Project Revenue By Department.
By Leslie Lyon
Monday, 7th January 2008
If you base your purchasing, hiring and marketing decisions on projections that are way off your actuals -the viability and sustainability of your business could be irreversibly impacted- Even worse, if you are not projecting future business revenues at all, how do you know how much you should be spending on new or existing staff wages and increases? Equipment? Marketing initiatives and new product acquisitions?

Annual Projections are an integral part of growing your business. To be able to pinpoint as closely as possible what the real revenue projections will look like, you'll need to departmentalize services, so that the end figure is not skewed too much by under or over utilized services at widely varied price points. Breaking the services down this way allows you to forecast different utilization rates and observe the corresponding result for these "like" services.

Let's look at this example. Say your multi-purpose dry room encompasses facials, massage and hair removal. To arrive at the most accurate projections for this room/department, these services would be combined together to arrive at the average service price and ultimately, the projected revenue.

If desired, you could even consider which service(s) you believe will be the most utilized in that room, and apply that presumption to your calculation as well. You would then total the departments for a much more accurate monthly or annual revenue projection.

Remember that the information your Financial Statements provide you with is only as accurate as the information you put into them. Having historical data to assist you in your projections will provide you with the best opportunity for accuracy, however if these are not available, forecasting by department will be a dependable alternative.

Formula to Calculate ServiceRevenue Example
Average Hourly Service Price for a Department$87.71
X Hours Available for service234 hrs/month
X # of Rooms or Stations offered4
@ Projected Utilization30%
= Projected Service Revenue$24,628/month

You will also want to add in the percentage for expected retail revenue to provide you with your total revenue projection per department.

Projected Retail Revenue $2,463/month
Projected Sales $27,089/month

Once you have done this for each department, you will then be able to add up and accurately calculate what your monthly/annual revenues should look like.

Skip Williams of Resources & Development in Las Vegas, provides coaching, support and consultation to the spa industry and says, "Have a vision, and stay in business by watching the bottom line, because it can tend to get away from us, especially with commission. Commission creates business partners more than employees and is difficult to manage. It's the biggest thing holding us back - you can overpay for everything else in your operating budget, but if you overpay in compensation, you're done".

Use a Staff Service & Retail Tally Sheet to assist with your Projections
Always have your Therapists monitor their service and retail sales on a daily basis. Spitting out a computer tape for them at the end of the day to tell them how well (or poorly) they have done, is just too late. If they are able to monitor their progress throughout the day, it will become very apparent to them where they need to adjust and why. At the end of the week, the results they have achieved are no surprise - it encourages accountability.

It goes without saying that a slow spa day makes for a low sales day, but this will be taken into consideration by you when you are applying utilization percentages to your revenue projections, which is then reflected on the targets you set for your staff. This self-monitoring process becomes a self-motivating process.

"And what about score boarding?" says Ducoff. " If your goal is to reach $10,000 this month, by week 1, you should be 1/4 of the way there; by week 2 you should be 1/2 way there, and so on. You have to be timely. Would you want to wait 2 weeks to hear the score on the ball game you watched last night? We at Strategies are believers of in-house accounting, you must know how to bring the numbers to life in your business."

Skip goes on to say, "And don't get carried away with retail. Not that it's not a viable leg of your business, but some of the drivers in our industry such as product companies, put more than appropriate emphasis on it. Think of the services you sell as if they were retail products, and think of all those bottles and lotions and potions and anything that you didn't sell at the end of the day, just evaporating.

That isn't what happens in retail, but it does happen with services. It is critically important to make sure that the service side of our business is working well, is profitable and we utilize much if not most of the capacity, then worry about retail from there. If we think retail is going to save our business, it won't, it is imperative that we focus on services and retail will follow naturally".

For Personal Service And Retail Tally Sheet contact www.spas2b.com

Spas2b is a full-service Spa Development, Consulting and Training company based in Waterloo, Ontario, Canada. Spas2b draws on the extensive experience of its President, Leslie Lyon. Leslie has evolved with the Health and Beauty Industry for more than 30 years and has participated in many aspects of the Spa trade. An Aesthetician and Electrologist for 25 years, today Leslie enjoys her profession as an International Consultant, Educator, Key Note Speaker, Published Columnist and Freelance Writer.
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