"Per Pet" Business Income and Expenses
At our Becoming
the Business Person That Grooms Workshop, Private
Consultations and now
Grooming Business in a Box® we empower our
participants with many easy financial formulas that you would
think would be common knowledge, but they aren't. For example,
I ask "How many grooming services did you provide in
1999?" Very few know, so far less than 10% of all
workshop participants. Then I may try, "What was your
average service fee in 1999 based on your bookkeeping?"
Again, few answer but we get some good guesstimates. It's
getting quieter in the conference room by the moment. One
more. On average, how much did it cost you to groom a pet in
1999. Dead air.
surprising? No. If we don't have widespread specialized
business management training how can we expect the majority of
grooming business owners to talk grooming finance. Indeed, as
part of vocational licensing of groomers (someday maybe) I
would heartily recommend required training in grooming
finance. Why? You are legally in business to make a profit
according the Internal Revenue Service. It's not a crime to
make a profit in grooming even though you are helping pets by
grooming them. Yes, some of my students have felt guilty about
becoming very profitable in grooming because the primary goal
is to help pets. All I can do is say why can't you do both,
and remind them that our tax authorities have mandated that
the intent of all businesses is to make a profit in order to
pay taxes too. That aside, common sense dictates that money
management is important if a business is to survive. Many
groomers have never owned a business and always been employed
taking paychecks; it's far different to be self-employed and
know that you paychecks are not a guarantee but something you
have to entirely manifest on your own. Therefore, learning
grooming finance is perhaps one of the most important skills
you will ever learn equal to the importance of your artistic
This Info Menu is
Here we want to
introduce you to a few of the concepts. This is no algebra or
calculus, but basic small business finance practices for the
grooming trade. In fact, after a few hours of practice at our
workshop suddenly we have beginners talking grooming finance
like upcoming pro's.
Indeed, getting a
job as a groomer may be much easier when you can talk this
lingo, and it's vital if your desire is to have a pet retail
or veterinary business build out a grooming department for
you, or to secure a loan or investor to build your own
Income from Grooming Services and Average Service Fees Per
Pet: This is an easy
one to learn, and if you will use this methodology when you
talk about your business, you are likely to be much more
respected as a business person that grooms.
How much did you
earn last year from grooming services? Or for newcomers, how
much do you PROJECT to earn from grooming services in your
first year? Both of these can be answered from the same data.
Last year, Jan at
the ABC Salon grossed $60,000 in 1999 (rang up on the
register) for her grooming services (no retail, just grooming
fees). Jan, like most grooming business owners, knows this
number very well because all owners need gross figures for tax
returns. However, if I asked Jan, "Great, and knowing
that, how much was your average service fee per pet?"
Things take a turn for the worst here, but wait, it's easy if
you do the following:
Keep a record of
the number of pets you groom every day of the year. If you
have an appointment book, total the number of pets groomed
each day and write it at the bottom of each day in the
appointment book, and circle it for future reference. If you
use The Madson Management System in From
Problems to Profits you will be doing this on the
Manager's Daily Summary Report form. At the end of the year,
go through the appointment book and calculate a grand total of
number of pet grooming services. Okay, let's assume Jan did
that for 1999 and the total number of pet grooming services
was 2,000. Now let's start the magic.
We know Jan
grossed $60,000 in 1999 from pet grooming services only. If we
divide $60,000 by 2,000 pet grooming services, voila', we have
determined that the average service fee per pet at Jan's is
$30. Now a world of potential opens.
Next, I could ask
Jan, how much do you want to make next year? She might say,
"Well I really need more income and I would like to gross
$90,000 instead of $60,000." Great! $30,000 is a lot of
growth in one year, but it is possible if you plot a major
expansion plan, but how realistic is it? Let's see. Since we
know how much Jan's average grooming service fee is we can
paint a much better picture of her goal to see just how
realistic it is. Therefore, here is what we do:
increase in business projected ($90,000 goal minus $60,000).
Divide $30,000 by Jan's average service fee of $30 and you get
1,000. What is the 1,000 then? Yes, it is the number of
additional grooming services Jan must do in the year ahead to
earn $30,000 more on the register (without raising prices). So
now I can say to Jan, "$30,000 sounds good, but are you
staffed and prepared to do 1,000 more grooming services in the
next year?" Now Jan the groomer better understands the
labor required. Sometimes just throwing numbers around is
misleading. Possibly Jan may come back and say, "Yes, I
have to hire 2 more bathers, or 1 groomer, etc."
Sometimes Jan may
say, "No, we can only do 500 more additional grooming
services in the next year. I answer, "Great Jan! You are
becoming a business person that grooms. Instead of just
talking money, we are more realistic charting a stable
operation. Since you tell me you can do 500 more in the next
year, and you're average service is $30, we multiply $30 times
500, and the result is $15,000. We add the additional $15,000
to the usual $60,000 a year (same as earned last year) and
therefore Jan is projecting with more reason that her business
will earn $75,000 gross income from grooming services in the
next year to come.
business owner is keeping track of the totals earned in
dollars every day, but see how much more we can do if they
would always keep track of the number of grooming services
performed each day?
Finally, let's try
to figure out what the average cost per pet grooming is. It's
not much more difficult, but you will need some bookkeeping
Let's stick with
Jan. Her business took in $60,000 from grooming services in
1999. Her bookkeeper advises her that the business'
"operating expenses" were $40,000 in 1999.
Therefore, Jan was left with $20,000 for her personal income
from the business ($60,000 minus $40,000). Right?
To figure cost per
pet grooming using the example above, take the $40,000 for
total operating expenses and divide it by what? Yes! Divide it
by the total number of grooming services Jan provided to earn
the $60,000 gross income, or as we discovered above, 2,000
grooming services in 1999. Therefore, $40,000 divided by 2,000
equals $20. Now we know that it cost Jan on average $20 in
labor, overhead (rent, gas, electric) to groom each pet in
1999. In other words, for every pet that Jan earned $30 from
(on average) it cost Jan's business $20.
You can imagine
that this number can be used to project future performance as
well. Remember that Jan finally decided to project 500
additional new grooming services in the year ahead, totaling
$15,000 more dollars rung up on the register than the previous
year ($60,000) for a new gross of $75,000 total in the next
year. Fine and good indeed, but there are new costs to groom
more pets, more shampoo, etc.
To determine a
good approximation of the new costs, take the last year's cost
per pet, $20 (see above) and multiply it times the number of
NEW additional grooming services Jan is shooting for, or 500.
Therefore, $20 times 500 new grooming services is $10,000.
professional picture. Jan can talk quite like a pro now and
say. Last year in 1999, we grossed $60,000 by grooming 2,000
pets at an average service fee of $30. My net personal income
from the business was $20,000 before taxes. Next year I
project the business to increase its gross income by $15,000
to $75,000 by grooming 500 more pets than in 1999, or a total
of 2,500 grooming services at an average service fee of $30.
As a result my personal net income from the business will
raise from $20,000 in 1999 to $25,000 in the next year.
Jan has gone from
an award-winning pet stylist, or average pet stylist, to
making her way to also being a stellar business person that
Well folks, spend
a few hours with us and if all you can do is add, subtract and
multiply, all of this will become second nature to you by
following The Madson Management System in From Problems to
Profits, or by also attending our Workshop where you will
learn this and more during the course. Everyone gets this
personal training at the Workshop,
and a lot more, and groomers that never thought they were
"numbers people" get really turned on. It's a very
rewarding experience to see so many lights go off.