Today I would like to chat to you for a minute about treatment profitability in a spa and salon business. My first question to you is, do you know exactly how much profit you make on each treatment in your business? Most salon owners or managers I speak to are not sure. They seem to throw out numbers like “I make 100% profit” quite often, but are not sure how they get to that number.
Knowing your exact profitability and exact cost of goods on each and every treatment in your business is vital to the financial success of your business as well as to enable you to grow and have smooth cash flow.
There is a formula and specific way to calculate the treatment profitability which is really so simple and we share the spreadsheet with you HERE. The formulas are already embedded, however, very importantly you need a treatment recipe for each of the treatments you offer.
A recipe is exactly what is needed ingredient wise (so product wise), to be able to perform the treatment. We are not going to include commission or running costs for the purpose of this exercise because what we want to see from this is which treatments need to be priced differently and which treatments need a discussion with the brand partner to cut the cost of goods.
This exercise will also show you which treatments to consider removing from your menu, so it’s really important to do this at least twice a year, or when considering introducing a new brand and/or new treatments. Don’t just launch, get all your information and most importantly, what the profit on the treatment is and what price the market can bear to pay.
Watch this quick tutorial to understand how to use the template.
Important to know when populating the spreadsheet.
Cost of goods. Aim for 2 – 6% for massage, waxing and nail services. Aim for 12 – maximum 20% for facial treatments, body wraps, pedicures and manicures. If you are not achieving this then do an audit of how many of these services you are performing monthly. If not many, time to remove this from your treatment repertoire. Lastly, I want to encourage you all to have a top 10 profitable list of treatments at reception so there is no guess work. When a client calls in wanting to book a facial your reservationist starts with the most profitable.
I worked with a spa group who has a specific reservation team who are not therapists, so they really don’t have an understanding of treatments and how they work in a spa and salon. I focused on two things that set that reservations team up for huge success. In fact, the spa group experienced a 50% profitability boost from this simple system. I gave them the top 2 treatments per category, so for example in massage, the top two most profitable massages and in facials, the top two most profitable facials. I gave them a simple script on how to sell those top two items and I gave them a list of 2 upsells per treatment. Well, that was all they needed to set them up for the huge profit jump they saw the very next month after this training.
I would LOVE to hear your feedback as to how you implemented this and the success it brings! We have so many tips to boost your profit and make you fall in love with your business again. In fact, I get so excited, I’d actually like to invite you to attend a free, POWER session where I will share the TOP 5 WAYS you can boost profitability in your spa or salon. Simply follow this link to register and then put the date and time in your calendar and don’t miss it! I’ll see you on Monday, 21 June at 2pm Johannesburg / 1pm London / 8am New York.
Till next week!