Watch this video before diving in!
Managing the financial structure of your business is the most important function you can perform as a manager. We are often passionate about what we do as therapists and the services that we supply our clients but we cannot lose focus that we do this to make money and to earn a living. To achieve this and keep your business open, you need to understand and manage the money. All your decisions have financial implications, some good and some bad.
You don’t need to be an accountant and you don’t need to do an accounting course either, you simply need to have the basic knowledge of how the numbers in your business work and be able to read and understand them to make decisions on a daily basis so you are able to steer your ship in the right direction.
The only way to do this? By implementing and maintaining your P&L.
What is a P & L Statement?
The reason we all run and invest in a business, is to improve our financial position. The profit & loss statement (P&L) is a summery of the financial position of a business and includes the sales, costs, expenses and profits during the accounting period. The aim is to give you a tool with which you can get a snap-shot of how your business is doing and a tool around which financial decisions can be made. Although, to the inexperienced eye, a P&L may look complicated, but by spending a little time getting to understand your P&L, you will gain a valuable opportunity to understand and manage the health of your business.
A basic P&L comprises the following:
Turnover: The income of your business.
Cost of goods: The cost of the product you sell
Gross profit: The difference between your income and the cost of the product.
Expenses: All the remaining expenses of your business.
Profit before tax: Gross profit less expenses
Net profit: Profit after paying tax
Using some key formulas in your analysis:
Profit to turnover = profit / turnover
This will give you a percentage. A good return would be 10%.
Retail percentage = retail sales / turnover
This will give you the percentage of retail on your turnover. If you are in a busy shopping center /strip mall or city/hotel spa or home salon you should aim to achieve at least a 40 – 50% retail percentage and if you are in a destination spa you should aim for at least 30%.
Expense to turnover percentage = expenses / turnover
This will give you the expenses to turnover ratio. use this number to ensure it stays the same or reduces. If it is increasing, your expenses are growing faster than you turnover and you could be heading for trouble.
And this subject continues! We have an entire Financial Management Module that is part of our Transformational Business Management Course where we provide templates, industry benchmarks and an excellent P & L template that has been adapted specifically for our Industry.
We also recently hosted a live Zoom coaching session with a walk-through of our P&L template which you can watch HERE.
Want to know more about our course and the financial templates available to you? Drop me an email and let’s chat about how we can help you double your revenue, reduce expenses and achieve next level profits.
See you soon!