Super-salon owner hellen ward offers tips on cutting costs

As owner of one of London's leading super salons, Hellen Ward is a management expert and knows the importance of keeping budgets under control.

Here she shares her advice on cutting costs throughout the salon without impacting your service offering.

"I'm a great believer in the adage 'Look after the pennies and the pounds look after themselves,'" says Hellen. 

"All too often when we look at our expenditure and how to impact it, we try to find one big answer - when in reality lots of little ones added together may also provide a solution to better profitability.

To get started, we need to split costs into two areas:

1. Fixed costs - those that the cash flow has to cover and that don't vary, like the rent

2. Variable costs - those costs that fluctuate (or can go up or down depending on footfall) like payroll or stock. So, variable costs need to be calculated in terms of percentage of turnover rather than the £'s themselves.

Once the costs are split into two categories, figure out what the most substantial amount of the turnover goes out in costs. 

For the hairdressing industry, the biggest cost is a variable one - payroll. Some 45 to 60% of net turnover can be spent paying staff (inclusive of taxes and liabilities - or gross totals). So, any inroads made here will have a swift impact. 

However, there are other ways costs can impact:

1. Track costs as a percentage of the net (after VAT) turnover

Once the costs are tallied, for instance 10% in stock costs, it's vital to regularly check areas of overspend, but not as a percentage of the gross turnover - first take off the VAT. Simply running good management accounts in salon should give the answers.

2. Monitor spending on the small stuff

Petty cash needs to be carefully watched by logging what is spent daily. By controlling any little extras, over the course of a year, it could make the difference between making or losing money.

3. Regularly re-evaluate the non-client-facing costs

One of my biggest bugbears is the commission percentage we pay as retailers/service providers for EPOS (Electronic Point of Sale) - or being able to accept debit and credit card payments. 

With more than 90% of salon clients paying by card, shaving even a tiny percentage off these costs will have a real impact on the bottom line without affecting the client experience whatsoever.

4. Track and forecast

Monitor what you spend, it gives a benchmark on which to forecast. Set a target turnover, but also a target for expenditure and monitor it constantly, comparing this year and last year to see areas of over-spending.

5.  Don't be afraid to negotiate

Just like the EPOS companies, banks won't offer reductions, neither will the bank manager on a loan, or the supplier on stock, or the landlord on rent - unless you ask! Use your trading history as a good tenant/payer/customer in the search for better prices. 

Look at costs in detail to see where you're not hitting target expenditure and address the area immediately if you want to remain profitable.

Margins are slim in this industry, so making sure you make money and guarantee your salon's future is never more important.