Slashing Operating Costs

Every business – small, medium or large – needs to audit its operating expenses at least once a year. NOW is a good time to take a closer look at this business aspect. If you haven’t done so yet, review your business plan. YES, you need to take it off the shelf!

Are you still in the same business as when you did your planning?

Are you on target with your operating expenses? What can you trim? [Tip of the week: think about how many clients it takes to cover $1,000 in operating expenses and adjust your business plan accordingly.]

Four major operating expense categories you need to take heed of IMMEDIATELY:

• Business Expenses:    

1. Call your insurance broker and review your policies – you may be over insured and pay too much on premiums
2.  Have your utility company come in and do an energy audit. This is a good time to change to energy efficient light bulbs
3. Can your staff fill in for your cleaning / laundry services during their down time?

•  Treatment Expenses:

1. Conduct a garbage audit. Is your staff throwing away too much product? Too much of a good thing on a client’s face or body is not always the best and can cost you dearly!
2. Portion the products for each treatment – one spa owner told us that it’s cheaper for her to buy individual treatment packages instead of the larger professional containers. You can also use portion control devices.
3. How much are you spending on tools, bowls, etc.? How much is over-kill?

• Staffing:

Since staffing is probably your single largest expense, and likely the hardest area to make wise decisions. It is never easy to let people go, even when you know they aren’t generating sufficient revenue for the business. Here are a number of different ways to look at your employee’s sales numbers:

1. Total volume sales
2. Sales by category growth
3. Client-base increase
4. Client retention rate [it’s cheaper to keep clients than to get new ones]
5. Retail sales revenue
6. Cross-selling revenue

Have you wanted to reward a staff member with an unpaid educational opportunity? Now’s the time! Has anyone been asking for unpaid leave? Now’s the time! Do you have consistent complainers disrupting operations? Now’s the time…

• Cash Flow

Credit card processing fees can really add up! Explore your options. If your bank has said ‘No’ to a loan, consider getting an advance on your future credit card charges. The Day Spa Association has 3 vendors offering special rates to our members. DSA members also get special low interest cash advances from 2 of our allied members!

So, let’s hear from you. If you’re a DSA member respond to this blog post with your email address and company name, and I’ll send you the DSA Forum password. You’ll have access to brilliant ideas from our DSA members. Share a few of your own.

If you’re not a DSA member yet- why not? Take a look at our Membership information. Feel free to post a comment / query here, too.