Industry • Best Practice
Mar.16,2023By Boulevard Staff
Running a successful beauty biz means keeping close track of finances, but manually analyzing every aspect of your business is both tedious and prone to errors. Reporting software can automate the process, uncovering business trends and areas of improvement that can keep you in the green. If you’re tired of poring over spreadsheets, here’s how to leverage reporting software to improve your financials.
There are plenty of ways to keep track of business trends for your beauty business, from the classic pen-and-paper method to hiring an accountant. Effective reporting tools make it easy to track key numbers such as client retention, revenue per transaction, and more. With those insights, you can fine-tune your business to ensure you’re as fully optimized as possible.
First and foremost, you’ve got to know your total revenue. Revenue fluctuates throughout the year, as business picks up during the holiday season and slows down during the summer for most beauty businesses. The important thing is that you understand what your earning potential is so you can plan your total expenses. If you’re over-extending yourself or being too conservative with your re-investments, you’re hindering your business’ growth.
Once you know the total amount that’s coming in, analyze how clients spend their money in your business. Identify the total sales for each product and service category you offer. Be as specific as possible. Get into the mindset of your clients. What is it about your business that’s keeping them coming back? If you’re selling a significantly higher amount of highlights than brow tints, you may want to rethink your price points for each.
Finally, find your average transaction value. Once you’ve identified how much your clients spend on average each time they come through your salon, you can create more accurate revenue projections and measure the results of new initiatives. For example, if you ditch underperforming moisturizers for higher-margin shampoos, you can track your average transaction value to gauge whether your business has become more profitable from the change.
There’s a lot of hidden profit lurking just below the surface of your revenue report. To unearth it, you need to create a list of action items and promotions based on the story your numbers are telling.
For instance, reporting software will tell you who your top performers are and who has room to improve. With that information, you can focus your training efforts on the individuals that need it most, improving the value they provide to their clients and the business. Data-driven performance evaluation is a balancing act: People are more than the numbers they create, but, you owe it to your employees to help them be as successful as possible — and that means coaching and other interventions may be necessary.
Let’s revisit the lotion versus shampoo example. Say you run your revenue report and find you’ve only sold $163 worth of hand lotion this quarter. How can you empty out that back stock to make room for products that perform? Bundles. You can earn some extra revenue (or minimize losses) on stagnant products by bundling them together with services. Not only can this improve your relationship with clients, but it can also make the item in question more popular, so you can empty the stock without giving it away for free.
Your data may point to the need for deeper changes to your business model, too. For instance, if your numbers show you’re having trouble retaining clients but making a decent amount on services, you might consider adopting a subscription model to make retention easier. On top of the guaranteed revenue of the subscription, discounts that increase the frequency of visits can create an overall increase in revenue.
This is just a small sample of how savvy beauty business owners can use powerful reporting software to improve business. The more information you have on the ways money flows into and out of your business, the better prepared you are to make beneficial changes.
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