If you're looking for advice on how to forecast sales, don't go to The Wall Street Journal.
    Most business articles advise looking at same-month sales from the previous year, then accounting for general economic and industry-specific growth. The problem: This approach applies to consumer- goods companies, not to an employee-driven business for which revenue forecasts are based on service sales.
    Notes Charles Penzone, owner of Charles Penzone spas and salons in Columbus, Ohio, "If a product company raises prices by 10 percent, it has no acceleration of costs beyond inflation. Salon costs are not fixed; income increases parallel payroll increases."
    All sales projections start with people, says Penzone, and you must always account for attrition. For a large, mature business like his, sales projections get met only if he ends the year with more employees than he started with.
    What else is crucial: historical data, of which Penzone has reams. It can help pinpoint monthly slow-downs or increases, fast-growing services, successful promotions and more. For operations in the $5 to $10 million range that have been established five to 10 years, 5- to 7-percent growth is realistic, says Penzone.
    Small-to-medium salons should also start projections with employees, or more correctly, with the hours they work. This is what allowed Cathy Strum, co-owner of Cass and Company Salon in Avon, Indiana, to project and meet a 20- percent sales increase for 2004. She based it on bettering productivity and meeting dollar-per-client goals.
    "Numbers tell the whole story," says Strum, whose salon is currently at 82- percent productivity. "If you aren't computerized, you can't make realistic sales projections or track how close you are to meeting them."

The Hours
Reality-based sales forecasts start with recognizing that it's time you're selling.
    "To project sales, determine how many hours you have available to sell per week and per month, " says Neil Ducoff, founder and CEO of Strategies in Centerbrook, Connecticut.
    "Start by adding up the hours that each service provider works weekly, then monthly. The total number of hours you can put on your books is your inventory.
    Then, determine your productivity rate or utilization of those hours. Using history, be realistic about how much you can increase that productivity rate and create a plan to do so. If you know how much you generate per hour, you'll have your sales projection. "
    For instance, if your salon has 1,800 hours available to fill this month and you are at 65-percent productivity, that means 1,170 hours are booked (1,800 multiplied by .65). Certainly, a 10-percent productivity increase would be reasonable. If you want to increase productivity to 75 percent, your goal is to sell 180 more hours, for a target of 1,350 hours sold per month.
    Next, add service fees to the mix. If you charge $50 a cut and do a cut and a half per hour, you generate $75 an hour. Adding 180 hours represents $13,500 more per month. This is your service revenue increase.
    Now account for cost increases, including commissions, and you'll know how much of that money you get to keep. After all, salons operating at 50-percent commission pay half of any service-sale increase to the stylists.
    "Do a complete monthly plan, including expenses, sales and profit," says Ducoff. "It should include seasonal changes and heavy vacation months, when you'll take stylists" hours out of inventory."
    If you want to keep pace with expenses and pay increases, 10-percent growth is slow for the average-sized salon, says Ducoff. Fifteen to 20-percent growth is achievable if you're disciplined.
    In addition, most salons do about 10 percent in retail, and retail sales forecasts should be based on a percentage of service sales. If you sell more services or add staff, retail should increase accordingly.

Getting There
Projecting a 20-percent sales increase is one thing; achieving it is another. Do you need more staff or more training to increase your current productivity rate?
    Consult your historical data: What activity increased sales during the same month the previous year? Can or should you add a service? Waxing, for example, is a super-sales booster that can bring in as much as a top stylist.
    "Meeting projections means massaging and manipulating the numbers every month," says Penzone.
    "You have to market constantly, provide five-star service and do everything better than the salon down the street. Try a number of creative things to see what works. It's very competitive out there, and you have to make certain the doors continue to swing."
    In business for about five years, Strum found that focusing on current clients and boosting the total ticket per client helped her meet goals. She's currently expanding to a larger space, but controlling growth will be tricky. She has three stylists who are preparing for maternity leave.
    "I have enough people in training to actually add hours, once the stylists are on leave," says Strum. "Also, I bought the new building as an investment."
    Like most salons with goals to meet, Strum makes her staff part of the action plan. She sets monthly goals, tracks them weekly and gives bonuses to employees who meet goals. She also has a strong client referral program and found a sizzling new service in the spa hair cut. A cut that includes a head, neck and scalp massage, it adds 15 minutes and $25 to the price of the service.
    In 2004, Heather Robak, owner of EOS Salon in Hoffman Estates, Illinois, added staff, raised prices and achieved 25 percent growth. She didn't do either of those things in 2005, so she lowered her projections to 10 percent growth.
  "We concentrated on marketing color and adding services," says Robak. "For 2006, we started January with a referral contest that rewards both stylists and employees."
  &nbs