The Esthetician Podcast

From Revenue to Real Profit Financial Tips for Estheticians

• Kari Jo

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Ever wondered why your bank account doesn't reflect the hard work and revenue your beauty business pulls in? Kari Jo Patterson is here to unravel the mystery behind why many estheticians find themselves in this predicament. Drawing from her own experience and the wisdom shared in her book, Fearless Prosperity, Kari Jo tackles the tough topic of financial mismanagement head-on. This episode is a must-listen if you're ready to confront the hard truths about why revenue does not equate to profit unless you have robust financial systems in place. Keri provides valuable insights into the importance of proper pricing, understanding margins, and the pitfalls of mixing personal and business finances. 

Join Kari Jo as she shares the secrets to healthy profit margins and financial independence, offering a sneak peek into her course, Master Your Base Price. She breaks it all down, highlighting why tracking expenses and maintaining clear profit margins are vital for success. Whether you're hitting six figures or still striving to get there, Kari's advice on managing your cash flow and setting appropriate service prices will transform your approach to running a beauty business. Listen and equip yourself with the knowledge to turn your passion into a profitable enterprise that supports your dreams and financial goals.

To learn more about coaching please visit: https://www.karijopatterson.com

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Links You May Want to Check out:

Join the Client Building for Estheticians group to go deep in learning all the latest tips and strategies https://www.facebook.com/groups/clientbuildingforestheticians
Check out Kari Jo’s courses here https://esthelaunchacademy.com

Announcer:

Welcome to the Esthetician Podcast, where passion meets prosperity. Your host, Kari Jo Patterson, transformed from a solo esthetician into a successful business owner, achieving ultimate time and financial freedom by the age of 38. Kari is the author of Fearless Prosperity, empowering estheticians to build their empire and achieve financial freedom, and the creator of the Empire Growth System for Aestheticians. Get ready for some empire-building wisdom Now. Welcome your host, Kari Jo Patterson.

Kari Jo Patterson:

Hey everyone, welcome to today's episode. I am so excited because today we are going to dive into a topic that has been coming up in my coaching calls and on online discussions, which is why is it that so many estheticians out there are working so hard, they are pulling in six figures or, worse, even more, but they are still not taking the profit home. What I know. You might be making like a hundred thousand, or maybe you're even making a $600,000, or maybe you're even making $600,000. But at the end of the day, your profit margins are not there and you're stuck wondering where is all my money going? This episode, I'm going to break down how to actually read your numbers, why most beauty businesses really struggle with their profit and how you can start making smarter decisions in your business. I am so excited. Let's just jump into it.

Kari Jo Patterson:

What I see the most happening is aesthetic business owners. They are so incredibly passionate. We love what we do. We got into this because it looked fun, it exciting, we have a passion, but you are not treating your business like an actual business. You might be looking at your revenue and you're thinking, oh my gosh, I'm making 150 000 or maybe I'm making 600 000 a year I am killing it. But then you go to your bank and there is nothing there. Why? Why does that happen? Here is the hard truth Revenue is not profit. Let me repeat that Revenue is not profit Unless you have strong systems that are managing your money clear, proper tracking, clear margins and you have reserves for the slow times you are actually going to be scrambling almost your whole entire time through your company. You can't cut corners when it comes to money. Money is always going to hold you accountable and estheticians, it normally shows up in things you are overbooking yourself and you are not pricing your services correctly. You don't track how much retail services are contributing to the bottom line of your business which, by the way, most retail should be around 30% of your revenue, 30% of what you're making. It literally should be your product sales or you are failing to separate your personal income from your business finances. Do not do that. My brother-in-law is a lawyer and he literally protects companies that are getting sued. That's it. I'm going to have him on for that story.

Kari Jo Patterson:

The root of these issues? It comes down to one thing margins and mismanagement of cashflow. That is your problem. How do you fix it? We're gonna start with the concept of margins. So I want you to think of your business like this Every service you offer is a job and each job has a cost. That cost includes your time, the products used and your employee or the rental cost if you have a team, things like that. Here's what you need to know. If your services aren't priced high enough to cover these costs and here's the and and leave you with a 25-30% profit margin, with a 25, 30% profit margin, then you are underpriced.

Kari Jo Patterson:

I do have a course that you can buy. It's called Master your Base Price. I do have a course where you can actually go and it will guide you through. It has the Excel spreadsheet, so you enter in your numbers and it will help you calculate everything for you. But if you want to do it, here's basically how you're to do it. Here's basically how you're going to do it is you got to track all of your expenses, your services, your products, your time, your labor and you got to add a percentage for overhead, like your rent, your utilities, your software, all of that and then you need to add your desired profit margin, what you desire to make on top of that.

Kari Jo Patterson:

Let's say you charge a hundred dollars for a facial and your product costs are, say, $20. Your overhead is 10 and your time is valued at say, 30. That is 60 total. With a 30% profit margin, you should charge at least $86. But if you want to scale your business or hire staff, you're going to have to charge even more than that. So I know that might sound kind of complicated while I did it and you're like, well, how do I figure that out? I promise if you just go and take the master your base price, it's really easy. You can do it yourself, like I just said, but it might be overwhelming.

Kari Jo Patterson:

This is where I see so many estheticians falling short. They're basically charging what they think the clients will pay and not what their business actually needs. That is problem one. So the next huge issue that I see is basically the lack of reserves. Many estheticians are operating from a paycheck to paycheck in their business, which is what is creating the constant stress that you are feeling, and if you are doing this, you need to change it. So here's what I recommend You've got to start saving a percentage of your profits as retained earnings.

Kari Jo Patterson:

Every month, you take 10 to 15% of your revenue and you've got to put it in a separate business savings account. This is basically becoming your emergency fund. You got to do it and let me tell you, I wish I would have started this before I was ready. Just start before you are ready. Yes, you are going to be in debt while you build More debt than you thought you were going to be, and it's going to take you longer to build. But do this now. Don't wait to do it and be like, well, when I make more money? No, start it now.

Kari Jo Patterson:

The next step is you've got to track your numbers weekly. You've got to do this. So you've got to set aside one hour a week to review your profit and loss your bank account. You got to move your money into different accounts. Right, pull out your taxes, pull out your saving, pull out your gift cards. You got to set aside time in order to do this. When you know your numbers, you will make way better decisions.

Kari Jo Patterson:

How I work this in my company is every Wednesday was my finance day and I started at 10 o'clock and I went until 12. I turned off all my phone calls. Nobody was allowed to talk to me. There was no distraction. It was money time and normally, like by 12 o'clock, like I was like so deep into it that I was like loving it and I wanted to continue going on.

Kari Jo Patterson:

Here's the thing you can't grow if you don't know where your money is going, and gotta create systems so that you'll stop relying on future revenue to cover your past mistakes and you'll start feeling so much more in control of your business. So, to wrap things up, here is what I want you to take in this week I want you to calculate your margins. Look at your most popular service, break it down. How much it costs you to actually offer it? Are you charging enough? You got to start tracking your jobs or your services. You got to treat every service like a mini business and you got to create a system to review your profit and loss on each service. And then you've got to build your reserves. So you've got to open a savings account for your business and you got to start putting away a percentage of your revenue each month so that when you hit that slow time, when January comes around and your numbers are not high, you're still able to pay yourself. You're still able to pay your bills. You have an oh crap fund to get you through until you can fill it back up again.

Kari Jo Patterson:

I know that this can be so overwhelming, and I promise you that understanding your numbers is going to be the biggest key to building a profitable business. If you want more help with this, I want you to make sure you go and download the master your base price from my stand store. I'll try to put it in the link here today and start calculating your margins and start figuring out what it is you actually need to charge. So I want to thank you for jumping on this episode with me. If you found it helpful, share it with another esthetician who needs to hear this. Together, we can build some thriving businesses that support our dreams. Thanks so much, guys.

Announcer:

Thank you for listening to the Esthetician Podcast with Kari Jo Patterson. Each week, Kari brings you real-world lessons on how to grow your empire. To learn more about Kari fearless prosperity mastermind group, one-on-one VIP coaching opportunities and more visit Kari. That's Kari. That's wwwkaryjopattersoncom. See you next week for more insights and strategies on the Esthetician Podcast.

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