Timeliness and accuracy are the two most critical characteristics of service. Service is primarily a labor based function. For the entrepreneur, he/she needs to understand the total cost of that service and the associated skills involved. Gaining a true understanding of all the elements allows the small business owner to properly gauge the costs and charge an appropriate and competitive fee for the service rendered.
Labor costs include actual direct compensation, indirect compliance costs, benefits, training and human resources management.
The articles in this section of the website are related to the service industry. They include how to evaluate the costs of service, standards of performance, and tools to evaluate these standards.
Most of the articles below are in depth and are written to educate and train the small business owner. Read to gain a true understanding of the subject matter involved. Act on Knowledge.
Value Investing Episode 1 – Introduction and Membership Program
A long standing custom in the hair salon industry is owners of salons leasing out booths to hair stylists. If not properly documented and exercised appropriately, the owner opens the door for many legal issues. Booth rental has both legal and IRS compliance issues that need to be addressed. Booth rental is legal in many states but ...
A very common small business in the service industry is the carpet cleaner. Many owners of such businesses desire to know the margins and of course the associated operating expenses involved.
Service based operations do not use the traditional retail based format for the profit and loss statement which utilizes a ‘Cost of Goods Sold’ section, instead the service industry uses a ‘Cost of Services Rendered’ segment. The presentation format is very similar though.
Service related businesses require a different format than the traditional profit and loss statement AKA the income statement. The traditional profit and loss focuses on sales of products and a corresponding cost of goods sold section to help the reader evaluate the gross margin. But in service, the owner needs a profit and loss statement ...
One of the most fascinating business models is the hair salon industry. Many salons are poorly managed and rarely generate adequate profits. To make matters worse, the stylists are like professional sports players. One week they are playing for this team, and next week they are on a new team. In effect, they switch salons. It often happens ...
Have you ever wondered why technology is so expensive? Why does the technology repairman charge more per hour than what many attorneys charge? Why does it feel like you get nickeled and dimed to death with technology costs?
Every service related business wants to maximize the hours the staff bills or provides services to customers. When they are working, the business gets to bill for time and generate revenue. Maximum revenue means the best chance at creating the highest profit.
An owner of a hair salon needs a well organized and properly formatted profit and loss statement (income statement) to properly evaluate performance. There are multiple presentation formats used in the service industry, but after 25 years of accounting I advocate for the functional presentation arrangement. This form of a profit and loss statement allows ...
The constant movement of stylists from one salon to another is actually bad business. How do you, as the owner, prevent or minimize this employee turnover? The answer lies in basic employee desires and needs in comparison to the salon’s needs and priorities.
In the world of accounting, we stand on two principles; timely and accurate information for the client. Without either, the client can’t make good decisions. As accountants our job is to record economic transactions and report this information in a financial format. For the client it is imperative that the information is provided in a reasonable period of ...
Team based pay in the hair salon industry is the newest solution for compensating employees and increasing the overall performance of a salon. IT WILL NOT WORK. This article is a critique of this program and provides several reasons why this management style is ineffective for a salon.
I laugh at the definition of labor costs because in my opinion the so called experts only have it half right. Labor costs are more than just gross wages and benefits. It should include the costs of insurance, employer taxation, human resources management and incentives. All of the costs associated with delivering the human element of ...
