Learn the Language of your Business

Your P&L, or Profit & Loss Statement, is just one of the key financial indicators you need to know when it comes to your business.

We know that it doesn’t sound like the most exciting topic — but gaining control of your success and well-being should! And that’s just what a solid understanding of your P&L can do for you.

Caylee Augé of Salon Profit Project shows us that anyone can understand their P&L statement — even if you’re thinking it seems too scary or intimidating. “We have an idea in our mind that stylists can’t do numbers. But it’s us stereotyping ourselves, this limiting belief that makes us shut down on ourselves — when it’s actually quite simple.”

While she admits there is a bit of a learning curve, “once you learn the language, you won’t see the numbers anymore. You’ll see what they’re communicating.” And what your P&L is communicating is the story of your business and what it’s needs are.

In the simplest terms, a P&L is a statement of all the money coming into a business and all the money going out. While a very simple P&L will only list total sales and total expenses, Caylee recommends breaking down exactly where the money is coming from and going into categories. You can ask for this from your bookkeeper or use a service like the Salon Profit Project.

Ideally, your profit is broken down into services sold and what kind, retail products sold, room rental income, etc. Then your “losses” should be broken down into regular expenses, such as payroll and rent, as well as direct costs or Costs of Goods Sold (COGS). COGS are only counted on a P&L when you use them. So, for example, you only count the cost of a tube of colour when you have colour client, or the cost of a skincare product when you sell it.

This will give you a clear picture of how much money is coming into the business and leaving the business within a given timeframe. At the end, you’ll get your “bottom line” or net profit — but it’s not the end of the story.

As Caylee says, “your Balance Sheet is your truth serum,” which we’ll learn about in a future episode of Tuneup Tuesday.

Still, with a comprehensive breakdown, you’ll be able to look at your P&L statements month-by-month and year-over-year to get really valuable insight. For example, is there a lot of colour wastage going on? Are you down in retail sales? If you’re up in services, why?

“My goal is to get salon owners to fall in love with their numbers, because when they can speak the language of their business, they can really hone in on what they need to do and focus on,” says Caylee.

Still unsure?

Greg offers this analogy: Think of all the money coming into your business as a water hose filling up a bucket. Your expenses are holes in the bucket, letting water out. In order to keep your bucket full, you need to strike a balance. And sometimes that means turning up the hose (increasing the amount of money coming in) or tightening up the holes (decrease your expenses). Your P&L lets you know where and how you can make these changes. It’s your business speaking to you.


And if that doesn’t work, hire help! BeautyCouncil members get 75% off Caylee’s services at Salon Profit Project. Log in and check your member benefits for the offer for the program.