Most spa owners start their businesses because of their passion for skincare.
But a business can not run on passion alone. It also needs good systems, people, and financial management to thrive.
If you are not comfortable analyzing and monitoring the financial data in your business, it can spell disaster cash flow, which is the lifeblood of any business.
Yet many business owners avoid looking at their financial data altogether because they feel overwhelmed with where to start.
Reading financial statements, analyzing trends, and monitoring cash flow is something that most small business owners (or their staff) do not have any training in.
And why would you? You never set out to be an expert in this. You wanted to focus on aesthetics!
Between your bookkeeping, questions from your CPA, and ensuring you are on top of daily business obligations, it is easy to feel overwhelmed. Stress can prevent you from taking steps to understand your finances, but the stress that can accumulate from ignoring your numbers is worse.
We’ve outlined four reasons why everyone involved in your spa business needs financial literacy.
1 – Developing your financial skill set is one of the most critical skills you can learn as a business owner.
It is critical for you to speak the financial language of your bookkeeper, know what key metrics to look at each month on your Profit and Loss report, and know how much cash you need to keep the business running.
Ultimately, the most important thing your business needs is profit. Profit keeps a pulse on how healthy your business is.
But how do you improve profit? Where should your focus be in your unique business?
Your numbers hold that answer.
2 – Every number in your business is telling you a story about what is working and what could use attention.
Your numbers give you a clear direction of where your focus should be to improve profit and reach your business goals.
Maybe you feel like you need to grow more, but after analyzing your numbers you realize that the real issue lies in your profit margin on services. Maybe you feel like you need to cut operating expenses, but payroll is the driving expense on your books.
There is so much to do in a day, you can’t waste time spinning your wheels. You need to use your financial data to get to the core of the issues.
But the numbers are not just a place to find out what is not working, they are also a great place to see what is working. Your financial data can give you the confidence you need to invest in a new piece of equipment, hire an additional team member, or pay a bonus to staff.
3 – Because profit and cash flow are critical to growing a successful business, it is important that all key team members of your spa have an understanding of profit and financial trends in your business.
When you AND your team can directly connect your daily decisions and areas of focus to the bigger financial picture in the business, everyone wins. They gain a skill set that will serve them their whole career, and you gain an invested team member who understands and contributes to the bigger financial goals.
4 – Every daily decision made in the business contributes to the bottom line.
Each small action taken by your staff contributes to the overall profitability and health of your business. Not only that, but if you provide training to help increase the financial knowledge and understanding within your company, you are providing training in a skill set that will serve your staff their entire career.
If you are ready to gain the financial confidence you need to run and grow a successful spa, consider learning more about AWI’s Financial Literacy course.
In the Financial Literacy course, we cover topics such as Profit and Loss Statements, Cash Flow Management, and Budgeting. All topics are presented with specific guidance and targets geared towards the spa industry.
We understand that learning and talking about money and finances might be overwhelming and a little scary. But the truth is, Financial Literacy doesn’t have to be difficult. You need a little help moving through the learning curve, and we are here to support you through it. Understanding basic financial management in your business has an ROI that is invaluable. This course focuses on terminology and systems, but we also have a community component that will help you work through money mindset issues along the way, as that is also vital to your development.
And no, your bookkeeper can’t handle all of this for you.
Nobody cares more about your business than YOU. Even if you have a great bookkeeper or accountant on your team, you still know your industry and your business better than them. You need to have enough knowledge and confidence to collaborate with them.
We love a great financial team, but no part of your finances should be fully outsourced without you checking their work. It is up to you to ensure that your business is captured correctly on your financial reports.
Plus, only YOU are in charge of your cash flow (or more specifically the CEO and/or key support staff). Cash flow is not something that a bookkeeper manages. Cash flow is a forward-looking system that needs to be actively managed within the business. And that means you need to know how to run it.