355 Why Your Bank Account Never Matches Your Profit

[upbeat music] I'm sure you've probably seen magicians, or perhaps it was a con man on the side of the street, doing a magic trick that usually involves three upside down cups and a ping pong ball. And it's where the con man puts the ball under one of the cups and then moves the cups around very quickly. And when he stops, you're meant to guess which cup the ball is under. Now, what's that got to do with your salon? Well, absolutely nothing, except to say that wondering which cup the ball is under reminds me of salon owners wondering where the profit in their business went. I'm Anthony Whittaker, and this is the Grow My Salon Business podcast. For over three decades, I've been working with salon owners around the world, from single chair operators to multi-site salon groups, helping them turn a business built on skill and hard graft into one that's actually financially sound. And if there's one word that confuses salon owners possibly more than any other, it's the word profit. So I want to start with a question. If I stopped you right now and asked, "What was your profit last year as a percentage of total sales?" could you tell me? Not roughly, not, "I think we did okay," the actual number. You see, most salon owners can't answer that, and here's what's strange about that. If you were to ask the same salon owner for a client's color formula from two or three visits ago, they'll often be able to rattle it off without blinking, the exact amount of grams, the exact developer, and even the exact processing time. But ask them what their business actually made last year, and you'll often get a bit of a shrug. So here's what's happening. You've mastered the one skill that got you into this industry, and you've completely overlooked the skill that determines whether the business survives. That's what we're focusing on in today's episode. Today's episode is all about profit, what it actually is, where it goes, why your bank account never seems to reflect it, and why some tiny one-person salon down the road is out there claiming that they make 50% profit while you're sitting at 5% with a full team. So let's get into it. Let's start at the beginning because this is where almost everybody gets it wrong. Profit is what is left over after everything else has been paid. That's the definition of profit, and I mean everything else has been paid, including you. Now, that last part is the part that trips most people up. I've frequently sat across the table from salon owners who tell me business is going great, the profit's fantastic, and then I look at the numbers on their profit and loss report, and there's no profit at all. What they've actually done is pay themselves and called that the profit. But your wage isn't profit. You work in that business, so you get paid for that work just like your team does. Profit is the money left over after you've paid your rent, your product, your staff, your bills, and yes, even your own wage too. And if there's nothing left after all of that, then there's no profit. No matter how great things feel or how well you're being paid, the business hasn't made a profit, and a business has to make a profit or it won't survive. Now,