Some helpful finance strategies you can implement now.
What a tough time it is for everyone, but there will be a future, especially now that beauty businesses in NSW and VIC are allowed to reopen starting next week, and financial advisor JENNET CUNNINGTON touches on a few vital business and finance aspects to think about as you plan to return to your salon, spa, or clinic:
What to do NOW
1. Prepare a realistic projection of customer return. Think back to the time you started your business and your expectations then, remembering that this time many of your clients may have been retrenched for a while or working reduced hours.
2. Evaluate your business. Take the opportunity to fully review the service menu, maybe there are items that are not very profitable or just linger on your price list. Also assess your salon and home care products and finally revisit employee spread of working hours.
3. Bring your financial records up to date. Most of you I am sure will have some form of accounting package, but is it current? Do you have a good picture of income/expenditure and know the value of stock on the shelf?
How to plan the finances
4. Prepare a cash flow spreadsheet (or similar) using the information from your projections plus the up to date financial information. This is the MOST IMPORTANT THING YOU WILL EVER DO; a projected cash flow focuses on the movement of cash in/out of the business, showing the times when your business needs cash and when there is a surplus. Using the cash flow, gradually step up the income over the 12-month period until you think you have reached a similar pattern before the virus. Likewise enter your fixed and running costs (rent, electricity, wages) into the expenses and ramp these up as appropriate (e.g. wages, stock). Taking control of your cash flow is so important, I cannot emphasise it enough. It is the best guide you can have for planning and managing the cash in your business. Update it regularly, of course.
5. Pay what you can by installments wherever possible. As an example, annual insurances, spread over a 12-month period, will keep a steady cash flow. Pay a set amount each month for your electricity then the big bill every quarter won’t seem so difficult to find. Make provision each month for GST, PAYG and superannuation. All these measures put the brakes on impulsive spending so that you have the cash when it is needed.
6. Consider a business loan to assist your planned growth. For instance, we at SME Cash have a wide range of finance products on our shelf including a very flexible Health & Beauty Combo package, created especially to include a broad range of salon/spa needs. Little did we know how useful it would become this year.
7. Open a separate bank account into which you can move surplus funds. Additional Gift Voucher sales and seasonal income can be ‘put aside’ and drawn down progressively. This is when a cash flow forecast is SO beneficial.
Back at Work
8. Call a staff meeting and discuss your plans and decisions for the re-launch. Be open to suggestions but don’t lose track of your long-term plan.
9. Keep your sights on getting your business back to normal, but also remember that your client’s personal income has probably taken a battering. So, to encourage clients, for example, you could offer a ‘mini package’ that is not expensive but includes a pared down version of some of the popular treatments.
10. Honour all your gift vouchers, even if a little out of date, and treat the recipients like gold. Vouchers are one of the best ways to increase your client base and build good will.
Jennet Cunnington is the founder of digital marketplace lender, SME Cash. Visit smecash.com.au for more info.