Professional Beauty SA

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BUSINESS TIPS

Money Talk Beauty professional Diana van Sittert unpacks the concept of gross profit and looks at the treatments that best line your pocket

f you are reading this magazine, you are passionate about the beauty industry. When deciding to study Beauty, it was most probably because you love making people feel good and have the option of starting your own business. Sadly, we don’t learn in college how to run a profitable business by focusing on profit margin. This is crucial when you need to ensure that you can pay your suppliers and employees. So, what is gross profit? Simply put, gross profit (GP) is the amount of money you clear after all deductions have been considered (i.e. pure profit). The following example will show you how a true gross profit percentage should be calculated. • You are doing a facial treatment at R500 • The facial is 1 hour (the rental and electricity cost has been worked out based on the treatment time) • You deduct all physical costs from the R500 (as shown in the table) What often happens is that we focus on a supplier’s gross profit calculations, and we do not keep in mind what our true costs are. The supplier’s 50% gross profit might sound great, but you need to bring your costs into the equation.

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WHAT OFTEN HAPPENS is that WE FOCUS on a SUPPLIER’S GP CALCULATIONS, and we DO NOT keep in mind what our TRUE COSTS ARE. CHECKLIST

PRICE

Treatment products

R23,00

MINUS Consumables (sponges, spatulas, etc)

R10,00

MINUS Treatment room cost per hour (rental)

R20,83

MINUS Therapist commission on the treatment (10%)

R50,00

MINUS Electricity

R30,00

TOTAL COST OF TREATMENT

R133,83

TREATMENT INCOME

R500

TRUE GP% = (Income – Total cost) / Income

73%

TRUE PROFIT

R366,17

A healthy TREATMENT GP% should always be more than 20% if the business is set up and no set up costs need to be covered or included in calculations. A healthy RETAIL GP% should be more than 25%. How the picture changes by simply adding retail sales:

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