Why Splitting Up Your Revenue Matters
Running a salon or med spa is more than just providing great services – it's about understanding your business's financial heartbeat. Something that might seem basic can be a game-changer: separating your different types of income on your profit and loss statement (P&L).
Think of your P&L like a story about your business. When you lump all your income into one category, it's like trying to read a book where all the chapters are mixed together. Breaking out your revenue streams – services, retail products, and other income – gives you a clearer picture of what's really driving your success.
Let's start with service income. This is the bread and butter of your business – your facials, massages, haircuts, color treatments, or med spa procedures. When you track this separately, you can spot important trends. Maybe your skincare services are booming while hair services are staying flat. Or perhaps your Botox treatments are generating more revenue than your laser services. This knowledge helps you make smarter decisions about where to invest in training, equipment, or marketing.
Retail revenue tells its own story. Those products sitting on your shelves – are they really pulling their weight? By tracking retail sales separately, you might discover that your product sales are actually bringing in a significant chunk of profit with less effort than services. Or maybe you'll find that certain product lines are collecting dust while others fly off the shelves. This insight helps you make better inventory decisions and can even guide your retail strategy.
Then there's "other" income – things like membership fees, gift card sales, or rental income from booth renters. These revenue streams can be easy to overlook, but they often have different profit margins and business implications than your core services or retail sales.
Here's where it gets interesting: when you separate these income streams, patterns start emerging. You might notice that:
Your service revenue spikes during certain months, but your retail sales remain steady
Some services lead to strong retail sales, while others don't
Your membership program is actually more profitable than you thought
This knowledge empowers you to make better business decisions. For example, if you notice that facial services consistently lead to skincare product purchases, you might create service packages that include product samples. Or if you see that your retail sales dip during your busiest service months, you might need to adjust your merchandising strategy or staff training.
Think of it this way: imagine trying to lose weight without knowing which foods you're eating. Sure, you know your total calorie intake, but wouldn't it be more helpful to know exactly what you're consuming? The same goes for your business – knowing your total revenue is good, but understanding where it's coming from is better.
Working with a bookkeeper can transform how you see your business performance. They'll help connect your appointment booking system with your financial data, ensuring your income is properly categorized in ways that make sense for your specific business – from your highest-performing services to your best-selling retail items.
Remember, this isn't just about having neat and tidy books – it's about having the information you need to make confident business decisions. When you understand which parts of your business are performing well and which need attention, you can focus your energy and resources where they'll have the biggest impact.
So next time you look at your P&L, ask yourself: Can I clearly see where my money is coming from? If not, it might be time to start breaking things down. Your future self (and your bottom line) will thank you.
Want to take action? Start by listing out all your revenue streams and thinking about how they might be grouped. Then work with your bookkeeper to make sure your accounting system reflects these categories. The sooner you start tracking this information, the sooner you can use it to grow your business.
After all, you wouldn't mix all your hair colors together and hope for the best – why would you do that with your financial information?
Ready to transform your business’ numbers into growth? Book a free discovery call to explore how we can help you build a more profitable business.
The Glow Standard organizes financial data to help salon owners make better business decisions.
