You may be wondering how to manage seasonality in a salon. Isn’t it just a matter of stock piling up on extra inventory and staff when the busy ‘seasons’ come around? It is actually more complicated than that, as there are many factors to consider. See our guide below…
Why is seasonality an issue in salons?
Seasonality is a real issue for clinics and salons, and it’s one that affects your bottom line. Defined as the cyclical variations in demand for goods and services caused by changes in the seasons. In other words, people tend to get specific treatments (slimming, toning, waxing) more often in the three to six month leading up to Summer and then bookings for those said treatments fall off from July through September.
The problem with seasonality? It can affect cash flow, making it difficult to predict revenue fluctuations throughout the year. And if you’re unable to predict how much revenue you’ll bring in based on your sales volume and prices, it becomes hard to plan accordingly.
The problems caused by the fluctuations in cash flow
The most common problem caused by seasonal cash flow, then, is the difficulty of paying bills. Salon owners who have been in business for a while know that there are certain times of year when they need to bring in more money than usual and others when they can use a bit extra. If you are planning your budget with the expectation that this will be your experience—and if you’re not careful about managing your cash flow—then it’s likely that at some point during each season (probably more often than once), you’ll end up in a position where it’s too late to take advantage of opportunities when they arise or pay off debts before their due date arrives.
The benefits of a recurring revenue model
As you may be able to imagine, the benefits of recurring revenue are many. In fact, the following advantages are the primary reason that more and more businesses are moving toward a recurring revenue model. The ability to earn a cash flow each month regardless of whether or not you have any walk-in traffic is an incredible advantage when things are slow. There are many different ways that salons can bring in recurring revenue, which means there’s no one-size-fits-all approach when it comes to generating more money from your existing clients.
- Increased profits – It’s simple math: Get paid for what you sell. The money comes in regularly, which means it can be used to pay down debt or as an investment into other areas of your business.
- Increased cash flow – While you may not see any physical pounds flowing in or out when working with a long-term client, those payments add up very quickly over time and provide a solid foundation for future growth. Your business will have better cash flow management and less need for credit (or loans) from banks because your client base is reliable (and loyal).
- Improved customer retention – We already mentioned this one above, but it bears repeating: Recurring revenue helps keep customers coming back again and again, while also encouraging referrals to friends and family members who want similar services at their own salons!
Membership or Subscription programme
One way to implement a recurring revenue program is to set up a membership program. There are some steps you need to take, including:
- Creating an effective membership program – think of services that you offer and what you can turn into a membership or monthly subscription. Add as much value to offerings as you can to increase the amount of recurring revenue you can generate.
- A good initial target is to generate enough membership revenue to cover your overhead expenses.
- Set up a payment system that is easy to use for both clients as well as staff and offers the best rates.
- Creating a membership plan – look at different price points or tiers that would appeal to different clients. This is also a way of engaging all levels of staff (those less qualified can still have a subscription offer).
- Creating a marketing plan (include how you will reach out to potential customers, as well as how you’ll let current clients know about your new offerings). Incentivise staff to move their clients onto a subscription model.
- Creating a customer service plan – ask your customers what they love/would change about the programme. Use this as a way of adding value if they ‘refer a friend’.
By implementing recurring revenue strategies in your salon business you can increase the profitability of your business and build a more stable income stream. The six steps to implementing recurring revenue strategies in your salon are:
- Analysing sales data and cash flow trends for seasonal fluctuations
- Reviewing current pricing plans and offering additional packages and memberships to offset seasonality issues
- Using technology to automate membership management, communication and payment collection from customers
- Providing recognition, rewards and incentives for existing customers who use memberships or recurring services
- Educating staff about the benefits of recurring revenue, how it works and how they will be rewarded for their contribution, and;
- Reviewing sales data regularly to measure the financial benefits of a membership model for your salon business.
To learn more about managing seasonality in salons download our free eGuide “How to combat salon seasonality using memberships” today.