through any obstacle. It has an implied efficiency because once an object achieves a certain level of forward momentum, it requires less energy to maintain that speed. By connecting the physics of an object in motion (a piece of matter) to a business in motion (an idea/concept), you gain a unique perspective on how momentum can work for a business.

A start-up business requires massive amounts of energy to gain enough forward momentum to sustain itself. Once it achieves a level of sustainable momentum, you can dial back the throttle a bit and allow “physics” to work for you. In essence, the leader is “piloting” the business by adjusting throttle to maintain its forward momentum. Achieve a certain level and the company can easily break through obstacles such as competitors, cash crises, loss of key employees, bad decisions and other issues. However, every obstacle the company breaks through chips away at its momentum. If the leader fails to throttle up the company’s sense of urgency to overcome the obstacles in its way, it will lose its energy and eventually stall. [Read more...]

Filed Under: Business Builders, Monday Morning Wake-Up, No-Compromise Leadership, Productivity, Profitability, Teamwork Tagged With: , , , , ,

Creating a foundation for salon and spa growth

May 3, 2012 by

You’d never open a salon without the proper tools — state-of-the-art scissors, top-of-the-line blow dryers and, of course, fabulous, effective products. Similarly, no one would try to run a spa without massage tables, pedi chairs and wonderful scrubs and lotions.

Unfortunately, many owners do try to run their salons and spas without the proper business tools needed to be profitable and successful.

Many salons and spas struggle with cash-flow and figuring out what’s coming in (and going out). Without a clear financial picture, it’s impossible to plan for steady growth, as expenses always pop up. Many owners (maybe even you) start using their personal credit cards to pay the bills — even to cover payroll. It’s impossible to build a strong business without a realistic cash-flow plan.

Numerous other owners and managers grapple with staff concerns, from hiring to pay design to performance evaluations. Some owners have leadership issues, uncertain how to translate their vision to their employees so that everyone is working toward the same goals. Proper communication is one of the first steps in building a successful business, yet it is one of the basics that many salon and spa owners believe they don’t have time for. A culture where employees want to do their best, stay and grow is one of the hallmarks of a thriving, profitable business.

Providing consistent customer service is also difficult for many businesses. As you know, customers expect more — just doing the minimum is no longer effective in today’s super-competitive environment. Surpassing customer expectations in every area of the business is a requirement to develop a loyal customer base that will recommend a salon or spa to their friends.

Do these challenges seem familiar? While perhaps not as glamorous as offering a great cut, a photo-worthy up-do or a creative manicure design, solid business practices are what every salon and spa need to be successful.

The path to addressing these issues starts with you — the leader. Start coordinating your game plan for change now. Now is a good time. And you can find the time to make it happen. The alternative action — putting it off again — will only leave you in a declining holding pattern. If you want change, do it now.

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Looking for the best place to start?

The Strategies Incubator is designed to jumpstart the business side of your salon/spa. In four intense, exciting days, you will learn the basics to grow a strong business, including financials, leadership, teamwork, communication, compensation, employee retention and customer loyalty.

Without a proper business foundation, a salon or spa cannot grow in a healthy way. It may appear to be doing well, but it’s no more stable than a castle built in the sand.

Start building your foundation for success at the Strategies Incubator, June 10-13. Find out more here.

Filed Under: Customer Loyalty, Financial Literacy, Information Flow, No-Compromise Leadership, Productivity, Profitability, Staff Retention, Teamwork Tagged With: , , , , , , , , , , ,