There is a saying that, “If you fail to plan, you plan to fail.”
No business that wants to be profitable should open their doors if they don’t have a plan of action. An essential way to run a profitable business is to work with a set of budgets. We’ve all heard of the concept and I’m sure some salons and spas do work with a set of budgets. The whole idea of budgeting is to:
- Achieve turnover goals
- Control costs
- Make a profit
… and profit is what’s left from your turnover after all your costs are paid.
There are two approaches to setting budgets depending on whether you are a new start-up business or if you are and existing business with a trading history.
For a new business budgeting for the above should have been a part of your business plan. Otherwise how will you know how much turnover you need to generate to cover your costs – your break-even point.
Many of your start-up costs such as rent are fixed by your lease, and the prices you will be charging in order to generate turnover will depend on the area you are in and the target market you are aiming for. While others costs such as salaries, stock purchases and operating costs need to be estimated until you get actual figures.
The same process applies with an existing business only now you have historical figures on which to base your turnover and expenditure projections (budgets) as well as the previous year’s figure in order to see actual turnover growth.
This is a very simple and yet useful approach to budgeting that gives you more control on both generating turnover as well as controlling costs.
Create a set of budgets for each month of the year.
This exercise can be made even easier by using Excel or the Budgeting/Income Statement with My Salon Software which can be set up to monitor the month, the quarter or YTD (year to date).
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