Salon Financial Management Flashcards

A booth-rental stylist pays a flat weekly fee to the salon. For the salon owner, this fee is classified as what?

Answer: Rental income

Booth rent received by the owner is treated as rental income.

What is the effect of high staff turnover on salon finances?

Answer: Higher costs from hiring and lost client relationships

Turnover raises hiring and training costs and can cost clients who follow departing stylists.

A salon earns $50,000 in revenue and has $42,000 in total expenses. What is the net profit margin?

Answer: 16%

Net profit of $8,000 divided by $50,000 revenue equals 16%.

Why should salon owners separate business and personal bank accounts?

Answer: It ensures accurate records and simplifies taxes

Separate accounts keep records clean and make tax filing far easier.

What is depreciation as it applies to salon equipment?

Answer: Spreading an asset's cost over its useful life

Depreciation allocates the cost of equipment across the years it is used.

Which pricing strategy sets service prices based on the value clients perceive rather than cost alone?

Answer: Value-based pricing

Value-based pricing sets prices according to the perceived worth to the client.

A salon offers a prepaid package of 5 services for $360 instead of $400. What is the main financial benefit to the salon?

Answer: Immediate cash flow and guaranteed repeat visits

Prepaid packages bring in cash upfront and lock in future visits.