Your salon is profitable when revenue consistently exceeds all fixed and variable expenses, including your own salary. The number to watch is net profit margin, which is profit divided by revenue. Below 5 percent, you are breaking even and one bad month wipes you out. Between 8 and 15 percent, you have breathing room and can invest in growth. Above 15 percent, you are running a tight, well-managed operation. I learned this the hard way when JScott Salon, my 18-stylist salon, closed in 2006 and I lost everything. Check five numbers monthly: gross revenue, payroll percentage, rent percentage, supply cost percentage, and owner pay. If payroll is above 50 percent or rent is above 15 percent, you have a leak that will keep you stuck regardless of how busy the salon is.
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Why is my salon busy but not profitable?
A busy salon that is not profitable almost always has a pricing or payroll leak, not a traffic problem. If every chair is full but nothing is left at month end, check three numbers: your prices against your true cost per service, your payroll as a percentage of revenue (over 50 percent is a red flag), and your rent (over 15 percent is a red flag). Being booked solid at prices that do not cover your real costs just means you are losing money faster. Fix the price and the payroll percentage before you chase one more client.