Investment vs. Expense
There is a systemic problem in our industry, and honestly much of our society at this point, but it always seems to be prevalent in our industry. Whenever it seems we need something to better ourselves, buy new tools or if an unexpected expense occurs, we don't have the money we need.
I remember a salon owner saying to me years ago that whenever there was a financial challenge, their team was either wearing all their savings or driving it. Now, I know we are in a fashion business and looking good is important, but if there is no money, you aren't really in business. So what can you do? Understand the difference between an investment and an expense.
Where You Work
Where you work is an investment, it is an investment of time and talent, and you can waste time or invest it. I am always blown away by young stylists that would rather make some money and have the time and flexibility they want, usually to hang out with friends that are still living at home while they figure what they want to do or how they are going to get rich…while still living off their parents.
The challenge is those friends aren't going to be successful, and instead of investing themselves 100%, and committing 100% to working with and training with the best, they want it to work for them. You know what, I've been on a lot of teams and the ones who tried to do less push ups, less laps and less practice were never the championship teams! Champions don't invest 90%, that's just a donation that will be taken by someone else. To be the best you have to commit 100%. Once that investment is made the dividends pay off for a lifetime, while those who didn’t try as hard jump from job to job trying to find success, because they aren't working hard enough to create it.
This can be addressed in a few ways when we are talking investment versus an expense this is a BIG one. Cheap tools (most of the time) end up being an expense, not an investment. A great pair of scissors can last a lifetime, a great blowdryer or flatiron not only makes it easier to do a great finish, they also tend to last longer than cheaper versions. Cheap tools can end up costing way more and let you create way less. I like to invest in tools that help me create a better experience for my guests that are different from others. From colored foil to iPads, these tools make bold visual statements that show the guest we know they are making a big investment in their hair. And, by having things they don't see in every other salon tells them that we are serious about making sure their investment pays off.
Life is money in (earnings/pay) and money out (expenses/bills); the key to staying ahead is a two-prong approach. 1. Remember there are only 100 pennies in every dollar and 2. If you have more money going out than coming in that's not sustainable and that’s not a business.
So let's take a look at both, it’s easy to figure out how much money is coming in because we can look at our paycheck. Next, let's look at our monthly expenses, is the in more than the out? If not, can we lower the out? There are two ways to make more money, make more or spend less, and if the two are close in income and expense then that's where I'll look at reducing other expenses likes coffees, going out, that new thing I wanted, until we again have the money/cushion we need to make the next investment we can.
My grandfather (both my grandfathers owned their own businesses) always told me not to spend money I don't have. My mom told me to invest everything I have but not to go into debt, because if you lose everything you can start over, but if you are in debt you might never get out. I was lucky, not only did I have that great advice, but I also found myself around the best, working really hard but not making a lot, constantly investing in myself and tools to do more. Then one day, I realized right around 26 years old that all those years of taking my vacations to teach, living on about $10-20 a week to eat and never buying a new car has set me and my family up for the rest of our lives. I just need to keep working hard. Even today I live by this, that’s why I invest in Goldwell Color and get one of the best cost per application to help us have a good bottom line. With money, you can invest in the guests experience, your team and your salon.