Saturday, August 25, 2007


The following is a quote from the July Readers Digest. The article was on how to save money. We all know that a majority of a salon's profits come from retail sales. We also know how hard it is to motivate our people to educate our clients on the importance of using salon products. Then here comes Jet Rhys with her recommendation. My question is "what was she thinking?"

Maybe her punishment should be to have her hair dryer confescated.

Larry Kopsa CPA

Buy your shampoo at the drugstore, and put the savings toward a quality salon conditioner, as stated by Jet Rhys, owner of Jet Rhys Salon in San Diego. According to Jet, “most drugstore shampoos have similar ingredients to salon brands. If you have highlights or color, ask you colorist about the best product to make it last.”

Friday, August 10, 2007


I read your article about budgeting and I am trying to plan for the next year. I am never sure how much I should spend on advertising. Do you have any thoughts? Evelyn

Evelyn, this is impossible to answer for you without knowing your location, revenue, history, competition, average pricing and a bunch of other factors. To give you a definite answer in your situation would just be shooting from the hip. At the same time, I can give you my overall thoughts.

Advertising is always a difficult one for salons. Being able to track the effectiveness of your advertising is really important. The amount of advertising that a salon or spa expenses runs all over the map. It really depends on the type of salon you are trying to create and also your location. This is especially crucial for start-up salons.

Many times salons invest in yellow page advertising. The question you must ask yourself is: “Are you really trying to attract people that look in the yellow pages to find someone to do their hair?” The answer to this question depends on the type of salon that you are trying to build.

In most cases the most effective form of advertising is direct advertising. Direct advertising uses different referral programs with your existing clientele. An example would be to offer someone a free product if they refer someone. You might ask your distributor sales person to give you some of the packages they put together. If you need assistance with the referral program, let me know.

Although we know there is some media advertising a person needs to do, we have not seen a direct relationship with the amount spent on media advertising and success in drawing people into the salon. The most effective media advertising we have seen is on the morning radio shows, where the announcer actually discusses the business. It seems that when the announcer is doing a live discussion of the business, people seem to pay attention much more than when they push a button and the ad comes on.

I recommend that you look at the Your Beauty Network website For a small fee they provide you with a wealth of information including examples of marketing programs.

If you would like to discuss this with me, please feel free to give my office a call. I would be glad to set up a time to discuss this with you in detail. It is a pleasure serving you.

Larry Kopsa CPA

Wednesday, August 8, 2007


Larry, thank you for your blog. It is nice to have an expert that answers questions. I am now renting a booth. Is there software that you recommend to help me organize my books? Maria

Maria, thanks for your kind comments. The program I feel is best for not only booth renters, but also for salons and personal, is QuickBooks. QuickBooks is very easy software to use. We have 99% of our clients on QuickBooks without any real problems.

If you are interested in training, we do a QuickBooks training program over the phone for our clients. To train you we use software so that you can sit at your computer and see how we are entering data etc. We can then watch you enter information so that we know that you are comfortable with the program. We have trained like this hundreds of times and it works very well.

The cost of this program is $400 until November 15, 2007. Between November 15 and April 15 the cost of the training is $600. With this training, one of our staff goes through with you, by phone, all of the details, helps you set up the chart of accounts, shows you how to use the check register, and is available for any follow up questions you might have.

This training is slightly more expensive than QuickBooks classes that are offered but our classes are one on one and are customized just for your business. We have found that the other classes can be confusing in that they are teaching many things, such as inventory and accounts receivable that you do not need to know.

If you are interested in some assistance, please let Amanda at our office know. Our telephone number is 1-800-975-4829, Amanda’s email address is As with all of our work we guarantee that you will not only be satisfied, but extremely satisfied with our services or receive your money back.

Larry Kopsa CPA

Monday, August 6, 2007


The following is an article that I co-authored that was published in the February 2007 issue of Salon Today. There are some good lessons here that many people have learned the hard way.

Larry Kopsa CPA

“I never have any money.” “My financial statements show I’m making a good profit, but I never have any cash in the bank.” “At the end of the year I had $50,000 in the bank, but now I’m overdrawn.”

These are just a few of the cash flow concerns that Larry Kopsa, CPA hears from salon owners on a daily basis. “Many believe cash flow is just an issue for small salons, but it doesn’t discriminate,” says Kopsa, one of the founders of Kopsa Otte CPA, an accounting firm specializing in the salon industry. “Cash flow can be a problem for both large and small, new and old, and high-ticket and low-ticket operations.”

Lack of cash flow drains both the owner and the entire salon, and can be a devastating problem, both financially and emotionally. “When an owner is working so hard but there’s never any cash flow in the bank, it deflates his enthusiasm. It’s a heavy weight that just won’t go away,” explains Kopsa.

The first step in solving any cash flow problem is to find the cause or causes, then work out a solution. Often, the solution requires planning, energy, patience and the willingness to change. Some of the most likely causes of a salon’s cash-flow crunch include:

Overstocking Inventory
Being able to have the correct amount of inventory on hand takes experience and planning. Expanding into too many lines, purchasing more than you need and not having proper inventory control and reorder points can tie up a large percentage of a salon’s cash.

“Recently I talked to a salon that decided to put in a high-end make-up line. Although in the long run this looked like it would be a profitable move, right now their hands are tied – all of the cash is tied up in inventory,” says Kopsa.

Gift Certificates
Although there are many benefits to gift certificate sales, they can give you a false sense of available cash. This is especially true with year-end gift certificate sales. Those salons that have high gift certificate sales in December see a swell in their cash, but they often don’t realize that they are going to eventually have to pay for the products, back bar, producer pay and payroll taxes associated with those services.

“Given that most profitable salons work on a gross profit margin (not net profit) of 35 to 40 percent – then $30,000 in gift certificates in December will have a cost of $12,000 to $20,000 in subsequent months,” explains Kopsa.

Improper Financing
“At times, we see salons that try to pay off debt too quickly,” says Kopsa. “Although being out of debt is a worthy goal, there are times that we need to allow debt to work for us. Doing a major renovation or purchasing equipment and trying to pay off over three years versus seven can really squeeze cash flow.”

Income Taxes
Many salons don’t plan for a reserve for income taxes, then April 15 comes along and they are behind the eight ball. “By then, it’s too late to get out of the cash-crunch hole,” says Kopsa. “The prior year taxes are due and you should already be making estimated tax payment for the current year. By not planning in advance, your taxes can double up on you, leaving you in a difficult situation.”

Rainy Days
Walkouts, pregnancies, accidents, unexpected renovations – as anyone in the salon business will tell you, there will always be things that come up. “Salon’s with good cash flow management understand that setbacks are inevitable and they prepare by setting some money aside for the unexpected.”

Beyond Your Means
“Let’s face it, there are just some people who live beyond the income of the salon,” says Kopsa. “In the end, it’s the business that will pay the price.”

Overestimating Paybacks
Kopsa has seen many salons run into cash flow problems by overestimating the payback on an expenditure. “An example would be advertising. I’ve seen salons spend enormous amounts on advertising thinking that new business will be beating down the door. Another example is expansions – they think those extra chairs will magically fill up.” Overestimating what an expenditure will pay you back can seriously burn through cash.

These are just a few of the cash culprits, all of which require a different solution. But if you examine the problems listed above, you can see they all could have been avoided by having a solid budget.

“Salons with an operating budget know at the beginning of the year exactly what the year will bring as long as they hit their numbers,” says Kopsa. “A budget will tell the owner what they can and can’t do – it’s a goal sheet, a roadmap to success.”

Comparing the results of the operation to the budget each month helps an owner keep an eye on his or her cash availability. If you are ahead of budget, you have the opportunity to spend more. If you are behind, you know you have to make changes.

Wednesday, August 1, 2007


Check to see if you are one of the fourteen states that are offering sales tax "holidays" for back-to-school shopping. Below is a link provided by the Federal Tax Administrators. From August 3-5, North Carolina exempts computer sales up to $3,500 per item.

This might be a good time to do a "back-to-school" on your tax situation and learn new concepts and strategies for saving taxes.

We do a complete review of your last two years tax returns and then meet with you by phone and computer to discuss our findings. We provide a written report giving you ideas to use this year. It is not too soon or too late to plan to save taxes for 2007 and beyond. Our fee for the Tax Second Opinion is $200... and that amount is deductible.

Let us use our experience specializing in the Salon and Spa industry to "teach you" before the IRS "takes you to school."

Here is the link to the tax-free states.