How do you accurately forecast salon goals?

August 30, 2019

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goals, forecasting, goal setting, salon goals

Would you believe me if I told you that you’re not really not selling haircuts, hair color or facials, but instead, what you’re really selling is time?  

I cringe when I hear salon owners tell me that they set their goals by simply adding ten or fifteen percent to the prior year sales for the salon.  Here’s why that doesn’t work.

Ask yourself the following questions:

  • Has your staffing changed since last year? In other words, do you have more employees or less employees than last year?
  • Are the number of hours available for booking this year different compared to the same month last year?
  • Is your average hourly sale different than the prior year?

If you answered yes to any of the above, then you can’t possibly take last year’s sales total and add a percentage to that and expect to have an accurate forecast.

Let’s talk setting goals and more specifically, how to accurately forecast using the right variables to predict realistic outcomes so you can effectively plan for your team’s success.

There are three variables that you need to consider when goal setting and forecasting.

  1. Hours Available For Sale (or booking)
  2. Average Hourly Sale
  3. Desired Productivity Percentage

Of the above-mentioned variables, Desired Productivity Percentage is the variable where you will have to use your best guess.  However, I will explain a scientific approach in just a moment to help you get as close as you possibly can.

Using the above-mentioned variables, here’s how I forecast and establish goals for my salons.

Step 1 – Run reports!

You will need to run the following reports. We use Salonbiz software, but any point-of-sale software can help you with these numbers.  

Here are the reports that I pull:

  • Productivity Report for the month in which you are setting goals.
  • Productivity Report for the prior three months.
  • Daily Sales Summary for the last three months (if your software has two different reports for services and retail, you’ll need to run both and then add them together).

Step 2 – Determine your Average Hourly Sale.

Example:   Using your Productivity Report for the past three months, add up the total number of hours booked for the whole salon.  Now, using your Daily Sales Summary for the same time period (this calculation is important since you will want to compare apples to apples) divide the total sales for the whole salon by the total number of hours booked for the whole salon to calculate your average hourly sale.

Total Sales (past 3 mos. for both services and retail) ➗ Total Hours Booked (past 3 mos.) = Average Hourly Service Sale

Step 3 – Determine what your average productivity percentage has been for the past 3 months to help you determine what you could realistically achieve during the month for which you are setting goals.

From there you’ll need to decide a goal for productivity.  Just pick a percentage, but use the information in the productivity reports to guide you. If the average of your last three months was 75%, maybe setting a goal of 77% could be realistic.  If you really want to be bold you could set a productivity goal of 80%.

This single step is what accurately accounts for your current staffing (which could be very different from last year and why you shouldn’t just add a percentage on to last year’s sales number) so that you are realistic in determining what services you can physically perform during the month.
The productivity report will clearly state what your productivity percentage has been for the past 3 months.  

Important Note: You’ll want to make sure you include the hours for anyone who was “on the floor” providing services during the past 3 months when determining your average productivity percentage. This includes apprentices if they have a column on the book and had services booked on their schedule.  

Step 4 – Plug In The Numbers!

When you get to step 4, you now have enough data to accurately forecast goals for the next month using all of that rich,  historical data that you just pulled. 

Here’s my formula: Hours Available For Sale (Current Month) X Desired Productivity % (Use prior three months actual productivity % to determine your goal**) X Average Hourly Sale = Total Sales Goal

Once you arrive at your Total Sales Goal, you’ll need to establish from that number what will make up services sales and what will make up retail sales.  

Our benchmark goal for retail sales is 20%.  

Total Sales Goal X .20 = Retail Goal

Total Sales Goal X .80 = Services Goal.

Here’s an example of the formula in use:
1,000 (Total Hours Available for Sale) X .80 (Desired Productivity %) X $97 (Average Hourly Sale) = $77,600
$77,600 X .20 = $15,520 Retail Sales Goal $77,600 X .80 = $62,080 Services Sales Goal Total Salon Goal = $77,600

**You could also look at the productivity percentage for the whole salon for the same month a year prior to help you determine a desired productivity percentage for the current month.  I like to look at the average of the last three months and also the same month a year prior to help me make my final decision on the desired productivity percentage for the current month.

This methodology may seem like a lot of work when it comes to forecasting and setting goals.  However, I guarantee it’s much more accurate and will allow you to set goals that are realistic in nature.  This is key to maintaining a healthy work climate where team members are stretched to perform but in a way where goals are achievable.  This scientific approach works.  Give it a try and see for yourself.

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Located in Austin, Texas.

Chris Murphy