7 Financial Mistakes Costing your Barbershop

Here’s a problem you might be facing. You don’t have a background in finance. Nor are you an expert in bookkeeping. And now you’re running a barbershop and dread the thought of doing your taxes your accountant keeps asking you for.

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In this article you'll learn:

• What to avoid if you want to run a successful and profitable barbershop
• How we avoid these mistakes across 12 stores
• What you can do to avoid these issues

Running a cash-only barbershop

Issues from a business perspective

Although managing cash payments might work for smaller shops, it becomes a nightmare for busy barbershops. Accepting cash only can lead to problems like:‍‍

• Although you might think cash only provides 'flexibility' during tax time, paying taxes means you're running a successful business. From an operational stand point it, accepting digital payments gives more options to your customers leading to an increase in overall increase in revenue potential
• The Australian Tax Office is cracking down on cash-only businesses. This means you'll need to keep a firm eye on your numbers and ensure you're not leaving any details out

Issues as a customer

'Can I pay by card?'

More and more customers are paying with card and although it may not be an issue with your loyal customers, it can deter them from coming into your store because they don't have any cash on them. Not only that, you're hurting your customer experience by adding friction to your payment process.

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Lack of Financial Planning

Not knowing your numbers

The successful barbershops have a firm understanding of their numbers. They know all the money going in and out. Without these numbers, its hard to grow and scale as a barbershop. It adds uncertainty when taking on new hires and investing in your business like marketing and social media.

‍Why barbershops fail

A business forced to close its shop is a number's issue. Not enough money coming and too much going out. In situations like these, making on the fly changes to your pricing or business model is key to turning your business around. Though without the actual planning and knowledge of your barbershop's business health, it's hard to make these changes before it's too late.

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How we manage the finances over 12 stores

All our store owners have the freedom to work with their preferred accountant. Though we implement an optimised financial management system to make sure you're not always in spreadsheets or calculating figures all the time. Things like a POS system to take payments and organise your business sales data automatically to working with our Mancave Accountant is how all our stores have been open for 3+ years (and counting).

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Not going digital

Many barbershops can get away with managing their customers with a notebook and a cash register. You'll be able to generate end of day reports and how much revenue each of your barbers generate. But what about how much each customer spends per year? Or the average order value per receipt?

After implementing a POS system like Lightspeed, Square or Fresha, it helps us understand more of our business, automatically.

Before this starts sounding like a plain promotion for them, here's why you need this data:

• Average customer yearly spend - if you know a customer is going to spend an average of $2000 per year on haircuts it makes things so much easier. Depending on how much you pay your barbers or yourself, you're able to set a target of 150 regular customers. Giving you a rough ball park of $300,000 in revenue per year. Though without these digital systems in place, you're just guessing.
• Profitable marketing - this means for the money you put into marketing your barbershop, you're getting a positive return on investment. To know whether or not your paid ad is profitable you need to first understand the average spend of your customer. So if you know you can convert a customer into a lifelong client who spends $2000 per year - it gives you a larger budget to work with when thinking of your business like this.

Rushing Haircuts

It's a double edged sword. You're getting through more haircuts and this ends up with a larger end of day for you.

Here's the problem:

• customers appreciate it when their service isn't rushed
• most customers come to you for the quality of work
• customers will stay with you as long as they're getting great service

If you're rushing your haircuts simply to get more in you're sacrificing an extra 2-3 haircuts per day for a life long customer.

We encourage all our stores to look long term. If you treat your customers with the service, care and attention they need you'll have a customer for life.

Don't skimp on the core fundamentals of what makes a successful barbershop:

• Great results
• Great service
• Great education.

This leads to the next mistake.

Not investing in education

If you're not investing in growing your barbers you're opening yourself up to huge problems:

Retaining your barbers

Barbers want career growth and they want to continuously elevate their skills. If you're not investing the time and money into developing your team, there's a high chance they'll join another barbershop who prioritises this. This is a nightmare for your customers and your barbershop as now you have customers who have connected with that barber and you're now short one chair.

Quality of work

Customers come back to you because you provide consistently great haircuts that they've asked for and provide great customer service. When encouraging your barbers to focus on how many haircuts they do over the end result, you're hurting your business and neglecting your customers.

Here's what we recommend

Focus on providing the best customer experience. Think long term with your business. The short term boost of revenue when rushing haircuts will soon dry up from poorly served customers.

Underpricing your services

Pricing is a lazy way to stand out in the barber industry. We believe in paying our barbers well all while charging fair prices. And we see fair as pricing your services not too much to drive your customers away, while also considering your business needs to make money.

Now the problem with underpricing your services is in the long run:

• Leases increase every 3-5 years depending on your landlord. Meaning you'll need to be able to increase your prices consistently while not turning off customers
• If your margins are too small it's hard to pay your barbers more as they develop

Again resulting in a retention issue and surviving past the 5 year mark as a barbershop.

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