PBA RETAIL STUDY

The Professional Beauty Association's recently conducted study on retail was published on July 21, 2009. In this study, "Presenter Neil Stern demonstrated how an overall 3 percent increase in retail sales would mean an additional $30,000 in revenue and $15,000 in incremental profits to a salon.

Click on Retail Mythbusters to read more.

QUESTION ON UNSELLABLE INVENTORY

Larry, I have a question about what to do with my unsellable inventory. Should I take a deep discount on my boutique items, or should just give the items to charity?

The answer to your question really depends on what method will put the most cash in the salon’s pocket?

The first item you have to consider is whether or not having these items for sale at a heavy discount will take away from your regular salon product sales. What I mean by this is, if someone comes into the salon and instead of buying hair care products that carry a 50% profit margin, buys the boutique items, they are going to be better off and have more money in their pocket at the end of the day by donating the items to charity.

If this is not the case, and the clients will continue to buy hair care products along with the boutique items, the method that would give the most cash to the salon’s pocket would be to sell the items at a deep discount.

An example might explain better:

Assuming the person is in a 20% federal and state tax bracket, let’s further assume they have paid for $2,000 of these boutique items that are sitting on the shelf.

If the salon donates these items to charity, the salon will no longer have these items in inventory, which will drop their income by $2,000. Assuming the 20% tax bracket, this would mean they would pay $400 less taxes when they filed their tax return.

If they are able to sell these items for more than $400, that would give them more cash in their pocket because they would have the cash and at the same time they would have some write off for the products that were sold at a deep discount.

If you have any other questions on this, please contact me. It is a pleasure serving you.

Larry Kopsa CPA

ANYBODY KNOW JET RHYS OF SAN DIEGO?

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.”