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Contents
- Operating practices
- Jargon and special features
- Sales mix
- Seasonality
- Factors affecting sales
- Prime records
- Customers, terms offered
- Suppliers, terms obtained
- Trade specific legislation
- General legislation
- Health and safety legislation
- Employment legislation
- Licensing requirements
- Sources of further information
Performance indicators
Main performance indicator
Performance within this sector is commonly expressed in one of the following ways;
- ratio of purchases to takings
- gross profit rate
The gross profit rate calculation might include both purchases and direct labour costs, or it might take into account purchases only.
Because of the varied and diverse nature of this sector, comparisons between individual businesses' results and industry norms should be made with care. A gent's barber, for example, might purchase considerably less shampoo and other hair products than a unisex or ladies' salon. Similarly, a downmarket salon in a small provincial town might purchase the same goods in the same quantities and at the same prices as an exclusive central London outlet, but may charge only a fraction of the price for an equivalent service. Individual businesses' trading results may also be affected by a number of other factors (see Performance indicators: Factors affecting ratios).
As a rough guide, however, trade sources suggest that the relationship between direct costs and takings in a 'typical' middle of the road, efficiently run unisex salon might be as follows:
Note; the cost of direct labour is taken as 30% of turnover in the above example; however, direct labour costs may be as high as 50% or so in many individual cases
A salon which makes few purchases and charges relatively high prices (for example an exclusive city barber) might achieve a considerably higher gross profit rate. However, in salons where purchases are substantial and the pricing policy is highly competitive (for example Afro-Caribbean outlets), the gross profit rate (purchases only included) might fall below 80% (a purchases:takings ratio of 1:5 or less). According to Annette Mieske, author of Hairdressing Business Management (Blackwell 1990), a salon's gross profit rate should ideally fall no lower than 45% - 48% if labour costs are included.