Written by Ryan Fox, Published by Hairdressers Journal Mar 2018
Slightly better growth forecasts with falling inflation and borrowing marks a turning point for the UK economy according to the Chancellor’s recent Spring Statement. Ryan Fox, Salon Consultant gives an update and explores the implications for Salon Owners.
This is the first of the new Spring Statements with the main Budget being presented last November. Basically, they have flipped round so the Budget is now in the Autumn followed by the Spring Statement.
An upbeat message from the Government does not mean we are out of the woods. Growth is still set to be low at only 1.5% this year and remains at 1.3% for 2019 and 2020. Remember these figures were already revised down in the Autumn from a maximum of 2% and with inflation also forecast at 2%, you can’t rely on the economy to grow your salon over the coming years.
What to do
You should look at new ways of growing your salon in order to get growth, whether that’s a price increase, improving the performance of your team, investing in better hairdressing and business training, filling more of those gaps in your appointment book or introducing new services.
The chancellor reported that there is now “light at the end of the tunnel” with government debt as a proportion of GDP (Gross Domestic Product is the total of everything produced by the country in a year) set for a sustained fall over the coming years for the first time in 17 years! This is good news and is what the government has been trying to achieve through its policy of austerity and cuts in public spending.
What to do
Just like government spending, with a small business like a salon, there is always a balance to achieve between how much debt you have and how much you invest in your business to achieve growth. Spend too much and you may not be able to cover your debt repayments, invest too little and the standard of service may fall which can affect growth. You don’t want too much debt but on the other hand money is still cheap to borrow. Check your debts vs spending with your accountant to see if you have the balance right.
Wages & Employment
Unemployment remains low and wages are set to start rising faster than prices over the next 5 years. New National Minimum Wages come in to effect from Apr 2018 to the following rates: Apprentice £3.70, Under 18 £4.20, 18 to 20 £5.90, 21 to 24 £7.38 and 25 and overs £7.83.
What to do
You should review your prices, targets and wages so you can ensure you can continue to make a profit with the New Min Wage rates and create an environment where stylists can generate their own pay rise from generating more income. If you don’t get this right, you may as well be working for someone else.
Ryan Fox is a Hair & Beauty Salon Consultant who improves salon performance through training and innovation. He offers help & advice on all the issues raised here. Ryan also offers an Accountancy Service specifically designed for Salon Owners to help manage your finances…