Beauty Business Strategies
The podcast where salon, spa, medspa, barbershop, and lash studio owners — just like you — learn quick tips to make more money, inspire your team, and create world-class client experiences.
Beauty Business Strategies
The Beauty Industry's Wake-up Call: Powering Growth in Your Business Post-Pandemic
In this episode, we navigate the choppy waters of the beauty industry's post-pandemic financial recovery, from the lifeline of PPP loans to the newfound urgency of profitability.
Reflecting on those who emerged from the storm unfazed, we unveil why a solid financial foundation isn't just helpful—it's imperative. Join us as we dissect the transition from survival to growth, emphasizing the need for each salon and spa to aim for the cushion of high-profit margins and smart cash flow management.
This episode isn't just about bouncing back; it's about leaping forward. We dive deep into the financial strategies that will not only keep your beauty business afloat but growing sustainably. Learn the essential discipline of planning for profit and the critical role that understanding financial ratios plays in your success. With actionable insights, this discussion arms you with the tools to craft a resilient, profitable future in the beauty industry.
Watch the video version of this episode: https://youtu.be/KfNj1pHPFuc
00:00 The reality of the post-COVID financial landscape
05:16 How the current economy is influencing customer spending habits
07:14 Be patient for growth, impatient for profit
09:14 How government aid masked pre-pandemic issues in the beauty industry
11:18 Key strategies for stabilizing salon/spa finances
19:24. How the beauty industry can move forward
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The Beauty Business Strategies Podcast is designed to give salon, spa, medspa, barbershop, and lash studio owners, just like you, quick tips to make more money, inspire your team, and create world-class client experiences.
Welcome to the Beauty Business Strategies podcast. I'm Michael Yoast, and joining me today is the founder of strategies, neil Ducuff.
Speaker 2:Neil, how are you? I'm doing great, Michael.
Speaker 1:Good have a good weekend.
Speaker 2:I had a wonderful weekend, awesome.
Speaker 1:Awesome. So I want to talk to you today primarily about the just where we are from a beauty industry standpoint. You know, maybe it seems like business always goes through ups and downs and we roll our coaster and things. But you know, lately it just feels like we've been in a real sense of a kind of a downward valley type of an area and I know we've been talking a lot about this kind of just amongst ourselves but thought it'd be great to discuss in general. We've been talking a lot about just the impact of what's happened post COVID. It's almost like this hangover now it's kind of lingered with us and a lot of discussions just based around the idea of where we've come from when it came to PPP loans and the idea and all of that and you know all that's that's gone on. Where's your mind on all this right now?
Speaker 2:It's really a. It's interesting to go back and and first thing I want to point out is COVID is not that long ago, but we're all happy to put it in the rear view mirror. Going into COVID and I'm talking about our coaching clients at strategies, our coaching clients that went into the pandemic in healthy, good financial shape, strong cultures, great critical numbers. Yes, the pandemic rocked their boat, I mean, and it should have, but they were in good shape going into it. Salon spas, barbershops, you name it. That went into the pandemic and not great shape. They had a hard time getting through. So the pandemic happens, and very quickly. God bless the government.
Speaker 2:They came up with the first PPP loan and PPP plugged the financial gap during the shutdown. Footnote PPP was the cover payroll. During the shutdown, most salon spas shut down and employees went on unemployment. So the cash was there. It most salon spas had that cash for the reopening or at least to fund the general expenses except payroll until the reopening. So there was PPP, thank God, and that helped bridge that gap during the shutdown where everyone's closed.
Speaker 2:Then we get to there was the EIDL $10,000 emergency loan. Great, that was great. Ten grand Take it. Then there was EIDL where you could get 30 year loans at was it four and a half percent, three and a half percent, something like that and no payments for like almost two years. So salons that got into that early got hundreds of thousands of dollars. Wow, this is really great and it was cheap money and you couldn't get that rate from a bank. Or two years before your first payment. But it was a growing interest. Then you know the reopening everyone's. You know clients want to get back in.
Speaker 2:Business was very busy, but PPP, eidl filled that financial gap and made many businesses whole. Strong ones were more whole and the weaker ones were relatively good shape. If they watched the money, then we get PPP too. Oh, my God, they're doing this again. Hey, take the money so more money comes in. Then we get through the pandemic and then we have ERC, the employee retention credit. We know many of our customers got hundreds of thousands of dollars that they got in additional funds and I'm not even sure why the government did ERC. But hey, we took advantage of it too and wow, so here there's hundreds of thousands, potential hundreds of thousands of dollars that salon, spa businesses had. That not only plugged the gap for COVID during the shutdown but gave them a nice chunk of change to fund their company and other idea, expansion and refurbishing and whatnot.
Speaker 2:Today all that money's gone, unless you still kept it in reserve. But that money is gone. And what's happening today? With past couple of years, with the rising interest rates, and then we had inflation and rising costs you go to the grocery store and the bag of stuff that cost you 60 bucks now costs $100. So everything costs more. Real estate costs more, housing costs more, and now we're finding consumers are saying prices are. I mean, I'm just tight for money, I gotta be more selective on what I spend money on. So now they're spreading out appointments and I'm talking in broad terms, but in general they're spreading out appointments.
Speaker 2:What's happening at the salon spa level is all that government money is either gone or a little bit left. And now the business has to be profitable. There's no padding, there's no more PPPs, there's nothing like that on the horizon. You have to run your company profitably and the point where the industry is at now is it's a sense of urgency for all salon spas med spas, you name it have to be fiscally responsible, and I wrote a blog post on this on my Monday morning.
Speaker 2:Wake up a number of years ago. They have to be impatient for growth. I'm sorry, take that back. They have to be patient for growth and impatient for profit. So payroll's got to be under control. Payroll's the elephant in the living room. All your other spending needs to be under control. Your critical numbers need to be saying you're running efficiently, your culture's in a good place, you don't have turnover, your pre-book rates are high, your client retention rates are high.
Speaker 2:Now there is that sense of urgency. To be meticulous and fanatical, I guess, is a good word about how you're managing cash that comes through your company and do all that you possibly can to drive profit, because profit greases the wheels of growth. Profit gives you all the money that you need to fund every project employee growth, income growth you name it expansion. That's where profit comes in. So state of the industry is profitability Got to be profitable and 3% 4% profit that's getting by. You're not in great shape if you're 3% 4% Profit, 8%, 10%, 12%, 15% higher. If you can do it, not at the expense of your people. But you've got to be really profitable today to see your way through to inflation getting under control, the economy coming down, clients coming back in on a more frequent basis. All of that is high priority right now.
Speaker 1:I love everything you shared there. I think, where we are and Alexa, hearing all of that, and Alexa, as we've talked, even on the side around this, we see the fact that, yes, we look at this timeline that you just took us through, this idea of how do we get to the point of where we are as an industry right now. And I think, really, what underlies this and I want to be very particular with how I say this certainly COVID was not easy for anyone. Everyone had to make changes and adjust, but what we adjusted, we adjusted in a very different way from what I'm about to kind of I guess, maybe question or kind of bring back to you, neil Is.
Speaker 1:This is, I think, in many ways, what all of this influx of cash did, was it took away, it masked maybe, some of the, I guess, maybe some of the challenges that were already there as a part of our business anyway, and while we faced brand new ones with COVID, with the challenges of how do we deal with a shutdown that for some places, depending where you lived, was weeks, others times was months, the whole deal you dealt with, the challenge you need to deal with, but I think the challenges that still linger with us are just purely maybe we can just call it this way the financial challenges that we needed to make adjustments for that. Now again, that's gone away. The buffer has gone away and really we're still left with what was already was always there is what I want to say. What do you think I mean as far as and now again, we couple that with the fact that we're in a time where economically as you mentioned, you know inflation is high. We might have spacing out of appointments or just the fact that people are being much more deliberate about where they're spending money.
Speaker 1:Everyone's feeling it. What would be one or two key things that you would share then that says all right, here's where we are. What are one or two things that you would share that can be the key to help move us in a better direction and move a business that might be again at that kind of challenge point right now, dollars and cents. Wise to start to say let's take some steps forward. As you said, let's be impatient for profit. As far as that goes, how do we what's going to create a little impatience?
Speaker 2:There's this can go back to when strategy started over 30 years ago. We have always been fanatical about coaching owners to do annual, month-by-month cash flow plans a budget we call it a cash flow plan and monitoring your financials and some key financial ratios. That is still, and probably always has been, in the industry. Where, hey, when was the last time you looked at your financials? When was the last time you looked at your financials? When was the last time you looked at a P&L year to date with percentages? When was the last time you looked at your balance sheet? And do you understand what your balance sheet is really telling you? Because your balance sheet will tell you is your company healthy or not. So the cash flow plan, as we call it, it's like GPS. If I want to be profitable, I need to plan for that profit. Profit isn't an afterthought, Profit is planned. So I need a cash flow plan to plan profit.
Speaker 2:What we see is some owners are well, if I want to create a budget, well, how do I know that number is going to be right? And they get stuck on filling in the numbers. Because what if I'm wrong? Well, you're going to be wrong, but you may be a little wrong or a lot wrong. But once you get into the mode of projecting you get better at it. So, build a 12-month cash flow plan. We put every client through a building a 12-month cash flow plan. And one thing going back to during the shutdown during COVID, we had so many clients coming on because everyone was closed and owners had a lot of time to get on Facebook and comment on stuff. That's all everybody did was comment on stuff on Facebook, but owners that were coming on saying thank you, thank you strategies for what you taught me about cash flow planning. But it is still the hardest thing to get owners to not just build a monthly cash flow plan but to live that cash flow plan every month, to monitor their profit and loss and balance sheet every single month and understand how cash flow, profit and loss statement, balance sheet, how those things interact. That was all non-negotiable before. The pandemic. Money, ppp, erc, eidls and all that stuff took some of that financial or a lot of that financial stress away so you could sleep at night.
Speaker 2:But now that all of that's in the rearview mirror and getting further in the rearview mirror now it's, I got to be profitable again and this industry for so long has been in that average net profit 4% or 5%. That is no margin for error. 45% net profit means if there's an oops you can be in trouble. Unexpected bill comes in, something breaks, air conditioning unit falls through the roof. You can be in bad shape really quick If you're not shooting for 10, 12, 14% profit and disciplining yourself, your spending, your revenue goals, monthly scoreboards every day, where we are at, are we ahead or are we behind, if you're not doing that fanatically, with great communication and inspiration and leading your team, but if you're not really plugged in to monitoring those numbers.
Speaker 2:10, 12, 14, 15% or better net profit isn't going to happen by accident. If you get your, if it's the middle of the month and you get last month's profit and loss statement and you go, you flip right to the last page and you go down a net profit to see what it is. You should have known what it was going to be by the middle of the month and working to make it better. Damn, we lost again. You can't do this.
Speaker 2:It's getting comfortable with how your business is performing, but this comes down to better decisions the got to have versus need to have expenses. What are you going to be investing in. There's customer service and culture and employee retention. All that stuff is another conversation. But right now, urgent, urgent, urgent, impatient for profit. Got to drive profit like you should have been doing before the pandemic, like you didn't have to work so hard during the pandemic because the Fed padded the bank account.
Speaker 2:And again, more importantly than anything, what does your cash reserve look like? Because you got to have a cash reserve. You can't live out of your checkbook and I'll make one more comment and I'll see what else you want to ask me. For any of you that are watching this, if you're going into your bank account because you got it on your phone and you can go in and check your bank balance every 10 minutes if you want, but if cash management for you is looking to see what you have in the bank, you're already in trouble.
Speaker 2:Already in trouble because all that money in the bank account so think about this a lot of that money is already spent or committed to pay bills. Money in the account is going to have to go to the rent when that comes due. There's withholding tax, there's payroll, all that stuff. So you can't say, well, I know, if I have about this much, I'm okay, you're not okay. Your profit and loss statement yes, the bank balances are important, but what do you have in reserve? Two months, three months, four months, and I have been relentless about four, five, six months operating cash in cash reserve. So if there's an opportunity, you can jump on it, if there's an oops, you can pay for it.
Speaker 1:But if all the money is in your checking account and there's an oops, you're gonna get in trouble really fast right, absolutely so, as we kind of wrap things up, I want to kind of highlight a few of the key points out of the conversation today. You know we see where we are and kind of the process of, probably more than likely, how we got here. But the key is this, as Neil was talking about, the key is how do we move forward? And the key for everyone is whether you're using one right now, or you are at least aware of one right now, or not. Getting in touch with your cash flow plan is of critical importance. It's got to be a guide for you that says, hey, we're making a plan for the better. And you know I love that.
Speaker 1:Neil brought up a couple key Measurements that that all of us can look at again. If you're anywhere on your profit and loss and in the single digits you are you're gonna feel every bump in the road. In order to feel more comfortable, you need to be in that 10 to 15 percent range here. In that range, you feel the bumps, but they're not severe, they don't slow you down, they don't. They don't completely derail you as such, and if you're over 15 percent gets even easier. So obviously we always shoot for the higher the better, but it's things we want to be aware of, so that's something that likes it.
Speaker 1:All of you that are that are watching and they're listening, you know, take a look at where that your profit, on your profit and loss. What, what's the percentage and where does that sit? Again, because single digits you're gonna feel every bump in the road, some very severely, and the way to start to correct that is Make a cash flow plan or get connected with a plan for the future, which, in turn, will mean what do we need to do? Maybe we have to make some hard decisions, maybe we need to make some course correction, but the only way you're gonna know or maybe it's let's continue these good behaviors, because we see a lot of positive things Happening. Any of those outcomes, the only way we're gonna know, is to stay in touch with that plan, stay in touch with your information, such as balance sheet, profit loss statements, and pay attention to those critical numbers In your business that drive these outcomes as well. So, with that in mind, we thank you for joining us on this episode of our beauty business podcast. Neil, thank you so much. Appreciate all the wisdom.
Speaker 2:It is my pleasure. And if you're checking your bank balance on your phone today, because that's what you do, if you're checking your bank balance, you need to talk to us right now Because you are not impatient for profit. You are asking for a Financial nightmare headache if you don't get this thing under control.
Speaker 1:I think that is a great way to wrap up today, a good, strong warning to all of us. And Again, it's not how we want to move forward. Let's move forward in a positive way and we look forward to talking to you again on our next podcast. Until then, see ya.
Speaker 3:Thanks again for listening to the beauty business strategies podcast. If you liked this episode, be sure to hit follow and please share the episode link with anyone who you think could benefit from today's content. To learn more about how strategies can help create more fun, profit and growth potential for you, your company and your team, we invite you to schedule a free 60-minute strategy session by clicking the direct link in the description of this episode. There you also find links to our wide array of coaching, seminar and learning opportunities, all of which can be found at strategiescom.