“Show me the Money”-how to increase your spa/medspa cash flow” Placécol speaking at the Day Spa Expo in Las Vegas

“Show Me The Money”- How To Increase Your Day Spa/Medspa Cash Flow
Posted by Day Spa Expo and Business Forum
at 8:00 am, January 26th 2010.


“Show Me The Money”- How To Increase Your Day Spa/Medspa Cash Flow

by Heather Elrod, Placécol Corporation USA

Heather ElrodMost of us have heard “manage to the metrics” or “know your financial Key Result Areas”. But let’s face it, how many of us are truly diligent and disciplined in analyzing our business financial statements on a monthly basis? Who really wants to spend time evaluating financial statements, right? This is the perfect chore to procrastinate! But, the reality is that this is perhaps one of the best uses of time as business owners and managers. Your Income Statement or Profit and Loss (P&L) Statement is an incredible weapon in your business management arsenal. Used effectively, it is a blueprint for guiding decision-making around the Key Result Areas of your business: top line revenue and bottom line profit!

Let’s break the P&L Statement into two parts: (note: the Balance Sheet is also critically important for the full “picture” of the business but we will only focus on the P&L for now).

P & LP&L Part I:

1) Revenue

a. Sales by category

i. Services (salon separated from

spa)

ii. Retail

iii. Other

2) Cost of Goods Sold

a. By category listed above

b. Service provider salaries are often

included

3) Gross Profit

a. Revenue -Cost of Goods Sold = Gross

Profit

Tip #1: The categorization is important! This shows your sales mix: hair, nails, spa, and retail sales within each category. Knowing your sales mix should guide marketing tactics, incentive plans, purchases, staffing levels, etc.

Tip #2: retail sales can greatly improve cash flow. This is often a neglected aspect of the business! The industry targets retail sales of 30% but we rarely see retail sales anywhere close to that percentage. In fact, most P & L Statements that we have evaluated show retail sales at single digit, less than 10%! The focus is generally skewed on services over retail but retail sales are a quick and easy way to increase sales and profit. In fact, we have seen retail sales turn Day Spas with negative cash flow into positive cash flow. Your profit on your retail products should be at least 50% (if not, you have the wrong vendor partners). There are unique tactics increasing retail sales that we will discuss in the workshop at the Day Spa Expo.

P&L Part II:

1) Operating Expens

i. All other expenses (e.g. Administrative Salaries, Marketing/Advertising, Rent, etc)

Tip #3: The most common expense categories that we see out of alignment and eating away profits are: 1) Salaries, 2) Supplies (general and back bar), and 3) Marketing/Advertising (for medspas: add malpractice insurance and repairs/maintenance to the list).

There are relatively simple ways to control these variable expenses but the first step is to know where you stand in these categories by taking a hard look at your P&L Statement. We’ll look at sample P&Ls, discuss targeted performance, and share best practices for increasing cash flow in our workshop at the Expo. We hope to see you there!

Heather Elrod, Placécol Corporation USA

888.855.5245

www.placecolusa.com

heather@placecolusa.com

To view full details on Heather Elrod’s presentation at the Day Spa Expo & Business Forum on Sunday, March 14th, click here: http://www.dayspaexpo.com/2010dayspaexpobusinessforum.html#Heather_Elrod

Special Discounts apply for social media participants! You will receive 10% off your Full Business Forum using social media discount code: SM1020 when you pre-register online by March 1st. Register Now! Click Here and use Code SM1020 *Discounts cannot be combined with DSA/IMSA Member discount.