Your comprehensive guide for starting a hair salon business

Decoding Your Hair Salon's Profit & Loss Statement

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Your hair salon’s profit and loss statement is a highly important financial document that you will have to create and review frequently. Your hair salon’s profit and loss statement will show you your hair salon’s revenue and how your hair salon’s net income is calculated from it. In laymen's terms, your hair salon’s profit and loss statement will let you know whether or not your hair salon is actually turning a profit. The statement will also alert you to any specific areas where you may be losing money.

Profit and Loss Statement Components

Each profit and loss statement your hair salon creates will be comprised of three basic parts: revenue, net income (profit), and taxes. These three parts will let you know whether or not your hair salon is remaining profitable, and can be explained by the following definitions:

  • Revenue: all money received by your hair salon before any expenses are taken out
  • Net Income: the money your hair salon has after all expenses are taken out
  • Taxes: local, state, and government taxes that your hair salon will need to pay.

Types of Profit and Loss Statements

Your hair salon’s profit and loss statements may be prepared in two ways, and both provide their own set of advantages and disadvantages. Both styles of profit and loss statements will give you the numbers you need to make sure your hair salon is remaining profitable; however, they do slightly vary in the amount of detail required.

  • Single Step
    Single step filing your hair salon's profits and loss statement requires that you total all your hair salon's revenue and then subtract all your hair salon’s expenses to get to the bottom line. Because this method requires little detail, it is the easier way to compose your hair salon's profit and loss statement.
  • Mutli-Step
    Multi-step filing requires a few more steps when balancing your hair salon's profit and loss statement, but is a more thorough way of doing so. Multi-step filing calculates all the expenses and revenues of your hair salon to find your hair salon's income before taxes first. Once your hair salon's income before taxes is calculated, you then calculate and deduct your hair salon's taxes to reveal the net profit for the period measured.

A hair salon owner should not be intimidated or feel overwhelmed about creating a profit & loss statement for their hair salon. There are numerous free templates available on line to help guide you, and your hair salon’s accountant is always available to help you as well. Profit & loss statements should be created monthly, if not quarterly, to ensure that you are able to find discrepancies in your hair salon’s spending quickly.

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