Poor you, I really sympathise. You need to increase your annual turnover to above £140k a year to make it worth being VAT registered, otherwise you’re on a losing battle and may as well keep your turnover below the threshold and deregister for VAT by having a regular maintenance shut down.
You need to increase your prices by 10% and make efficiency savings to reduce your costs by 10%. Efficiency savings are really tedious - it’s much easier to build turnover than to reduce costs, but there’s a saying “turnover is vanity profit is sanity”.
You need to nail your costs down by analysing each staff member’s takings against their wages. They should be taking 4X their salary in treatments. They should be doing bookable treatments for 80% of their paid hours and your room occupancy should be 80%. You should be keeping management accounts which allow you to monitor this on a week by week/day by day basis. Find the quiet times/days/therapists and run promotions specific to these issues.
You need to look at what you are spending on reception - expressed as a percentage of staff time or wage roll you need this to be a maximum of 20% otherwise you’re charging your clients for your own inefficiency which isn’t really fair.
Building demand is straightforward, you obviously know how to do this, it’s easier than taking a room out of use for half a day by renting it out or cutting staff hours.
You need to increase your retail sales and each staff member should have targets and be supported to hit these. You just can’t afford not to sell something to the majority of your guests. You need to take 25% of your turnover in retail sales as a minimum.
Look for areas where you can save money. I use very few towels because they’re expensive to launder. I use sheets under a client because I can get more in a washing machine and I use scrummi spa towels in place of hand towels or for wet treatments. I use a sarong (because they are pretty) over a client under a fleece blanket so usually only the sheets and sarongs are washed after every client. Fleece blankets aren’t tumble dried and are washed daily on a short cycle.
Look at your waste costs, are you recycling? Focusing on carbon savings do your bit for the planet and save you money. When I started I could never imagine keeping used couch roll in a separate bin, now it’s second nature. I have wheelie bins for my recycled waste and I don’t use black bags in these (I have paper sacks which I empty and reuse). You’ll get greater staff support if you have a reduce plastics campaign or a recycle more week rather than a save the Boss money campaign.
Try and save on your water usage - it’s really important for the planet and most of your water will be hot, so saving water will save you money.
Finally look at your product costs. Over generous dispensing costs you in product, clean up time and hot water and waste. I used to turnover up to £13k a month but I changed direction a few years ago to focus on profitability and found I didn’t need to work so hard. Now I work solo. One of the big shocks to me is how little product I need and how little waste I produce. My lovely team cost me far more in profit than I ever realised and to be frank, I suspect one girl was helping herself to products to use in her home salon.
The fun bit is working out how to increase profitability and add value to client experience. If you can increase the typical client purchase from say 60 minutes to 90 minutes you will save room turnaround costs and the day will fly by for your team. Having a smaller number of high value bookings from clients who love what you do may be key to your salvation! These are the clients that won’t blink at the cost - they may visit less frequently though so you need to create an enticing treatment menu with seasonal changes to tempt them to return.
Chin up. I know it’s a shock but these bumps in the road are part of your journey to greatness. You can do this.
