Lisa Starr discusses how to use metrics from your operating software and financial statements in order to improve financial performance for your business in 2012. She creates a plan for you to focus on four areas of your salon, spa or fitness business.

1. New Year’s Resolutions:
Setting Financial Targets
By Lisa Starr

2. Your Presenter
Wynne Business provides consulting and education, including
live seminars and on-site team trainings, for the spa and salon
industry
• Lisa M. Starr
– 20+ years experience in
salon & spa industry
– Senior Consultant,
Wynne Business
– Community Ambassador,
Gramercy One
– Consultant, educator,
writer, presenter

3. Targets
and Goals

4. "If you don't know where you are
going, you will probably end up
somewhere else. “
Lawrence J. Peter

5. Goals must be . . .

6. SMART Examples
• Instead of this:
– “I need you to do better.”
– “We need to sell more.”
• Do this:
– “I need you to increase your average
ticket from $35.80 to $39.50 by the
end of next month.”
– “We need every technician to meet
minimum departmental guidelines for
retailing in the next quarter.”

7. Guidelines for goal setting
• There must be a
starting benchmark
• There must be
consensus on the target
• Danny Meyer: “constant,
gentle pressure.”
• Link achievement of
goals with company
performance

8. 4 Areas of Focus
• Revenue Side
– Average Ticket
– % Retail to Sales
• Expense Side
– % Payroll to Revenue
– Treatment Supply Costs

9. Income Statement Model
Revenue Service Sales 450,000 75%
Retail Sales 150,000 25%
Total Sales 600,000 100%
COGS Service Labor Costs 150,000
Back Bar Supplies 26,500
Products for Resale 68,000
Retail Commissions 22,250
Total Cost of Goods 266,750 44%
Gross Profit 333,250 56%
Expenses Rent & Utilities 36,000
Marketing 18,000
Support Labor 72,000
Owner Salary 40,000
Employee Benefits 14,212
Payroll Taxes 25,582
Insurance 6,000
Debt Service 1,100
Total Expenses 212,894
Net Profit 120,356 20%

10. Revenue-side
Targets

11. Average Ticket
• Service Sales + Retail Sales/
#of clients
– $85 + 85 + 85 + 85 + 30 = $370/5
= $75
• A simple but powerful way to
measure your performance
• The quickest approach
to growing sales
• Average ticket can be
measured by facility
and by operator

12. 4 Methods to
Grow Average Ticket
• Strategic Service
Menu design
• Each department has
micro tx available for
small fee – NO
additional time
• Add-ons
• Retailing

13. The Power of Average Ticket
• Feb 1; LMT has 5 clients (4 massages, 1
body tx)
$85 + 85 + 85 + 85 + 68 = $408
Average ticket = $81.60 or $408/5
• Feb 15; LMT has 5 clients (4 massages, 1
body tx, sells 1 retail product)
$85 + 85 + 85 + 85 + 68 + 18 = $426
Average ticket = $85.20 or $426/5
Increase of 4% with the sale of one item!

14. Service Menu Supports Avg Tkt
Facial Treatments Price Facial Treatments Price
Anti-Aging Facial $95 Anti-Aging Facial $102
Clear Skin Facial 85 Firming Facial 98
Spa Facial 85 Organic Facial 95
Gentlemen's Facial 85 Clear Skin Facial 92
Teen Facial 45 Spa Facial 85
Teen Facial 48
Hydrating Hands 13
Accupressure Scalp 13
RevitalEYES Tx 11
Smooth Lips Tx 8

15. Growing Average Ticket
• Feb 15; LMT has 5 clients (4 massages,
1 body tx, sells 1 retail product)
$85 + 85 + 85 + 85 + 68 + 18 = $426
Average ticket = $85.20 or $426 / 5
• April 1; LMT has 5 clients (4 massages,
1 body tx, 3 purchase retail)
$85 + 92 + 95 + 98 + 72 + 12 + 15 + 15 = $484
Average ticket = $96.80 or $484/5
• Another increase of 13%! (18% from 2/1)

16. More Methods to
Grow Avg Tkt
• Add-ons that do take more
time
– Additional 15 minutes of
service
– Add massage to body tx
– Add body tx to massage
• Retailing
– Estys, makeup high
performers
– MT’s
• Music, books, candles, gels

17. Average Ticket
Benchmarks
• Should be part of
advancement criteria
• Higher expectations for
longer term of service
• Slow, steady, upward movement
• Assists with increasing
retail ratios
• Be aware when service
menu pulls it down (waxing)

18. Retail to Sales Ratios
• Retail to Service Sales
• Retail to Total Sales
Which is right?
$100 Svc Sale + $25 Retail Sale
25% Retail to Svc Sales Ratio
20% Retail to Total Sales Ratio

19. Methods to
Increase Retail
• Home Care Recommendation
Sheet for all clients
• Build into service price
– New client facial $98
includes take-home kit
• Vendor evaluation
• Retailing Basics
– Price tickets, visual
merchandising, lighting

20. Recommended Retail to
Total Sales Ratios
Day Spa Resort Spa
• Hair - 10-15% • Hair - 5-10%
• Skincare - 35-50 % • Skincare - 15-30%
• Massage/Body 1-5% • Massage/Bdy - 0-5%
• Nails - 5-15% • Nails - 0-10%
• Cosmetics - 40-100% • Cosmetics - 25-50%
• Gift - 10-40% • Gift - 5-15%

21. Retail Ratio
Considerations
• The more modalities
you offer, the lower
the ratio will be
• Etsy & Cosmetics
drive retail
• Massage & Waxing
do not

22. Expense-side
Targets

23. Payroll Breakdowns
• Labor – Your Largest Expense
–Technical Staff
–Hourly Staff
–Management/Salaried Staff
–Taxes & Benefits
–Owner

24. Income Statement Model
Revenue Service Sales 450,000 75%
Retail Sales 150,000 25%
Total Sales 600,000 100%
COGS Service Labor Costs 150,000
Back Bar Supplies 26,500
Products for Resale 68,000
Retail Commissions 22,250
Total Cost of Goods 266,750 44%
Gross Profit 333,250 56%
Expenses Rent & Utilities 36,000
Marketing 18,000
Support Labor 72,000
Owner Salary 40,000
Employee Benefits 14,212
Payroll Taxes 25,582
Insurance 6,000
Debt Service 1,100
Total Expenses 212,894
Net Profit 120,356 20%

25. Payroll Worksheet
• Total Sales _______$
• Total Payroll ________
• Service Labor ________
• Retail Commis ________
• Admin/Support ________
• Owner ________
• Benefits ________
• Taxes ________
• Total Payroll/Sales ________%

26. Payroll Worksheet
• Total Sales _$600,000_
• Total Payroll _$324,044_
– Service Labor _$150,000
– Retail Commis _$22,250
– Admin/Support _$72,000_
– Owner _$40,000_
– Benefits _$14,212_
– Taxes $25,582_
• Total Payroll/Sales ___54__%

27. Ideal Payroll Setup
Service & Retail Revenue 100%
- Management/Support 10-12%
- Technicians Svc 33%
- Technicians Retail 1.5%*
*10% of 15%
- Taxes +/- 4%
- Benefits +/- 4%
Total Payroll 54.5%

28. Payroll Benchmarks
• Average day spa overhead
40% of revenue
• So, payroll MUST
be below 60% to
see any profit
• % is focus for you, $
earnings should be
focus for your staff

29. Treatment Supply Costs
• Treatment supplies
are often seen as a
commodity item by staff
• They are one of the few
areas that can be
positively impacted by
careful management
• The answer:
Systems & Processes

30. Treatment Supplies
• What is a
treatment supply?
– Cremes, gels, lotions,
branded products
– Gloves, Q-Tips,
comestibles
– Gallons of distilled
water and massage oil
– Anything you purchase
to provide a treatment

31. Treatment Supply
Chart of Accents
• Each department
that you break out
for service . . .
• You also break out
for supplies
– Massage Service
– Massage Tx Supplies
– Nail Services
– Nail Tx Supplies

32. Controlling COGS for back bar
Simple Detailed
Revenue Service Sales 450,000 75% Revenue Massage Svc Sales 195,000 32.5%
Retail Sales 150,000 25% Esthetic Svc Sales 255,000 42.5%
Total Sales 600,000 100% Massage Ret Sales 5,000 0.8%
Esthetic Ret Sales 145,000 24.2%
Service Labor
Total Sales 600,000
COGS Costs 150,000
% of
Back Bar Supplies 26,500 COGS
Products for Resale 68,000
COGS Massage Svc Labor 78,000 29.2%
Retail Commissions 22,250
Esthetic Svc Labor 72,000 27.0%
Total Cost of
Goods 266,750 44% Massage Backbar 3550 1.3%
Esthetic Backbar 22,950 8.6%
Gross Profit 333,250 56% Massage Ret Prod 3,000 1.1%
Esthetic Ret Prod 65,000 24.4%
Massage Ret Comm 500 0.2%
Esthetic Ret Comm 21,750 8.2%
Total Cost of Goods 266,750
Gross
Profit 333,250

33. Power of Treatment Supply
Before After
Revenue Massage Svc Sales 195,000 32.5% Revenue Massage Svc Sales 195,000 32.5%
Esthetic Svc Sales 255,000 42.5% Esthetic Svc Sales 255,000 42.5%
Massage Ret Sales 5,000 0.8% Massage Ret Sales 5,000 0.8%
Esthetic Ret Sales 145,000 24.2% Esthetic Ret Sales 145,000 24.2%
Total Sales 600,000 Total Sales 600,000
% of % of Svc % of % of Svc
COGS Sales COGS Sales
COGS Massage Svc Labor 73,245 27.4% COGS Massage Svc Labor 73,245 27.4%
Esthetic Svc Labor 76,755 28.8% Esthetic Svc Labor 76,755 28.8%
Massage Backbar 3,550 1.3% 1.8% Massage Backbar 2,535 1.3% 1.3%
Esthetic Backbar 22,950 8.6% 9.0% Esthetic Backbar 18,360 8.6% 7.2%
Massage Ret Prod 3,000 1.1% Massage Ret Prod 3,000 1.1%
Esthetic Ret Prod 65,000 24.4% Esthetic Ret Prod 65,000 24.4%
Massage Ret Comm 500 0.2%
Massage Ret Comm 500 0.2%
Esthetic Ret Comm 21,750 8.2%
Esthetic Ret Comm 21,750 8.2%
Total COGS 266,750
Total COGS 261,145
Gross Profit 333,250 55.5%
Gross Profit 338,855 56.5%
Total Expenses 210,532 35.1%
Total Expenses 210,532 35.1%
Net Profit 122,718 20.5%
Net Profit 128,323 21.4%
Net cash increase of 4.5%

34. Treatment Supply Processes
• Coordinate orders among
departments
• Time orders for beneficial arrival
• Assigned & locked storage by
department
• Replenishment methods

35. Recommended Tx
Supply Costs
• Massage 1%
• Body Tx 2%
• Esthetics 7-8%
• Nails 4-5%
• Hair 7-10%
• Injectables 10-40%
• Cosmetics ˅1%
• Waxing ˅1%

36. Where to Start?
• Does your business model
support growth in average ticket?
• Do you have the right vendors and
system to support retail initiatives?
• Does your compensation
plan need to be overhauled?
• Do you have systems in place to
receive/track/replenish tx supplies?

37. Wise Words
"If you aim at
nothing, you'll
hit it every time. “
Unknown
"A goal is a dream
with a deadline."
Napoleon Hill

39. Setting Financial
Targets
Thanks for your attention!
Questions? Lisa Starr at
gotalkone@gmail.com
Gramercyone.com/blog
Facebook.com/GramercyOne
Twitter - @gotalknow