New Year’s Resolutions: Setting Financial Targets

By Lisa Starr

Your Presenter

• Lisa M. Starr– 20+ years experience in

salon & spa industry– Senior Consultant,

Wynne Business– Community Ambassador,

Gramercy One– Consultant, educator,

writer, presenter

Wynne Business provides consulting and education, including live seminars and on-site team trainings, for the spa and salon industry

Targets and Goals

"If you don't know where you are going, you will probably end up

somewhere else. “Lawrence J. Peter

Goals must be . . .

SMART Examples• Instead of this:

– “I need you to do better.”– “We need to sell more.”

• Do this:– “I need you to increase your average

ticket from $35.80 to $39.50 by the end of next month.”

– “We need every technician to meet minimum departmental guidelines for retailing in the next quarter.”

Guidelines for goal setting• There must be a

starting benchmark• There must be

consensus on the target• Danny Meyer: “constant,

gentle pressure.”• Link achievement of

goals with company performance

4 Areas of Focus• Revenue Side

– Average Ticket– % Retail to Sales

• Expense Side– % Payroll to Revenue– Treatment Supply Costs

Income Statement ModelRevenue Service Sales 450,000 75%

Retail Sales 150,000 25%Total Sales 600,000 100%

COGS Service Labor Costs 150,000Back Bar Supplies 26,500Products for Resale 68,000Retail Commissions 22,250

Total Cost of Goods 266,750 44%

Gross Profit 333,250 56%

Expenses Rent & Utilities 36,000Marketing 18,000Support Labor 72,000Owner Salary 40,000Employee Benefits 14,212Payroll Taxes 25,582Insurance 6,000Debt Service 1,100

Total Expenses 212,894

Net Profit 120,356 20%

Revenue-side Targets

Average Ticket• Service Sales + Retail Sales/

#of clients– $85 + 85 + 85 + 85 + 30 = $370/5

= $75

• A simple but powerful way to measure your performance

• The quickest approach to growing sales

• Average ticket can be measured by facility and by operator

4 Methods to Grow Average Ticket• Strategic Service

Menu design• Each department has

micro tx available for small fee – NO additional time

• Add-ons• Retailing

The Power of Average Ticket • Feb 1; LMT has 5 clients (4 massages, 1

body tx)$85 + 85 + 85 + 85 + 68 = $408

Average ticket = $81.60 or $408/5

• Feb 15; LMT has 5 clients (4 massages, 1 body tx, sells 1 retail product)

$85 + 85 + 85 + 85 + 68 + 18 = $426

Average ticket = $85.20 or $426/5 Increase of 4% with the sale of one item!

Service Menu Supports Avg Tkt

Facial Treatments Price Facial Treatments Price

Anti-Aging Facial $95 Anti-Aging Facial $102Clear Skin Facial 85 Firming Facial 98Spa Facial 85 Organic Facial 95Gentlemen's Facial 85 Clear Skin Facial 92Teen Facial 45 Spa Facial 85

Teen Facial 48 Hydrating Hands 13Accupressure Scalp 13RevitalEYES Tx 11Smooth Lips Tx 8

Growing Average Ticket• Feb 15; LMT has 5 clients (4 massages,

1 body tx, sells 1 retail product)$85 + 85 + 85 + 85 + 68 + 18 = $426

Average ticket = $85.20 or $426 / 5

• April 1; LMT has 5 clients (4 massages, 1 body tx, 3 purchase retail)

$85 + 92 + 95 + 98 + 72 + 12 + 15 + 15 = $484

Average ticket = $96.80 or $484/5

• Another increase of 13%! (18% from 2/1)

More Methods to Grow Avg Tkt• Add-ons that do take more

time– Additional 15 minutes of

service– Add massage to body tx– Add body tx to massage

• Retailing– Estys, makeup high

performers– MT’s

• Music, books, candles, gels

Average Ticket Benchmarks

• Should be part of advancement criteria

• Higher expectations for longer term of service

• Slow, steady, upward movement• Assists with increasing

retail ratios• Be aware when service

menu pulls it down (waxing)

Retail to Sales Ratios• Retail to Service Sales• Retail to Total Sales

Which is right?

$100 Svc Sale + $25 Retail Sale25% Retail to Svc Sales Ratio20% Retail to Total Sales Ratio

Methods to Increase Retail• Home Care Recommendation

Sheet for all clients• Build into service price

– New client facial $98 includes take-home kit

• Vendor evaluation• Retailing Basics

– Price tickets, visual merchandising, lighting

Recommended Retail to Total Sales Ratios

• Hair - 10-15%• Skincare - 35-50 %• Massage/Body 1-5%• Nails - 5-15%• Cosmetics - 40-100%• Gift - 10-40%

• Hair - 5-10%• Skincare - 15-30%• Massage/Bdy - 0-5%• Nails - 0-10%• Cosmetics - 25-50%• Gift - 5-15%

Day Spa Resort Spa

Retail Ratio Considerations• The more modalities

you offer, the lower the ratio will be

• Etsy & Cosmetics drive retail

• Massage & Waxing do not

Expense-side Targets

Payroll Breakdowns• Labor – Your Largest Expense

–Technical Staff

–Hourly Staff

–Management/Salaried Staff

–Taxes & Benefits

–Owner

Income Statement ModelRevenue Service Sales 450,000 75%

Retail Sales 150,000 25%Total Sales 600,000 100%

COGS Service Labor Costs 150,000Back Bar Supplies 26,500Products for Resale 68,000Retail Commissions 22,250

Total Cost of Goods 266,750 44%

Gross Profit 333,250 56%

Expenses Rent & Utilities 36,000Marketing 18,000Support Labor 72,000Owner Salary 40,000Employee Benefits 14,212Payroll Taxes 25,582Insurance 6,000Debt Service 1,100

Total Expenses 212,894

Net Profit 120,356 20%

Payroll Worksheet• Total Sales _______$

• Total Payroll ________• Service Labor ________• Retail Commis ________• Admin/Support ________• Owner ________• Benefits ________• Taxes ________

• Total Payroll/Sales ________%

Payroll Worksheet• Total Sales _$600,000_

• Total Payroll _$324,044_– Service Labor _$150,000– Retail Commis _$22,250– Admin/Support _$72,000_– Owner _$40,000_– Benefits _$14,212_– Taxes $25,582_

• Total Payroll/Sales ___54__%

Ideal Payroll SetupService & Retail Revenue 100% - Management/Support 10-12% - Technicians Svc 33% - Technicians Retail 1.5%*

*10% of 15%

- Taxes +/- 4% - Benefits +/- 4%Total Payroll 54.5%

Payroll Benchmarks• Average day spa overhead

40% of revenue• So, payroll MUST

be below 60% to see any profit

• % is focus for you, $ earnings should be focus for your staff

Treatment Supply Costs• Treatment supplies

are often seen as a commodity item by staff

• They are one of the few areas that can be positively impacted by careful management

• The answer: Systems & Processes

Treatment Supplies• What is a

treatment supply? – Cremes, gels, lotions,

branded products– Gloves, Q-Tips,

comestibles– Gallons of distilled

water and massage oil– Anything you purchase

to provide a treatment

Treatment Supply Chart of Accents• Each department

that you break out for service . . .

• You also break out for supplies – Massage Service– Massage Tx Supplies– Nail Services– Nail Tx Supplies

Controlling COGS for back bar

Revenue Service Sales 450,000 75%Retail Sales 150,000 25%Total Sales 600,000 100%

COGSService Labor Costs 150,000Back Bar Supplies 26,500Products for Resale 68,000Retail Commissions 22,250

Total Cost of Goods 266,750 44%

Gross Profit 333,250 56%

Revenue Massage Svc Sales 195,000 32.5%

Esthetic Svc Sales 255,000 42.5%

Massage Ret Sales 5,000 0.8%

Esthetic Ret Sales 145,000 24.2%

Total Sales 600,000

% of COGS

COGS Massage Svc Labor 78,000 29.2%

Esthetic Svc Labor 72,000 27.0%

Massage Backbar 3550 1.3%

Esthetic Backbar 22,950 8.6%

Massage Ret Prod 3,000 1.1%

Esthetic Ret Prod 65,000 24.4%

Massage Ret Comm 500 0.2%

Esthetic Ret Comm 21,750 8.2%

Total Cost of Goods 266,750

Gross Profit 333,250

Simple Detailed

Power of Treatment Supply

Revenue Massage Svc Sales 195,000 32.5%

Esthetic Svc Sales 255,000 42.5%

Massage Ret Sales 5,000 0.8%

Esthetic Ret Sales 145,000 24.2%

Total Sales 600,000

% of COGS

% of Svc Sales

COGS Massage Svc Labor 73,245 27.4%

Esthetic Svc Labor 76,755 28.8%

Massage Backbar 3,550 1.3% 1.8%

Esthetic Backbar 22,950 8.6% 9.0%

Massage Ret Prod 3,000 1.1%

Esthetic Ret Prod 65,000 24.4%

Massage Ret Comm 500 0.2%

Esthetic Ret Comm 21,750 8.2%

Total COGS 266,750

Gross Profit 333,250 55.5%

Total Expenses 210,532 35.1%

Net Profit 122,718 20.5%

Revenue Massage Svc Sales 195,000 32.5%

Esthetic Svc Sales 255,000 42.5%

Massage Ret Sales 5,000 0.8%

Esthetic Ret Sales 145,000 24.2%

Total Sales 600,000

% of COGS

% of Svc Sales

COGS Massage Svc Labor 73,245 27.4%

Esthetic Svc Labor 76,755 28.8%

Massage Backbar 2,535 1.3% 1.3%

Esthetic Backbar 18,360 8.6% 7.2%

Massage Ret Prod 3,000 1.1%

Esthetic Ret Prod 65,000 24.4%

Massage Ret Comm 500 0.2%

Esthetic Ret Comm 21,750 8.2%

Total COGS 261,145

Gross Profit 338,855 56.5%

Total Expenses 210,532 35.1%

Net Profit 128,323 21.4%

Before After

Net cash increase of 4.5%

Treatment Supply Processes • Coordinate orders among

departments• Time orders for beneficial arrival• Assigned & locked storage by

department• Replenishment methods

PROF RETMassage MassageSkin SkinWaxing WaxingNails NailsHair HairMedical MedicalMakeup Makeup

Recommended Tx Supply Costs• Massage 1%• Body Tx 2%• Esthetics 7-8%• Nails 4-5%• Hair 7-10%• Injectables 10-40%• Cosmetics ˅1%• Waxing ˅1%

Where to Start? • Does your business model

support growth in average ticket?• Do you have the right vendors and

system to support retail initiatives?• Does your compensation

plan need to be overhauled?• Do you have systems in place to

receive/track/replenish tx supplies?

Wise Words

"If you aim at nothing, you'll hit it every time. “Unknown

"A goal is a dream with a deadline."Napoleon Hill

Setting Financial TargetsThanks for your attention!

Questions? Lisa Starr at gotalkone@gmail.com

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Twitter - @gotalknow